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Tag Archive | DTI

Parliament thrashes out debt relief Bill

Credit Regulator calls for defined debt relief… 

From November 2017 ParlyReport…..

MacDonald Netshitenzhe, of Department of Trade and Industry (DTI), has told parliamentarians that his department in general endorses the call  by the National Credit Regulator (NCR) for the Minister of Trade and Industry to provide for debt relief provisions under the National Credit Act (NCA). The call will be answered by a Bill generated by Parliament because of its cross-cutting nature.

DTI’s input came after the portfolio committee last year held two meetings on the debt situation in South Africa, following a decision taken earlier in the year to gain input from the public and appropriate state entities on the possibility of debt forgiveness.

Parliamentary initiative

The parliamentary subcommittee, formed by Joan Fubbs (ANC), chair of the Trade and Industry Committee, was established last year to investigate possible debt relief systems for over-indebted households. The objective was to provide with consultation for as many parties as possible and to obtain a legal background to enable debt relief regulations to be drafted as an extension of the NCA.

It was tacitly accepted at the time that the result of the investigation would turn out to be a parliamentary committee Bill drafted on the subject to amend the anchor Bill after an initial policy review was carried out on indebtedness nationally. Documents before MPs showed that the World Bank had noted that South Africans currently owed R1.63-trillion to lenders and SA consumers were the most indebted in the world.

Basics

To draft the Bill, it was agreed that technical support would be given by DTI and that a Socio-Economic Impact Assessment (SEIAS) was to be undertaken when the Bill was agreed as a completed draft.

Meetings on debt relief have been held by the parliamentary subcommittee with South African Reserve Bank, the Financial Services Board, the National Credit Regulator (NCR) and the National Consumer Commission. Already implemented are revised cuts in interest and fees and the well publicised garnishee order changes for public servants.

National Treasury is also working on a draft Insolvency Bill with Department of Justice (DoJ) and input from DoJ has included the Debt Collectors Amendment Bill and the Courts of Law Amendment Bill both now before the PC on Trade and Industry, in separate meetings.

Debt relief per se

In recent meetings, Netshitenzhe who is Chief Director of Policy and Legislation at the DTI, when asked to contribute to the sub-committee’s work, outlined first whom he thought debt relief should apply to.    He replied that DTI recommended that such relief could be for retrenched consumers, victims of unlawful emolument attachment orders (EAOs), victims of unlawful social grant deductions and victims of reckless credit lending.

 

In answer to questions, it was explained that an EAO, more commonly known as a garnishee order, was a deduction by an employer from a wage as distinct from the more sophisticated administration order where an appointed administrator paid one or more creditors from an allocated sum for which a fee was charged.

Flexibility

In expanding on debt levels generally and in talking on counter measures, Netshitenzhe said the position on levels of debt that were currently being experienced would not always be the same and therefore, in allowing the Minister to provide debt relief measures in some form, DTI recommended that it be understood right from the start that the provisions could altered from time to time and the position should remain fluid.

It was DTI’s view that the Minister of Trade & Industry should consult carefully with the appropriate members of the credit industry before drafting the first such amendments in the form of the Bill and making any subsequent changes later. Naturally, he said, National Treasury had to be drawn into the debate immediately.

Domestic debt targeted

As well as providing remedies for household debt relief, strong counter measures also should be adopted, he said, in cases where indebtedness resulted from the behaviour of unscrupulous credit providers. This had become a major problem in SA.

Parliamentarians were told that over-indebtedness had worsened with the slowdown in economic growth and ever-increasing joblessness. Some 40% of the 24m credit card consumers had currently an “impaired record”, which was defined currently as three or more months in arrears or were listed with a credit bureau or who had been subject to a court judgement or administration order.

Causes

Consumer over-indebtedness resulting from prejudicial behaviour by unscrupulous credit providers, he said, was a further major problem, followed by borrowers borrowing more to redeem debt with no checks being carried out by lenders.

In outlining DTI plans, Netshitenzhe said that proposals may have to be provided to alleviate or support those in debt for reasons to be defined and the State therefore would no doubt need to establish a fund reserved for debt relief interventions to either partially or fully pay off the debt of qualifying consumers dependant on their circumstances.

Credit checks

Who qualified for relief of any kind and how to define the circumstances was the next big issue coming under debate. He added that it was DTI’s view that the possibility had to arise whereby credit providers should provide debt relief to over-indebted consumers who have already paid “a significant portion” of their debt. This whole concept had to be fleshed out, he inferred.

At that stage, Opposition members welcomed the propositions in general but were deeply concerned, as were many parties, that the very offer of forgiveness of debt might provide encouragement of reckless borrowing or spending. They wanted to see strong counter measures in the form of affordability assessments when credit was granted.

National Treasury

In a follow-up meeting led again by Chair Joan Fubbs with National Treasury (NT), MPs were told by Katherine Gibson, Senior Adviser for Market Conduct at Treasury (who also handles Twin Peaks regulatory measures) that in economic terms, further research was needed to determine the impact of possible debt relief packages which as an outcome, she said, could heavily impact on retailers and microlenders.

Treasury, she said, had previously introduced a debt amnesty to assist poor and indebted consumers and they also were considering many options including ‘extinguishing’ some or all of debt to help people get a fresh start. “However, the underlying principle that if a person can pay, he or she should pay is adopted at Treasury in all considerations”, she said.

Early days

Ms Gibson told MPs that such research was essential since the impact of any kind of debt relief packages was likely to affect retailers and microlenders which could have a knock-on effect of further inability for consumers to access credit. This would, in turn, cause further “worst case scenarios” pushing the more desperate creditor into the hands of illegal

operators. In all considerations, protecting the poor and focusing on the poor was paramount, she said.

In her briefing, she noted that whilst the new requirement that registration of credit providers applied to only those granting credit of over R500,000 or at least 100 agreements, reckless lending was playing a large role in the deterioration of household debt.

Overload

Ms Gibson said it also concerned Treasury that a great number of credit providers had provided credit to already totally over-indebted consumers and had failed to conduct affordability assessments. To this end government, through the Treasury, had appointed a service provider (consultant?) to investigate all EAOs issued to public sector employees.

The service provider had tested the EAOs against various parameters and the credit provider involved was asked to withdraw the arrangements if certain criteria could not be met.

Overhaul

The next phase, said Ms Gibson, was to check on the types and details on EOUs that were currently being applied. It had been noted in discussion with paymasters in government service that employees with the largest level of exposure had instalment values ranging between R1 200 and R6 500.

The state departments with the largest number of EOUs were the SA Police Service (SAPS), followed by the Department of Education, the Department of Health and then the Department of Correctional Services. SAPS also had the largest exposure of different types of credit providers, she said.

Ms Gibson commented, in answer to questions from MPs, that mostly credit providers had corrected their processes and credit arrangements voluntarily after an enquiry by the team investigating. Those not doing so were now subject to litigation in court. This was happening across the various state departments but in answer to a question, Ms Gibson said she was not referring to SOEs.

In need

She also identified many areas where Treasury agreed in principle with DTI as to who were the groups were most likely to receive relief in the final analysis.

These categories were those who had no money or assets; those who had low income and low assets but according to circumstances needed relief; those who had been defrauded and those who clearly had no basic understanding or capability to understand what they were signing because of lack of explanation, lack of understanding of a financial arrangement or lack of a needs assessment.

Any international precedents on the issue of whom should be assisted that had taken placed in developing countries should sought, said Ms Gibson. She said she understood this was in process at DTI.

Debt clearance

Treasury had stated that a procedure must be established, she said, whether the debt was to be written off completely; whether it should be restructured; whether write-off should apply to people who were poor and whether the credit should never have been given in the first place and therefore how it was granted followed up on.

Other cases could involve people who were only insolvent for the moment and therefore needed only a debt restructuring plan to tide over. MPs flagged that they saw problems ahead with instituting such processes in practice but would await a further briefing from DTI and take matters up with them.

OK so far

Ms Gibson concluded that Treasury had already found it had common ground with DTI about debt relief. She acknowledged that the tailoring of measures to meet the circumstances was going to be difficult but most important was to install simplistic check systems.

However, she said, it was also important to control better with strict applications any credit availability and to “change the behaviour of reckless borrowers.” She understood that education processes were to be organised by DTI for borrowers on the subject of borrowing without conscience or thought of the implications of debt.

Big stuff

Chair Joan Fubbs explained to members that the whole issue of mortgages, secured loans, various banking arrangements and pawning were not discussed at this stage, this being left to further final debate and parliamentary presentations after the parliamentary recess in August.

Many inputs have, however, have already been made by the banking industry, business entities and employee representatives during initial discussions but with no draft Bill as a consideration.

Finance Regulatory Bill

Ms Gibson added that much would change upon the implementation of the “Twin Peaks” banking and finance institutional programme where Treasury’s influence upon the banking industry and debt collectors in general would come into play.

Legislation is being concluded by DG Roy Havemann of Treasury, she said, and “Twin Peaks” would change the aspect that the Treasury did not have the power to monitor debt collectors and banks but would have so shortly.

She said the banks had been highly co-operative but had expressed deep concern over long term debt effects and its effects on banking costs, as distinct from immediate short-term relief most of which was in place already as far as consultation with their own clients was concerned

However, she said, the proposed impact assessment on debt relief to attempt to measure outcomes on the proposals for both the private sector and public service sectors was now essential.

Final mix

In conclusion, she said that there was a need for correlated action by all role players since there were many different players, consumer groupings and regulators involved and the views must be heard again of the various entities granting and dealing with credit when the Bill is in final stages of the Bill.

Consumer bodies dealing with debt relief should also be asked to comment, she said. Ms Gibson concluded by saying that there had to be a better understanding how debt was incurred by different South African groupings, why it was so easily incurred and to identify the most appropriate remedies and options that were available to various groups and cultures.

PMQ & A

Questioning from MPs was direct bearing in mind that the proposed Bill was to be a parliamentary submission for tabling. One MP noted that most debtors were litigating against creditor providers whereas it was the collector, such as a state department, that had wittingly or unwittingly entered an illegal garnishee and not necessarily the credit provider.

It was also suggested as not ideal that in some retail-to-consumer arrangements, the credit provider sold the debt to the debt collector in the first place. Then it was the debt collector who arranged the garnishee order and worked on a collection fee.

Ms Gibson responded that this kind of situation had to be accepted and, furthermore, it was not of consequence, providing the credit provider who granted the credit was registered and obeyed the rules and the arrangements fell inside of what was to be allowed in the Bill.

Dave Macpherson (DA) asked about the progress regarding the fraudulent EAOs and asked for a list of the deregistered credit providers who were still operating despite the restraint. Ms Gibson said she would supply such a list to the committee which would be confidential but such a list existed.

Debt collectors

Ms Nomsa Motshegare, Chief Executive Officer: National Credit Regulator (NRC), also said that the “policing” of credit providers could not be controlled with existing legislation but that on the sale of debt, debt collectors were required to register with the NCR to allow monitoring. NCR had a mandate to ensure that the purpose of pensions should not be to pay off debt but to cater for retirees’ welfare

Charmaine van der Merwe, Parliamentary Legal Adviser, entered the discussion to say that not everything that debt collectors did was illegal, by any means, but it was incumbent upon any regulated debt collection profession to reported shady arrangements in credit provision, especially if it involved a legal application.    Sadly, she said, reckless lending could not be reported because it was a matter of opinion and in most cases the facts were unavailable to governance authority.

Learning money

Chairperson, Joan Fubbs asked for the number of teachers involved in debt education in government service since there were many consumers who resigned from the workplace in order to cash in their pensions and pay off debts resulting in skills being lost to the country. Ms Gibson advised that this was a problem that existed throughout South Africa and in any country.

On the issue of rigged auctions, which subject had arisen in earlier meetings, Fubbs said, that although banks were proven to be complicit in some cases, consumer conduct needed also to be addressed in this area since consumer fraud and unmanageable debt had arisen. The committee said this would have to be once again investigated.

Around in circles

MPs warned that in providing for stricter conditions on loans, it might become more difficult for the poor to secure credit. Chairperson Joan Fubbs said that all were aware of this problem but she charged that the most serious issue facing her Committee were poor people losing their homes because they had become jobless, a poor economic climate and unavoidable debt with school fees added to food costs. Frivolous debt was not the issue under discussion, she said.

Department of Justice will now see through the associated Bills and the question of debt relief moves to a final wording with approval of Treasury and ending with hearings. Being a parliamentary Bill, the NEDLAC process will be short-circuited.
Previous articles on category subject
Treasury proposals on debt control approved – ParlyReportSA
Credit regulations to squeeze racketeers – ParlyReportSA

Posted in earlier editorials, Finance, economic, Labour, Trade & Industry0 Comments

Credit regulations to squeeze racketeers

Debt relief and credit under microscope

… sent to clients 22 Dec 2016…. Further powers for the National Credit Regulator to regulate against reckless lending have been reaffirmed as necessary and the subject of debt relief for needy persons considered.

This conclusion was the result of a series of hearings conducted by Parliament and criteria are to be developed for the application of debt relief measures and how this could be achieved are now being studied.

Such criteria could include target groups of debtors who would be eligible for the relief; the period in which the measure would apply; the type of debt that would be covered and how the measure could be implemented.

An earlier study, commissioned by the National Credit Regulator (NCR) some months ago, concluded that there was a need for the National Credit Act to make provision for the introduction of some form of national debt relief but the NCR decided to consult Parliament and to involve public input.

Growing debt bubble

Whilst reckless lending and irresponsible borrowing which led to the disastrous housing bubble in the US, Joanna Fubbs, as chairperson of the Portfolio Committee on Trade and Industry, acknowledged that the situation regarding any retail debt bubble is not as bad in SA.   Nevertheless, she said that for some time she has been concerned that the National Credit Amendment Act is not working in the best interests of vulnerable groups.

On the issue of debt relief, whether from reckless lending or not, it was agreed some time ago by the Committee that it was important for stakeholders to be consulted to establish a better picture.  A parliamentary select committee, chaired by MP Eddie Makue of the same Committee, was formed to investigate whether debt relief would be an acceptable policy for SA and to organise parliamentary hearings focusing on banking input and debt control aspects.

The brief

The Portfolio Committee also recommended to this subcommittee that there needed to be a better understanding between the excesses of lending, the plight of borrowers and a view established on regulations which should refrain from fostering any culture of not paying debt in the hope that it might be written off.

Meanwhile, it has been proposed by the Department of Trade and Industry (DTI) to extend the powers of the National Credit Regulator to conduct proactive investigations into reckless lending . They would also be asked to impose administrative fines and to empower the Minister to provide debt relief mechanisms through further regulations, yet to be drafted.

Also, NCR submitted that it had already laid out its own proposals to tighten up existing regulations and penalties for perpetrators of reckless lending which the Regulator was currently entitled to enforce under the Act but the views of the Regulator were to be sought on debt relief by Makue’s Committee.

DTI view

DTI has since confirmed to this Select Committee that it was their view was that the Minister of Trade and Industry, Rob Davies, should be given the power to prescribe debt relief measures, the nature of which must be carefully thought through . At the time, DTI acknowledged that banks and credit providers had to make their views known preferably in a series of hearings now conducted.

NCR view

National Credit Regulator, Nomsa Motshegare, has confirmed to the Select Committee that in their view some form of debt relief is necessary given the reasons of the country’s slow economic growth; retrenchments that were taking place; and rising unemployment figures.

In general, she said, these factors had already diminished household income and led to difficulty for consumers to repay loans.   The NCR had found, they said, that there was a willingness in general amongst banks to find ways to relieve the financial burden of indebted clients, many of them stating that they did this already, but there was considerable doubt on whether this should or could be backed up by any enforcement measures and regulations.

 The banks

In this regard, during further public hearings, Cas Coovadia of the Banking Association of SA (BASA) emphasised that legislated debt relief for all would have negative consequences since this was far too prescriptive. He  called for “a customised debt relief approach that would suite various portfolios” as a better principle to follow.

At the outset of the discussions, Coovadia stated that BASA did not support the principle of debt forgiveness as an objective.  One of the banking system’s foundation principles, he said, was the need to efficiently and legally lend money to borrowers and to collect repayments from borrowers to settle the loans.

He told parliamentarians. “A confluence of pricing, regardless of individual consumer risk, will arise at a portfolio level to offset the inability to price for the risk.    This will mean that consumers who have a good repayment history will no longer be rewarded for such behaviour when they apply for further credit.”

He warned that blanket debt forgiveness would accelerate irresponsible borrowing and said all banks offered means to repay and gauged the circumstances when lending.   Any failure to perform on this principle would have severe consequences for the industry and economy; would increase risk to depositors/savers; would impose a cost on society; and would limit credit providers’ ability to extend credit, he said.

Making a plan

Nedbank said that the option of rehabilitation was always a preferred course rather than hard legal collections and the bank had recently adopted a philosophy in general banking terms that to become proactive in terms of debt relief solutions was the far better solution for those who had over-extended themselves.

They said the situation between credit provider and consumers should remain “mutually beneficial”, which principle bore in mind that the economy of the country was less affected.   Nedbank confirmed that a satisfactory low, in their view, of 4.6% of their clients could be classified as technically in total default without the any possibility of rescue, as at the end of 2015.

Too prescriptive

Individual banks, such as Standard Bank, Absa, First Rand, Capitec and African Bank generally supported BASA’s view that prescriptive laws or regulations regarding lending, collection and debt relief would remove the principle of case by case treatment which in turn, they said, would probably inhibit loans being granted or drive up their cost

Debt and labour

Chamber of Mines was blunter and took the view that employee over-indebtedness was a major problem in labour relations and “fed into unrealistic wage demand” scenarios.  Indebtedness, they said, was one of the major catalysts in recent mining unrest.

They were clear that education on family accounts and the implications of over borrowing had to be stepped up, rather than complicated prescriptive measures on relief that would favour one and not the other.  More important they said was that loan sharks should brought under control and whose malpractices were rife amongst the mine working community.

Ms Sue Fritz, speaking for the Chamber, said that any form of debt relief provisions must consider the danger of undermining the basic principle that with the ability to borrow came the understanding such debt had to be repaid or quality lending would cease and debt might increase.

Cosatu view

Cosatu’s Matthew Parks urged that some form of debt relief be provided to a defined base of categories, such as retrenched workers; those only on social grants; the poor; working-class and middle-class students with student loans and borrowers who had paid off a large part of a loan but fallen on hard times. He also appealed to parliamentarians that there was a need to crack down on loan sharks, formal and informal.

Paul Slot, speaking as president of the Debt Counsellors Association, said some form of debt relief was necessary to counter the current high level of household debt, noting that according to the association, 54% of those in financial trouble simply applied for more debt to extricate themselves.

Conclusions in process

The Select Committee has now made a call upon on the National Credit Regulator to tighten regulations further on loan sharks and the registration process.  Chairperson Eddie Makue has now reported back on the hearings to the Portfolio Committee but has noted in Parliament that he was deeply concerned that a large amount of vulnerable people remain exposed to unregulated credit and can become victims purely because of greed alone on the part of the lender.

On reckless lending, it was noted that often ridiculously high repayments from the poor were a weapon used to gain control of assets.    Makue said, “The NCR has to protect poor South Africans against such lending by unregistered and immoral micro-lenders.   In most rural and semi-urban areas people maintain their existence through borrowing and the interest they sometimes get charged is shocking, and interest rates should be capped by law”, Makue said.

State debt relief and debt relief regulations

The “jury is still out” therefore for 2016 on the issue of DTI tabling a Bill and the subject of debt relief generally.

Parliament closed 7 December and will resume this debate early in 2017

 Previous articles on category subject

National Credit Act Bill aims to help consumers – ParlyReport

Treasury proposals on debt control approved – ParlyReportSA

National Credit Amendment Bill changes – ParlyReportSA

 

Posted in Finance, economic, LinkedIn, Special Recent Posts, Trade & Industry0 Comments

Liquor licensing may have impractible conditions

DTI gets tough with age limits

...sent to clients 17 Oct…..   In what will be a tough ask, Minister of Trade and Industry, Robliqour-store Davies has proposed a number of changes to the National Liquor Act, the most contentious being to raise the legal minimum age for purchasing liquor from 18 to 21 years of age. The call for public comment on the draft National Liquor Amendment Bill as gazetted closed on 30 October.

The Department and Trade and Industry (DTI), who deal with liquor licensing at a national level, state that South Africa has globally the worst figures for alcohol related accidents and anti-social incidents involving liquor abuse.

Drastic steps had to be taken to gain control of alcohol related injuries, illnesses and abusive behaviour that were costing the state some R40bn a year, the Minister said.

Younger age groups

The Bill focuses specifically on youth since DTI maintains that alcohol abuse specifically damages the development of the brain making youth vulnerable. Liquor advertising aimed specifically at young persons will be prohibited under the Act and revised rules set down on broadcast times and content. Advertising billboards aimed at youth will be banned from high density urban areas.

Minister Davies called for “robust public engagement on the issues raised in the Bill” as it dealt with matters “that are of significance to South African society.” He noted that South Africans consume alcohol related products at double the world average rate.

On the question of the age threshold proposed in the draft Bill is a minimum purchasing age, not as has been widely reported a “minimum drinking age”. The onus of establishing age will fall upon the supplier who must take “reasonable steps to establish age” when dealing with a young purchaser.

Pressure point

A civil liability will now fall upon the manufacturers and suppliers as well who knowingly breach the new regulations, Minister Davies said, believing that this was the only way to get the problem understood and the new rules adhered to.

sab-youth-beer-adThe draft Bill states that responsibility will also fall upon the seller not only not to supply liquor to a person visibly under the influence of alcohol but that the seller could be in addition asked to show reason why they should not bear costs for damage incurred as a result of a subsequent accident involving that person who made the purchase.

On the problem of community issues, such as tackling foetal alcohol syndrome which is considerably worse in South Africa than elsewhere in the world and alcohol related crime, the onus of proof will shift not only to a supplier but also to manufacturers to show that reasonable steps were taken to ensure that liquor is not sold to illegal or unlicensed outlets. Which brings up the issue of liquor licences.

Distance from community

Licensing is a provincial matter and there are a number of changes that the amending Bill police-raidwill make to the anchor Act which will have to be abided by. Particularly notable is the proposal that licences cannot be granted to an outlet less than 500 metres from any school, recreation facilities and places of worship.

Provinces are stated as “having an obligation” to be far stricter in granting licences in highly urbanised areas, giving due regard for the need for stricter business hours and for the need to deal with noise pollution in stressful living conditions.

Previous articles on category subject
New health regulations in place soon: DoH – ParlyReportSA
Licensing of Businesses Bill re-emerges – ParlyReportSA
Medicines Bill : focus on foodstuffs – ParlyReportSA

Posted in Justice, constitutional, Security,police,defence, Special Recent Posts, Trade & Industry, Transport0 Comments

Draft Copyright Amendment Bill raises queries

Copyright Bill proposes revenues to state…

copyright graphicsent to clients 28 Oct….  Anomalies abound in the draft Copyright Amendment Bill, recently published for comment and now awaiting tabling in Parliament hopefully with a number of changes, say experts in the intellectual property industry.

The Bill primarily affects music, artistic and literary copyrights but the whole issue of patents, copyright and intellectual property rights are so intertwined that any changes will undoubtedly send up red flags up in various areas.

Government says in this instance it is trying to modernise the existing Copyright Act but as with any changes to established procedures that have existed for years, there are pros and cons that come with change it seems.

50 years after death

The draft Bill deals primarily with copyright of artistic, musical and literary work and most assume earphonesthat works of great composers such Brahms, Beethoven and Schubert are free of copyright, those geniuses having long since passed away. In fact under the existing Act, the author, composer or artist has copyright for life and then fifty years

The draft states both clearly and unambiguously that the ownership of all copyright held by individuals will automatically transfer to the state upon their death.

Until death do us part….

There is not the slightest indication of what body or entity is involved, other than the fact that the Bill is to be tabled by the Minister of Trade and Industry, meaning that DTI, or an entity controlled by it, would receive such, presumably the individual’s Estate being responsible for notifying DTI that they are heirs. The draft also states that government may never re-sell or pass on such copyrights.

The question to any casual observer is what happens to this money, at present collect by such bodies in doubtful manner by such bodies as SAMRO and passed to DTI? It is revenue and does it go to National Treasury, perhaps a fund for aged musicians, authors and artists even child education in the arts? On this the Bill is silent, no policy having been ever stated by any cabinet minister on such matters.

Another tribunal

In the absence of any new guides as promised on intellectual property in general, such having been promised by DTI in the form of a National IP Policy many months ago, more concerning is the establishment of an Intellectual Property Tribunal which is a case of “overkill” in dealing with this limited area of copyright and royalties.

Such a body may adjudicate on “on any application and on any legislation brought before it”, the draft supermarketstates.

On the whole, we have to assume that the majority of the draft Bill applies to individuals only, with the exception of the recording industry and literary reproduction industry, there also being certain clauses regarding End User Licence Agreements affecting software sales.

Criminalisation

Of concern though to many is the growing tendency to introduce criminalisation into legislation such as areas of BEE with fines normally reserved for more serious and harmful criminal police offences. In this case DTI have once again mentioned maximum jail and penalties of totally disproportionate periods and amounts.

To many, this Bill appears to have a lot more written in between the lines and prompts again many questions as to the direction DTI is taking with regard to international agreements, in this case the Agreement on Trade-related Aspects of Intellectual Property Rights.

It will be interesting to see what is finally tabled in Parliament for debate and what emerges from parliamentary public hearings

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25.1% is maximum BEE control, says DTI

DTI upbeat on implementation of BEE codes…..

lionel october 3

In a report to Parliament on the amended BEE Codes of Practice and their implementation as from 1 May 2015, Lionel October, Director General of Department of Trade and Industry (DTI) and his B-BBEE staff team, emphasised that the generic scorecard was aligned to government’s key priorities. He also said the State had no ambitions to take their target on black control beyond 25.1% of ownership.

Supplier Development is new title

DG October said the main emphasis of the codes had now switched to greater emphasis on what was previously termed procurement – now referred to as “supplier development”. This approach was more in alignment with the National Development Plan (NDP) objectives, DG October said, simply because that was the main direction needed to empower the development of black enterprises and build the economy on a stable growth path.

“In fact the German auto industry working with the German Chamber of Commerce had established a fund

BMW-Werk Südafrika

in South Africa”, he said, “for financing, training and building expertise in black businesses to supply the auto industry”.

There was considerable discussion on this by members and DG October said that there had been a general recognition in business and industry of the word “must” had replaced “may” in terms of B-BBEE requirements; that level four had to be reached for incentives and in general now “certainty” had been restored to the business environment on BEE issues, he felt.

Five “Elements”

The generic scorecard now had five elements, he said, which all companies, except those micro-exempted, had to comply with for recognition. All employment equity and management control had now been merged into one of those elements, now termed “management control”.    Sector codes were now to be aligned by 1 Nov. 2015, as set out in Code 003.

He said that “in response to public submissions” the import exclusion principle would be maintained and that the definition of an “empowering supplier” in the context of code alignment was a compliant entity which could demonstrate that its production and/or value adding activities were taking place in this country.”

DTI said that that “deviations of sector codes in terms of targets must be over and above those of generic codes and companies that derive more than 50% of revenue from sectors where there is already a sector code must be measured in terms of that sector code.”

DTI has no doubtful intentions

George Washington, having cut down the cherry tree, with his fatherIn general, DG October said in response to questions from MPs about the amendments, it had been his impression that business seemed to accept there were no political mala fides on the part of DTI; just a wish to get on with the planned NDP growth path which required the co-operation of business and industry on black empowerment.

The funding of Sector Charter Councils was a “joint responsibility between government and the private sector and entities must report annually on their B-BBEE status to sector council who will in return reports to the BEE Commission”, DTI said.

New sectors in the sights

Sector codes were being considered for the tourism, which had reached the stage of gazetting for public comment; “alignment” was being reached in the construction, integrated transport, ICT, financial services and chartered accountancy sectors; the property and forestry sectors had reached gazetting stages and marketing, advertising and communication were with their appropriate ministries for approval.

DG October mentioned the fact that the manufacturing industry stood alone as there were so many different sectors but over a period, aspects would be dealt with such as the film industry and textile and clothing industry.

DTI concluded their input to the meeting by advising that a technical assistance guide to B-BBEE was in process and DTI were in the process of finalising the B-BBEE verification manual.

Recent faux pas

rob davies2Opposition members asked how it was that DTI went so wrong with the question of  downgrading the pointing system for employment schemes and why it was that the Minister of Trade and Industry, Dr Rob Davies, had to retract that portion of the amendments which were not gazetted for public comment.

Chairperson Joan Fubbs intervened at this point, noting the Minister had taken the blame, had apologised for the mistake and could do no more than admit that DTI had been wrong.

DG October added that at a DTI workshop on the subject with “some stakeholders” this direction had been considered as a good option for broader rather than narrow empowerment but it had now been recognised by DTI that “they had gone down the wrong route as far as investor confidence was concerned”.

DTI had now reversed everything with the promise that this would not occur on the agenda again.

Better ideas could come

It had also been realised that such a move could also destroy imaginative plans for black management control such as that pitched by Standard Bank where 40% shareholding went to staff who could have representation on the board; 40% went to recognised BEE shareholders and 20% went into community organisations and trusts.

In answer to direct questioning by MPs, DG October confirmed that by the term “black”, DTI translatedlionel october this as African, Coloured, Indian and Chinese. He also confirmed that all these groups, if foreign and not South African citizens, were excluded.

More than 25.1% “unrealistic”

DG October, when asked by ANC MPs whether the 25.1% target for black ownership was realistic and fair considering that the demographics in South Africa demonstrated a far larger proportion of black people, he said that 25.1% could be considered as a “basic critical mass to engender a solid forward movement”.  To go any further would be unrealistic, he added.

In Malaysia, he said, local ownership was considered fair at 30% and other African countries as high as 50%, but he felt that in South Africa, where the need for the transfer of skills and training from large to small companies, especially through supplier development by state utilities and large businesses, was essential, this was a fair percentage assumption and which called for co-operation and fairness between all parties, all bearing in mind “a pretty hideous past”.

Redress of the past in all preambles

joan fubbsAt this point, Chairperson Joan Fubbs referred to the South African Constitution, reading out the clauses which not only stated that all were equal despite race colour or creed but that discrimination was possible if it was fair and she reminded MPs that redress of the past was “fair”.

She asked for all “not to isolate clauses in the Codes to determine personalised interests but get on with job of re-aligning communities that had been excluded from ownership for over 300 years”.

One ANC MP asked that the focus on big businesses be less emphasised and that DTI rather spent considerably more time with the job of developing ownership of black small business, which he stated could be “the power house of South Africa”.

He called for legislation that enforced government and public utilities, “as custodians of state power” to set an example on supplier development since, he said, one could hardly expect the private sector to follow suit, if the SOEs did not lead the way on this issue.

Incentives needed, not law says DTI

DG October said such sort of things were “impractical in the real world” and said the main challenge was a phased process of change which now had the support of many in positions of power in business. He also emphasised that B-BBEE had to tie in business and industry with incentives rather than with the law.

When asked about his recent public statement that he had set DTI’s target to produce “100 black industrialists”, he was referring rather to 100 black industrial leaders “financed and supported by DTI initiatives”.

Other articles in this category or as background
BEE comes under media scrutiny – ParlyReportSA
Rumblings in labour circles on BEE – ParlyReport
B-BBEE Codes of Good Practice far more onerous – ParlyReportSA
One year to implement B-BBEE Codes – ParlyReportSA

Posted in BEE, Facebook and Twitter, Finance, economic, LinkedIn, Special Recent Posts, Trade & Industry0 Comments

DTI does flip flop on BEE codes

B-BBEE codes changed on “management control”…

Rob+DaviesA  lack of understanding of the effect of B-BBEE Codes on business and the industrial environment, despite a workshop on the subject, was demonstrated when the department of trade and industry (DTI) amended its own amendment in a matter of days on the point scoring issue in terms of broad- based employment share ownership schemes.

More emphasis has been placed in the Codes generally on procurement from black business, now referred to as “supplier development”.

As you were…

However, the minister of trade and industry, Dr Rob Davies, confirmed in a statement that the second amendment corrected the changes as far as employment schemes were concerned and any such changes would not be retrospective on deals already done, such earlier deals continuing to reap the same benefits under B-BBEE Code pointing as before.

Control is everything

Minister Davies said that DTI still had a think tank operating on how further to make BEE in generalplan BEE more effective insofar as pressure on business was concerned to effectively ensure that management, control and ownership by black persons was increased.  His task team appointed would report back by the end of the month. He repeated this in his budget vote speech.

DTI completely avoided established government procedure by issuing an “explanatory notice” to a gazetted publication on B-BBEE procedures by announcing a completely new aspect on the rules on B-BBEE award-pointing, in this case termed as “amending guidelines”, thus avoiding the issue of public comment.

Most worrying was the fact that minister Rob Davies failed to make any reference to this in his earlier introduction to DTI’s strategic plan to Parliament a week before, subsequently presented to the portfolio committee on trade and industry by DG Lionel October and then to the select committee on economic affairs in the NCOP.

Forgot the union movement

Just as as business leaders were, so was the trade union movement, many of whose members are part of share employment schemes, options or not, and are therefore touched on the issue of reduced profit and dividends.

As far as not mentioning this in a budget vote speech, which was an excellent opportunity to inform business, there is fine line, say opposition members, between failure to disclose to Parliament and avoiding a contentious disclosure to Parliament that that might compromise a negotiation but in this particular case of changes to B-BBEE, the matter  appears to have only involved some members of cabinet and certainly none of the large spectrum of stakeholders involved. It all came as a big surprise.

The minister has published two further notices on the amended B-BBEE Codes regarding the second phase now implemented. The Chamber of Mines was yet another body caught by complete surprise, thinking that their relationships, in this case the minister of mineral resources, were far better than they actually now seem to be. There seemed to be a vacuum in communications.

DTI has now reported to Parliament on subject

To the rescue...

To the rescue…

DTI, in the form of DG Lionel October, has since reported to Parliament on the subject of the amended B-BBEE Codes of Good Practice and explained that Minister Davies had admitted that DTI had taken the wrong route with all good intention “to take a narrower view on black management control” but now had apologised for the descision, now reversed, on this aspect of the pointing system. All is reversed, retrospectively as well.

A full report is with our clients with further comments by DTI on the Codes and their application as revised “after the event”.     This analysis of DTI’s presentation will be archived to this website in the course of time.

In the meanwhile, we note that there is useful extra-parliamentary political comment on http://www.polity.org.za/article/da-geordin-hill-lewis-calls-for-debate-in-parliament-over-elitist-bee-codes-2015-05-08

Other articles in this category or as background on this website
//parlyreportsa.co.za/bee/dti-earns-ire-parliament-bee/
//parlyreportsa.co.za/bee/liquid-fuels-industry-short-transformation/
//parlyreportsa.co.za/bee/one-year-implement-b-bbee-codes/
//parlyreportsa.co.za/bee/b-bbee-codes-of-good-practice-far-onerous/

Posted in BEE, Facebook and Twitter, Finance, economic, Labour, LinkedIn, Trade & Industry0 Comments

Small business gets R1bn incentive scheme

Tax relief and business incentives

The new small business development department (SBDD) has transferred from the department of trade and industry (DTI) the R1bn fund which covers both corporate incentives to develop small business and the Small  Enterprise Finance Agency (SEFA).

However, it will leave with DTI all matters relating to B-BBEE insofar as regulations are concerned.  Both the new minister, Lindiwe Zulu, and deputy minister, Elizabeth Thabethe, were present for a short departmental briefing by SBDD given to the new small business portfolio committee chaired by Ruth Bengu, who in the last parliamentary period served as chair of the transport committee.

Revised thinking

In an earlier portfolio committee meeting of trade and industry, a few days before under their chair, experienced ANC member Joan Fubbs, DTI had called for a rethink on small business policy.

They said they wanted to see a clearer policy on the SMME support role by national government with provincial and local government and to establish a programme for rolling out more small business “incubators”- something that opposition parties had been calling for over a long period of time.

Also DTI supported the call to review the small claims court system so that access to affordable justice was more affordable. They wanted this to be a further target of the new department.

Such recommendations came amidst a foray of criticism by commentators that the new department could become a diversion for unsolvable small business issues or alternatively the new department could become merely a point for start-up small business without any real muscle.

Less red tape

The new department in addressing MPs confirmed to them that its mandate was to focus on “enhanced business support” and they emphasised their support for women, people with disabilities and to provide mechanisms to access finance, business skills development.  They also said they were there to ease regulatory conditions; to help regulate better the SMME environment and to give leverage on public procurement.

It was important to recognise, SBDD said, that it was also there to encourage the development of cooperative entities, in which instance shareholders themselves were the members and entrepreneurs. Finally, the process of creating market access was an important task, they added. Nothing was new here.

But opposition ears pricked up when they said tax relief grants to corporates that invested in small business development were to be considered and incubation programmes and technology upliftment were priorities.  The immediate future, however, was all about configuring the new department; the “migration” of responsibilities from DTI; and transferring allocations for the establishment of support institutions.

Chair of the committee, Ruth Bhengu – previously chair of the parliamentary transport committee – then called for response from opposition members which mainly came from Toby Chance of the DA, whose questions were answered by both by the new minister and deputy minister.

Jobs or not

Chance said that whilst applauding the formation of this department, he wanted to know whether or not any success was to be measured in terms of jobs created,  which to him was the bottom line, he said. Also he wanted a clearer definition of what government actually meant by the term “small business”.

He said there were plenty of “gleaming new supermarkets in our townships but very little industrial developments, in fact some industrial parks were in a state of decay.” Chance said the DA was also worried that the impact of new labour legislation and labour regulations was immobilising small business and the amount of red tape currently being experienced was becoming “out of hand”.

Chance said he hoped the new department recognised the fact that that corporates and industry should focus on the development of small businesses to create the job growth called for by the NDP.   Partnerships with small business were the best way of achieving this, he noted.  He concluded that all “tax incentives should be re-visited” and that more emphasis should be laid on small manufacturing businesses.

In reply, minister Lindiwe Zulu agreed on the issue of red tape as a hindrance to small business and said her objective was to become like Rwanda where direct contact with national bodies that supported initiatives was far easier.

Compliance for all

However, she said that business had to understand that it had a role to play and a “culture of compliance” had to be encouraged in both small and large business and manufacturers or there would be anarchy.   Also large businesses and the state will have pay small business invoices on thirty days or risk penalties.

The minister said on the subject of labour regulations, dept of labour had its own targets and own agenda on decent work conditions and that was a separate issue. “The job of small business development was to work inside current conditions and for business to respect that.”

Chance replied that the governing party seemed to have “developed a track record of “attacking business persons when they criticised ANC economic policies or asked tough questions”, which statement prompted vehement denials from the minister and deputy minister.

Other articles in this category or as background
//parlyreportsa.co.za//trade-industry/licensing-of-businesses-bill-re-emerges/
//parlyreportsa.co.za//bee/minister-davies-gets-cooperatives-bill-approved/
//parlyreportsa.co.za//parlyreport-contacts/cabinet-ministers/ministry-small-business-development/

Posted in Facebook and Twitter, LinkedIn, Special Recent Posts, Trade & Industry0 Comments

All not well in the trucking industry

Call that corruption exists

trucksIn answer to a call made by the portfolio committee on transport on the state of the trucking industry in South Africa, it became evident from responses by the department of transport (DoT); from the Road Freight Association (RFA) and examples given by an independent small operator, that large truckers dominated in an industry in an unfair manner that was rife with corruption.

Mawethu Vilana, deputy director-general DoT, said that going back to 2002/3, the department had begun an exercise to look at how to provide opportunities and also broaden the space for participation by smaller operators in the road freight sector. It became clear that smaller entrants lacked finance; that an “unscrupulous broking sector was part of the industry” and generally there was a lack of skills and know-how in the trucking industry generally due to poor provision of training facilities and an industry which was undercapitalised except but a few large operators.

DOT not playing proper role

Vilana admitted that when it came to black empowerment opportunities, the main player was the department of trade and industrydot logo (DTI) and not DoT, DTI having the BEE verification control system in their court, DoT playing virtually no part in either reform of the industry or the development of SMME’s.

On the subject of crime, little could be done about bribery and corruption, Vilana admitted under questioning by parliamentarians, unless legislation was beefed up with proper powers and a full, properly constituted investigation carried out into the industry.

Road users must pay

roadsHe also admitted that permit fees were high because of the principle of “user pays” which had been adopted by government “since road truckers caused great damage to the road system.”

Gavin Kelly, RFA said his association had 385 members, with 109 affiliates and 40 associates representing different levels of possible enforcement and ability to develop skills and training but complained of massive permit fees (the last being 412%); large levels of corruption amongst government officers and no value being added by the government’s road agency to the industry in general.

RFA also stated that there appeared to be no proper government road freight strategy and single government officials determined policy without ministerial approval.    Kelly said “no real consultation exists between the state road agency and the industry” and it was the RFA view that DoT “was just going through the motions.”

Trucking group says market closed

One medium sized operator, Tramarco, said that despite heavy investment in trucks and bearing in mind the “ever rising price of

tramarco site

tramarco site

fuel”, it was almost impossible to break into the transport business to obtain long-term “tangible” contracts from major mining groups and state utilities.   They appeared to feel “safer” using old contacts and larger companies and quite clearly favours were being granted, they said.

Their spokesman said that the entire industry was dominated by a number of large trucking groups and smaller entrants were effectively “locked out” of the industry because the industry was either not regulated properly.

AARTO somewhat dubious

They also said the licensing AARTO system was not working properly; there was a lack of legislative enforcement; too many corrupt officials had too much power and there appeared a lack of interest by large companies generally to uplift smaller operators, little interest in encouraging training and building the trucking job market.

Tramarco said that no favours or finance was called for by the medium and small sized companies but merely a fair chance to compete for tenders.   They called on government to provide leverage within its own government departments, state utilities and with industry to break up monopolistic habits and encourage more black empowerment opportunities.

“Large groups and utilities make lots of statements on freeing up the market but nothing happens”, Tramarco said.

MPs demand better skills development

MPs demanded of DoT that concrete steps be taken to assist small entrepreneurs and to provide proof of a record in the area of skills development. “It was clear that little had been done by the DoT in this area”, said one ANC member.

Opposition members said they were convinced that DoT “had no meaningful understanding of what the situation was on the ground.” One MP said the City of Cape Town had provided a solution by cutting the bigger contracts into smaller parts, supplying smaller quantities and increasing the number of entrants slowly. He called on DoT to start thinking of similar solutions on a national scale.

Roads to nowhere

Ruth BhenguChairperson Ruth Bhengu told DoT that the meeting had been called because an examples had been given to parliamentarians whereby “large companies gave small companies short-term contracts and rates that would not take them anywhere and businesses that were desperate could not only pay for their trucks but could not maintain them, the business going ‘broke’ as a result”.

There was also an immoral business broking sector emerging, she felt.

Vilana of DoT said there was nothing government could do to protect such entrepreneurs and that this was the nature of the industry which was high capital risk with a road system that was deteriorating.

The committee found this all very unsatisfactory and called for further meetings with DoT stating that these matters had to be resolved and that the challenges facing the trucking industry were to be investigated further. Also cross-parliamentary meetings with public enterprises and trade and industry committees were to be called. DoT was told it would be re-called for further reports.

Further archived references

//parlyreportsa.co.za//public-utilities/aarto-amendment-bill-gives-back-up-to-road-law/

//parlyreportsa.co.za//finance-economic/transport-laws-bill-on-e-tolling-amended/

Posted in Finance, economic, Mining, beneficiation, Public utilities, Security,police,defence, Transport0 Comments


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