Radical changes to NCA laid out
MPs propose amendments
THE PORTFOLIO committee on trade and industry has issued a radical new set of proposed amendments to the National Credit Act (NCA) that would substantially alter the way credit is granted.
In terms of the proposals, which were distributed to industry players on Friday, the board of the National Credit Regulator would be removed and the cost attached to credit insurance would be closely monitored.
It would be an offence to levy “prohibited charges” and credit providers would have to prove they had sent out section 129 notices to consumers advising them of their rights before taking legal action to recover the consumers’ debt.
The proposed amendments would allow the minister of trade and industry to introduce further regulations aimed at overseeing the conduct of participants in the industry.
Opponents of the amendments said they represented an attempt to legislate the industry as though every credit provider was irresponsible.
“They are creating an environment in which everyone must be treated like a threeyear-old,” said one industry adviser.
Opponents also contended that the industry had not been given enough time to consider – and respond to – the radical new proposals.
However, supporters said the proposals represented the only way of ensuring a sustainable credit granting industry.
“When the NCA was introduced in 2007, it was an entirely new area for the government,” said Deborah Solomon of the Debt Counselling Industry, a web-based information platform for debt counsellors and consumers.
“Now it has six years of experience to draw on as it considers amendments to the act.”
She said the widespread problems in the unsecured lending market, as evidenced by recent developments at African Bank, JD Group and other unsecured lenders, had not developed overnight.
“There may be complaints that tougher regulations will discourage lending and stifle economic growth, but the reality is that we won’t have sustainable economic growth unless credit is provided on a sustainable basis.”
The latest proposals were distributed to interested parties on Friday and the deadline for comment was the close of business yesterday.
Joan Fubbs, the chairwoman of the portfolio committee, told Business Report yesterday that the new proposals “arose from the public hearings” that the committee had held over the past 12 months.
Business Report was unable to obtain comment from individual banks. Cas Coovadia, the managing director of the Banking Association of SA, said the portfolio committee “wrote to the individual banks asking for information at extremely short notice”.
“The Banking Association of SA also received the request for information and decided not to provide information at an industry level as each bank responded to the request and there was no logic to overlay an industry response on the individual bank responses.”
The proposed removal of the NCR board reflects the perceived ineffectiveness of the board and the desire to tighten up the lines of accountability between the minister and the NCR. An indication of the board’s ineffectiveness is the fact that it has pursued only one case of reckless lending – against African Bank last year.
While the lines of accountability would be tightened under the proposed amendments, concerns were raised about the capacity of the department to make best use of this provision.
One industry source remarked that the critical issue was not the need for tougher regulations but the need for better implementation of the existing regulations.
“The [department] seems always to believe that if there is a problem then new laws must be introduced, instead of trying to make the existing laws more effective.”
SUDDENLY, almost out of the blue, the parliamentary portfolio committee on trade and industry seems to have woken up to the possibility that there are a variety of measures that could be used to try to rescue the unsecured lending industry from itself.
Up to now the focus has been on wiping out part, or all, of the huge swathes of information held by credit bureaus. But none of the three versions of this proposal received much support from the many parties that have made submissions to the committee over the past year.
Even Treasury deputy director-general Ismail Momoniat was not persuaded that wiping out this information was the appropriate way to deal with the problem. Indeed, anyone who attended Momoniat’s presentation to the committee two weeks ago would probably not be too surprised by the proposed amendments that were released by the committee on Friday.
The deputy director-general likened the financial sector to a nuclear facility – “it provides lots of benefits but you only need one problem to create a crisis”.
It is an excellent analogy, as many of African Bank and JD Group shareholders will attest to.
He suggested that the regulators should have been tougher five years ago, but were under pressure to encourage lending “so as not to be seen as party poopers”.
South Africa is now living with the consequences of that lax attitude. “When people are over-indebted it causes all sorts of problems,” said Momoniat, making special reference to Marikana. He added that intrusive supervision was needed to regulate the financial sector.
If you think that’s tough talking, consider that back in the 14th century, according to Felix Martin in his book Money, the authorities in the Catalonian region of Spain decided that any banker who failed to meet his clients was to be publicly denounced and then summarily beheaded in front of his bank. This makes Basel 3 seem a little wishy-washy.
Group Five
In the aftermath of the fatal shooting of 34 protesting miners at Marikana on August 16, 2012, and the continuing labour unrest in the mining industry, the disclosure by listed construction and engineering company Group Five that it doubled the mining housing component of its R6.63 billion building and housing secured order book in the six months to December is positive news for the embattled mining industry.
The deputy director-general likened the financial sector to a nuclear facility – “it provides lots of benefits but you only need one problem to create a crisis”.
This is particularly so as labour unrest in the mining industry has been partially attributed to the poor living conditions of mineworkers, with many having no option but to live in shacks.
In addition, this is not a new business area for Group Five, which said it had been building housing for the mining industry for many years.
So the doubling of its mining housing order book does not represent a steep increase off a low base.
Group Five is obviously not the only construction firm involved in competing for housing contracts in the mining sector but its comments give an indication of new trends in the mining industry.
Group Five chief executive Mike Upton believed the increase in the group’s mining houses order book stemmed from a recognition in the mining industry that mining houses needed to do something better in terms of the social environment.
The increased investment in housing in the mining industry comes against the backdrop of targets set in the mining charter for the industry to improve the living conditions of mineworkers. However, National Planning Minister Trevor Manuel expressed doubt last year that the mining industry would meet the requirements of the charter.
Mining firms have been severely criticised since the Marikana tragedy for their failure to improve the living conditions of their workers. In light of the continuing labour unrest on the mines, it is strange the industry is not actively involved in spreading the word about what it is doing for its workers – irrespective of whether or not it meets the mining charter targets.