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Why South Africa’s draft revised material transfer agreement is not fit for purpose

Forcing a square into a circle: why South Africa’s draft revised material transfer agreement is not fit for purpose

PAIA manual

View the PAIA manual HERE 20230626_PAIA_Manual_Esselaar Attorneys_PGE

Paul Esselaar

Paul Esselaar completed his BA, LLB at Rhodes University in Grahamstown in 1997. Thereafter he attended the School for Legal Practice at the University of Cape Town in 2000 and went on to complete his articles at Kessler De Jager Inc. During his articles he focussed...

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Financial Services Laws General Amendment Bill tabled in Parliament

According to the South African Government News Agency (SANews) the Financial Services Laws General Amendment Bill was tabled in Parliament last week. In short, 'the Bill, which was released for public comment in March, addresses urgent issues in eleven financial...

Is the Financial Services Industry pulling wool over consumers’ eyes?

The Financial Services industry is in a state of flux. The Financial Services Laws General Amendment Bill (FSLGAB) was tabled in parliament on 25 September 2012. The aim of the Bill is to ensure that ‘South Africa has a sounder and better regulated financial services...

Credit Law: Section 89(5)(c) of the NCA declared unconstitutional

In the May/June edition of CLR Paul Esselaar wrote about a decision by the Western Cape High Court in which s 89(5)(c) of the National Credit Act was declared unconstitutional for being inconsistent with the right to property in s 25(1). In other words it was found...

Draft NCA Regulations on Affordability Assessments published

The Department of Trade and Industry has published draft regulations on, "Affordability Assessment for the Amendment of Regulations for matters relating to the functions of the National Consumer Tribunal and Rules for the Conduct of matters before the National...

Drowning in Red Tape: The new threshold for registration as a credit provider

With all the pieces of legislation that are constantly being updated it is easy to miss changes to legislation that are really important – especially if that change comes in the form of a Regulation (something typically drafted by a ministry such as the Department of...

NEW

Why South Africa’s draft revised material transfer agreement is not fit for purpose

Forcing a square into a circle: why South Africa’s draft revised material transfer agreement is not fit for purpose

PAIA manual

View the PAIA manual HERE 20230626_PAIA_Manual_Esselaar Attorneys_PGE

Paul Esselaar

Paul Esselaar completed his BA, LLB at Rhodes University in Grahamstown in 1997. Thereafter he attended the School for Legal Practice at the University of Cape Town in 2000 and went on to complete his articles at Kessler De Jager Inc. During his articles he focussed...

Web Site Terms and Conditions

The Esselaar Attorneys Web Site is subject to copyright by Esselaar Attorneys or is licenced under copyright from third party owners. You may reproduce any web page - subject to the disclaimer below - for personal use only. Any comments and statements contained within...

Email Disclaimer

This message and any accompanying attachment(s) may contain confidential and copyrighted information. If you are not the addressee(s) indicated in this message or responsible for delivery of the message to the addressee(s), do not copy or deliver this message or the...

Financial Services Laws General Amendment Bill tabled in Parliament

According to the South African Government News Agency (SANews) the Financial Services Laws General Amendment Bill was tabled in Parliament last week. In short, 'the Bill, which was released for public comment in March, addresses urgent issues in eleven financial...

Is the Financial Services Industry pulling wool over consumers’ eyes?

The Financial Services industry is in a state of flux. The Financial Services Laws General Amendment Bill (FSLGAB) was tabled in parliament on 25 September 2012. The aim of the Bill is to ensure that ‘South Africa has a sounder and better regulated financial services...

Credit Law: Section 89(5)(c) of the NCA declared unconstitutional

In the May/June edition of CLR Paul Esselaar wrote about a decision by the Western Cape High Court in which s 89(5)(c) of the National Credit Act was declared unconstitutional for being inconsistent with the right to property in s 25(1). In other words it was found...

Draft NCA Regulations on Affordability Assessments published

The Department of Trade and Industry has published draft regulations on, "Affordability Assessment for the Amendment of Regulations for matters relating to the functions of the National Consumer Tribunal and Rules for the Conduct of matters before the National...

Drowning in Red Tape: The new threshold for registration as a credit provider

With all the pieces of legislation that are constantly being updated it is easy to miss changes to legislation that are really important – especially if that change comes in the form of a Regulation (something typically drafted by a ministry such as the Department of...

I recently finished a seminar on the National Credit Amendment Act with a great and highly informed audience. Obviously this article cannot address all the changes to the Act but these are the high level things that stood out for me: 

1. The Act has been signed into law but is not in force yet

Just like the Protection of Personal Information Act, the National Credit Amendment Act has now changed the existing National Credit Act but is not yet in force (confusing I know). The point here is that you don’t have to comply with the Amendment Act yet and you probably won’t have to for about 18 months more (which is my best guess). The most obvious reason for the delay is that the National Credit Regulator needs to get a great deal more money and needs to increase its staff dramatically in order to cope with the new ‘debt intervention’ system. Credit providers also need about the same amount of time to get their systems in place. 

2. The Amendment Act has its heart in the right place

Some years ago I wrote an article ‘Giving Hope the Hopeless’ where I bemoaned the fact that our current system of sequestration (declaring someone insolvent or bankrupt) does not allow a really poor person to be sequestrated. This perversely means that you need to be rich enough to be sequestrated! There is no doubt that there is a societal evil which traps poor people in a debt spiral that they simply cannot get out of and that this must change. So the question is not whether we need a solution, but rather if the amendment to the NCA is the solution we need? 

3. An impact analysis of the Amendment Act has been done (and it is fascinating)

Almost for the first time we have an impact analysis of the NCA amendment Act and it is truly fascinating to see what the likely impacts of the amendment Act will be. The Impact Analysis was drafted by Genesis Analytics and appears to take a balanced, evidence-based approach to what the likely impact of the Amendment Act will be. In particular the analysis highlights that there is a likely second-tier impact that will ultimately reduce the amount of formal (legal) credit available by R12.7 billion to people earning R7500 or less. This will, in turn, result in more people approaching illegal loan sharks (mashonisas) who are likely to increase their loans by about R7,62 billion(!). To truly understand what this means you also need to read another fascinating study was commissioned by Wonga on how mashonisas operate and the ‘enforcement mechanisms’ that they use. 

4. The NCR becomes a quasi-debt counsellor

As things stand we have debt counsellors who put consumers under debt review. It would have been obvious to get debt counsellors to manage the new concept of debt intervention (which initially suspends the debt for up to 2 years and then extinguishes (forgives) the debt if the debtor has no hope of being able to repay the creditors) but this is not what the Amendment Act does. Instead the National Credit Regulator is now placed in a position where it is both the regulator (it manages debt counsellors, credit bureaux, credit providers etc) and a player (it receives applications for debt intervention and gets them heard at the National Credit Tribunal).  This has a massive implication for the cost of the NCR to the state and an equally big implication for the development of capacity (particular in the form of skilled employees) at the NCR. In fact, Genesis Analytics estimates that its worst-case scenario (which is unlikely) would result in the budget for the NCR to increase from its 2018/2019 funding of R134 million to R1,554 billion (with a ‘B’).  

5. The Amendment Act is likely to be challenged in the Constitutional Court

It is starting to seem inevitable that the NCA Amendment Act will see its day in the Constitutional Court. There are several potential grounds to challenge the constitutionality of the Amendment Act which include: 

  1. Arbitrary deprivation of property (the credit providers cannot recover their loans)
  2. Irrational decision-making (the impact analysis indicates that the Amendment Act will have precisely the opposite effect of what is intended)
  3. Failure to separate the executive from the legislature (the Minister of Finance makes various regulations)

A discussion of these challenges (and their potential to succeed) is not part of this article (although we know that there are senior advocates on either side who do / do not believe the Amendment Act is unconstitutional). What we can expect though is that the challenge may delay the implementation (and possibly the substance) of the NCA Amendment Act. 

All this leaves little doubt that the journey of the NCA Amendment Act will be interesting to follow…