WILL INTERNATIONAL OBLIGATIONS STYMIE EXPROPRIATION PLANS?

This article appeared in the 28 November edition of Legalbrief Today, under Policy Watch

Ruling party members of the ad hoc National Assembly committee responsible for drafting amendments to section 25 of the Constitution to explicitly allow for land expropriation without compensation appeared to have been caught on the back foot by last Wednesday’s briefing on the implications of existing international investment agreements. Apparently requested at ‘short notice’ from the Department of Trade & Industry (DTI), the briefing made it very clear that, when foreign-owned property is expropriated, international standards require compensation to be paid at market value. This is noting that, while ‘most’ post-1994 bilateral investment treaties have been terminated, the ‘survival clauses’ now in place are underpinned by international standards. Should the amount offered not be considered ‘satisfactory’, legal challenges and international arbitration would inevitably ensue.

While this information was described by Deputy DG for International Trade & Economic Development, Xavier Carim, as ‘a terrible message’ for the committee to hear and came as ‘a bombshell’, ‘a shock’ and ‘a hard pill to swallow’ in the view of one ANC representative, EFF deputy president Floyd Shivambu was unfazed. Interestingly, he was the only committee member familiar with the 2015 Protection of Investment Act (in force since July 2018) and measures he understands to be in place to safeguard the property rights of foreign investors in SA’s special economic zones. In Shivambu’s view, ‘there is no crisis’ – especially given that the founding provisions of the Constitution not only ensure its status as the supreme law of the land but also SA’s sovereignty. DA representative Werner Horn’s question about international trade agreements at least clarified that these do not ‘speak to property rights’. However, his request for insight into provisions in international law for changes in the status of these rights pointed to the need for detailed information on the survival clause of each terminated bilateral investment treaty.

In anticipation of informed discussions at the next meeting, committee chair Mathole Motshekga asked members to study the presentation document thoroughly. Unfortunately, it was not made available to observers – and, although parliamentary legal adviser Charmaine van der Merwe was present, she was not asked for her views. However, when the committee met on 13 November, Van der Merwe assured members that section 25 can be amended ‘in a way that ensures that SA does not breach its (international) obligations’ (Parliamentary Monitoring Group). It was nevertheless on her recommendation that the DTI was asked to brief members on the implications of treaties to which SA is signatory. A media statement on last Wednesday’s meeting made it very clear that the briefing was a first ‘engagement’ and that ‘further information’ will be requested ‘if necessary’.

On 16 October, in answer to questions posed in the European Parliament, the European Commission confirmed that, in line with European Union (EU) policy, ‘the commission does in general not endorse expropriation without compensation’. ‘Current proposals to allow for expropriation without compensation compound EU concerns (about the unilateral termination of investment treaties), especially in the absence of adequate levels of protection for EU investors,’ the commission noted. ‘The commission pursues the interests and protection of EU companies worldwide through its free trade and investment agreements with those partners who are willing to engage’. A similar position underpins the US African Growth and Opportunity Act, in terms of which certain South African products enjoy ‘significantly enhanced market access’. China (whose bilateral investment treaty with SA is apparently still in force), Germany (whose bilateral investment treaty with SA was terminated in 2013) and the US are SA’s top trading partners (South African Market Interests).

CONSTITUTION SECTION 25 AMENDMENT PROCESS: UPDATE

Parliamentary legal adviser Charmaine van der Merwe was instructed last Wednesday, 13 November, to begin drafting the necessary Constitution Amendment Bill. Her work will be underpinned by themes that emerged during a constitutional dialogue on land reform held by the ad hoc committee to which she reports on this matter. On Wednesday 13 November, political parties represented in the committee were given two days to comment on Van der Merwe’s presentation on these themes.

Contrary to the opening sentence of a DA media statement issued on 15 November, political parties were not required to meet a ‘deadline’ that very day for submitting their input on ‘the draft section 25 amendment Bill’. No such document exists. There appears to have been a misunderstanding, despite the final sentence of a committee press release on Wednesday’s meeting clearly giving political parties ‘until Friday (that week) to make further submissions, if any, on the themes of the constitutional dialogue’. This misunderstanding was communicated more widely in last Saturday’s edition of The Star.

Both the DA’s statement and The Star leave nobody in any doubt about the leading opposition’s position on amending the Constitution to more explicitly provide for land expropriation without compensation, Unfortunately, however, they have misinformed the public on the process being followed by the committee.

Anyone questioning the accuracy of this account of last week’s events should listen to a Parliamentary Monitoring Group sound recording of the meeting, which is freely available to members of the general public.

CONSTITUTION SECTION 25 AMENDMENTS: TWO OPTIONS MOOTED

This article appeared in the 8 November edition of Legalbrief’s Law Society of SA weekly newsletter

For information on the process to be followed in amending the Constitution to provide explicitly for land expropriation without compensation, please refer to the previous article (immediately below this one)

Two possible options for amending section 25 of the Constitution (property rights) will be considered by the ad hoc parliamentary committee tasked with initiating and introducing the legislation required to make explicit what is already implicit in section 25 regarding land expropriation without compensation. This was confirmed in a recent committee media statement following its constitutional dialogue on land reform, when ‘experts and stakeholders’ shared their ‘insights’ on issues of concern. However, a Parliamentary Monitoring Group sound recording of the workshop at which these proposals were presented does tend to point to minor inaccuracies in the statement. Parliamentary legal adviser Charmaine van der Merwe has recommended that either sub-sections 25(2)(b) and 25(3) be amended – or that they remain as they are and that a new sub-section is inserted.

She envisages the amended sub-section 25(2) reading: ‘Property may be expropriated only in terms of a law of general application (a) for a public purpose or in the public interest; and (b) subject to compensation, the amount of which and the time and manner of payment of which have either been agreed to by those affected or decided or approved by a court, provided that a court may determine that no compensation is payable in the event of expropriation of land for the purpose of land reform’. The change envisaged for sub-section 25(3) would then be consequential and would replace the entire sub-section with a provision possibly reading: ‘Where compensation is payable, the amount of the compensation and the time and manner of payment must be just and equitable, reflecting an equitable balance between the public interest and the interests of those affected, having regard to all relevant circumstances’.

Alternatively, a new sub-section could be inserted, possibly reading: ‘Notwithstanding the requirement for compensation contemplated in subsections (2), (3) and (4), for the purposes of instituting land reform and in order to redress the results of past racial discrimination, land may be expropriated without the payment of any compensation as a legitimate option for land reform’. Van der Merwe does not support a presidential panel recommendation that the only amendment required is the insertion of a sub-section specifying the circumstances in which land would be expropriated without compensation. In her view, this would need to be combined with one of the two options proposed.

CONSTITUTION: SECTION 25 AMENDMENT PROCESS CLARIFIED

This article appeared in the 28 October edition of Legalbrief Today, under Policy Watchand was not reserved for subscribers only

For information on proposed amendments to section 25 presented to the parliamentary committee concerned on 6 November 2019, please refer to the article immediately above this one

Amendments to section 25 of the Constitution specifying the circumstances in which land may be expropriated without compensation will take the form of a section 74(2) Bill, which is likely to be subjected to robust public participation in the provinces once the proposed new piece of legislation has been approved by the National Assembly and sent to the NCOP for concurrence. This was unfortunately omitted from a media statement issued by the ad hoc National Assembly committee concerned after its meeting last Friday – a statement only published on Parliament’s website the following Monday.

According to a Parliamentary Monitoring Group sound recording of the meeting, when responding to a call from the ANC’s Zwelivelile ‘Mandla’ Mandela for a longer public participation process, committee chair Mathole Motshekga noted the vital importance of ensuring that Parliament’s ‘constitutional mandate’ in this regard is strictly observed. In the context of Friday’s discussions, he was probably referring to the committee process itself and Mandela did not pursue the matter. However, while most MPs are familiar with the procedures followed by both Houses when considering and adopting a Bill, they may well need to be spelled out in media statements – if only for the sake of clarity.

In the sound recording, committee members are told that themes emerging from their upcoming ‘constitutional dialogue on land ownership’ will inform discussions on policy imperatives to underpin a first working draft of the Bill. These are expected to take place during meetings tentatively scheduled for 13 and 15 November. The working draft will then be finalised for presentation to members on 29 November, when a two-week period of formal deliberations will begin – extending into the National Assembly’s first constituency week. It is anticipated that the draft Bill will be ready for publication in the Government Gazette during the week ending Friday 13 December.

According to Parliamentary legal adviser Charmaine van der Merwe, the three-week period officially allowed for comment from members of the general public will only begin after the festive season – although they will in fact have far longer. This is noting past criticism levelled at other committees when the public commentary period for a draft Bill has fallen during the festive season. However, the main reason for gazetting the proposed new statute early in December will be to give the provincial legislatures and National House of Traditional Leaders time to arrange sittings during January in anticipation of preparing and submitting their own input.

The draft Bill is expected to comprise one substantive clause and a short title. This notwithstanding, given its considerable significance to the entire country and its citizens the deadline for all written submissions has been set at 27 January, after which input will be arranged into themes and considered by the committee. Public hearings are expected to be held between 17 and 21 February. Further deliberations will then ensue and any changes deemed appropriate made, possibly informed by legal opinions. It is anticipated that, from 20 March, the committee will be ready to finalise the Bill for tabling in the National Assembly.

MIXED MESSAGES ON PRESCRIBED ASSETS?

This article appeared in the 17 October edition of Legalbrief Today, under Policy Watch, and was not reserved for subscribers only

Finance Deputy Minister David Masondo has drawn attention to the potentially ‘enormous power and influence’ of pension funds and similar ‘long-term’ fund management instruments to ‘drive’ economic reform and growth by ‘insisting on high standards of delivery, governance, and social responsibility’. Included in his address at a recent ‘private investors for Africa’ event, the Deputy Minister’s observations may have been prompted by ANC plans to ‘investigate the possibility of using pension savings to support SA’s broader social and developmental agenda’ (Daily Maverick), popularly termed ‘prescribed assets’. While the term was not used in his speech, Masondo did ask ‘what prevents’ the ‘potential’ of pension funds and similar fund management instruments from being ‘unleashed’ for developmental purposes.

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The Deputy Minister’s observations at the ‘private investors for Africa’ event tend to add another dimension to his remarks during Tuesday’s National Assembly Finance Standing Committee meeting when, he apparently expressed the view that fund managers should not be ‘compelled’ to ‘invest in bad programmes’ (Business Day). This would serve only to ‘squander’ workers’ ‘deferred’, ‘hard-earned’ wages – savings that ‘must be protected’, according to his speech at the investors’ gathering. Tuesday’s remarks were made before a briefing on the Public Investment Corporation’s (PIC’s) 2018/9 annual report and may have been prompted by concerns about the PIC’s ‘governance challenges’ (EWN) and allegations of improper investment-making processes. It is not clear from the Business Day report if the issue of prescribed assets was discussed at the meeting.

PRIVATE HEALTHCARE MARKET INQUIRY REPORT: IMPLICATIONS FOR NHI

This article was published on 4 October 2019 in the Law Society of SA Legalbrief Weekly, an initiative of the Law Society of South Africa & Juta Law

Recommendations in the recently released Competition Commission’s health market inquiry report were made with the aim of providing a better-functioning environment for national health insurance (NHI). According to the report’s executive summary, this is noting that NHI implementation ‘is some years away’ and that the fund proposed in the 2019 NHI Bill is ‘scheduled to be operational by 2026 at the earliest’. The six-year inquiry found the private healthcare sector to be ‘neither efficient nor competitive’ and characterised by low levels of ‘value-based purchasing’, poorly regulated practitioners and accountability ‘failures’ at many levels. In the panel’s view, this has left consumers ‘disempowered and uninformed’ – especially in the prevailing ‘highly concentrated’ funder and facilities markets. The Department of Health is partly to blame, not having used its ‘existing legislated powers’ to conduct the ‘regular reviews … required by law’ and hold regulators ‘sufficiently accountable’.

Key recommendations include establishing a supply-side regulator (among other things to formulate a ‘needs-based system of licensing’); making a standardised, single benefit package a mandatory medical scheme option; introducing a risk adjustment mechanism (among other things involving income cross-subsidisation and disincentivising risk-based competition between medical schemes); and putting in place a ‘reliable outcomes measurement system’ (allowing consumers to compare and select healthcare providers, and funders to contact those offering value for money). In addition, the report calls for changes in the ‘ethical rules’ of the Health Professions Council of SA (to promote ‘innovation in models of care’ that allow for ‘multidisciplinary group practices and alternative care models’, ending the dominance of the fee-for-service payment mechanism); the development of guidelines for health professional associations (‘to ensure that they are not at risk of potentially anti-competitive behaviour’); and compulsory training for undergraduate and postgraduate students on the cost implications of healthcare technology and the impact of health system financing models on patients’ healthcare choices.

While President Cyril Ramaphosa’s remarks at the health sector anti-corruption forum launch this week tended to point to a focus on the plethora of illegal practices bedevilling state-run healthcare institutions, he nevertheless noted the importance of curbing ‘false invoicing, collusion and price fixing’ by private service providers. Also speaking at the launch, Justice & Correctional Services Deputy Minister John Jeffery said the Council for Medical Schemes has estimated that private healthcare system fraud amounts to ‘approximately R22bn annually’. According to Health Minister Zweli Mkhize, ‘over-servicing’ consumers and ‘over-pricing’ products in some markets are the ‘big issues’ requiring attention as his department rolls out NHI (Engineering News).

Meanwhile, the National Assembly’s Health Committee has extended the deadline for written submissions on the NHI Bill by seven weeks – to 29 November. This will allow ‘important’ healthcare delivery stakeholders two weeks more than they requested to prepare input in anticipation of parliamentary hearings likely to be held next year – although no dates have been announced. The decision may have been influenced by recommendations in the Competition Commission report, which committee chair Sibongiseni Dhlomo believes point to the need for government intervention. Public hearings in all nine provinces are scheduled to begin on 25 October in Mpumalanga, followed by the Northern Cape on 1 November.

NHI BILL: PUBLIC PARTICIPATION PROCESS

The thinking behind Parliament’s decision to hold provincial public hearings this year on the National Health Insurance (NHI) Bill has not been clearly communiciated in the mainstream media. A Parliamentary Monitoring Group (PMG) sound recording of the meeting at which National Assembly Health Committee chair Sibongiseni Dhlomo announced what is envisaged confirmed that several stakeholders have already approached the committee for more time to prepare detailed written submissions and, subsequently, to present their views during parliamentary hearings. Given the importance of allowing committee members enough time to study these submissions and others already received, according to Dhlomo it seems likely that parliamentary hearings will only take place next year – possibly also allowing more preparation time for those requiring it.

Meanwhile, members of the general public will air their views during provincial hearings scheduled to begin on 25 October in Mpumalanga . Hearings in the Northern Cape province will follow on 1 November. Although dates for the remaining provinces have yet to be announced, four days have been allocated to each province thus far. According to the PMG recording, Dhlomo believes it is important that committee members have an opportunity to hear first-hand the perspectives, concerns and expectations of ordinary South Africans before considering those of stakeholders with the resources to make more detailed written submissions and travel to Parliament to present them in person.

A presidential health accord signed in July maps out what needs to be accomplished during the next five years if NHI is ever to get off the ground. Among other things, the compact entails ‘engaging the private sector’ on improving healthcare service access, coverage and quality.

NHI NEWS FLASH:

During a meeting of the National Assembly’s Health Committee on 29 August, Department of Health DG Precious Matsoso told members that work has already begun on drafting amendments to Acts likely to be affected when the National Health Insurance Bill becomes law. They are listed in a schedule to the Bill and include the 2003 National Health Act. Last week, in a written reply to questions from the DA’s Mbulelo Bara, Health Minister Zweli Mkhize provided some insights into ‘direct powers’ likely to be ‘allocated’ to provincial governments in amendments to this Act.

Readers are encouraged to bear in mind that:

  1. Any proposed amendments to the Act will need to be released as a draft Bill for public comment;
  2. Once finalised, that Bill will then need to be tabled in Parliament for processing; and
  3. Public hearings will then need to be held in the National Assembly and, as the Bill proceeds through Parliament, also in the NCOP and provincial legislatures.

This is just one example of the extent to which NHI implementation is likely to be postponed until other legislation affected by the NHI Bill has been synchronised with it. Realistically, that cannot be done until the Bill has been finalised and passed by Parliament.

The same will apply to any proposed amendments to the 1998 Medical Schemes Act. Although a draft Medical Schemes Amendment Bill was released in June 2018 for comment, its proposals appear not to be in line with the NHI Bill – tending to imply that it is being reworked and will therefore need to be released again for public input. It will then need to be tabled in Parliament and undergo the same process as any other Bill.

Against that backdrop, the NHI Bill’s passage through Parliament is likely to be long, arduous and fraught. It could take many years, begging the question: Has this has ever been explained to grassroots ANC members and supporters? If the party’s 2019 election manifesto is any indication, probably not.

ON THE VEXED ISSUE OF ‘PRESCRIBED ASSETS’:

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In the absence of a clear policy statement, speculation is rife about the likelihood of government introducing ‘prescribed assets’ as one measure to rescue struggling state-owned companies and boost economic growth. Vague comments on the subject from President Cyril Ramaphosa and ANC national executive committee member Enoch Godongwana have been quoted endlessly in the mainstream media. However, apart from an undertaking in the ruling party’s 2019 election manifesto to ‘investigate the introduction’ of prescribed assets on the funds of financial institutions – with the aim of ‘unlock(ing) resources for investments in social and economic development’ – only one Cabinet member has made an official comment on the matter.

In June – addressing pension fund trustees at a function in Johannesburg – Trade & Industry Minister Ebrahim Patel urged them to play their role in stimulating economic growth by investing in ‘real assets’. This was noting that government ‘is looking not just to foreign direct investment’ to stimulate the economy but also – ‘and very strongly’ – to domestic investment. The Minister believes fund trustees ‘have a responsibility … to help lift the long-term rate of growth of the South African economy as a key means of realising the pension promise’.

‘A sluggish economy impacts directly on the performance of your overall portfolio,’ Patel is quoted as having said in a Department of Trade & Industry media statement at the time. Against that backdrop, he invited the Council for Retirement Funds to ‘engage with government to learn more about ‘the new administration’s vision’ for promoting sustainable development, along with the interventions being considered. In the Minister’s view, the situation in which SA now finds itself calls for for ‘a longer-term perspective on returns’.

An article along these lines appeared in Legalbrief Today on 12 June, under Policy Watch

IN PARLIAMENT LAST WEEK:

DEBT RELIEF:

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It could take as long as two years to implement the 2019 National Credit Amendment Act, according to Department of Trade & Industry officials. Briefing members of the National Assembly’s Trade & Industry Committee on Tuesday, they emphasised the importance of avoiding any ‘unintended consequences’ identified during a socio-economic impact assessment concluded in May. One could be that credit providers ‘implicitly’ draw a distinction between higher- and lower-risk low-income earners applying for credit – creating a ‘dual credit system’ and pushing the very people the Act seeks to assist away from legitimate credit providers into unregulated, informal markets.

Signed into law last month, once operational the Act will make long-term debt intervention accessible to consumers with a monthly income of R7 500 or less and unsecured debt not exceeding R50 000. However, regulations will need to be developed, released in draft form for public comment and finetuned before the Act can be implemented. In addition, the National Credit Regulator and National Consumer Tribunal will need additional resources to deal with what will inevitably be an increased demand for their services. That said, Trade & Industry Minister Ebrahim Patel made it very clear that the expectations of low-income consumers will need to be carefully managed. The Act will not ‘write-off’ their debt.

LAND EXPROPRIATION WITHOUT COMPENSATION:

The process of developing a Bill to amend section 25 of the Constitution – specifying the circumstances in which land may be expropriated without compensation – could take longer than expected. During Wednesday’s meeting of the ad hoc committee established by Parliament to draft the Bill, it was agreed that, while every effort should be made to meet the 31 March 2020 deadline for tabling it in the National Assembly, constituency work and demands on the time of members chairing other committees may well cause delays.

In keeping with the constitutionally enshrined principle of public partifcipation in the process of drafting new legislation – not to mention the Rules of Parliament – a draft Bill will be released for comment and public hearings held in the National Assembly, NCOP and provincial legislatures.

Before beginning the drafting process, the committee intends holding a workshop at which it will be briefed by experts and key stakeholders on the thinking behind recommendations in a broader report produced by former President Kgalema Motlanthe’s high-level panel, as well as a more recent report compiled by the presidential advisory panel on land reform and agriculture. However, while these recommendations will inform the process of developing the Bill, they are not binding.

Committee members (courtesy of the Parliamentary Monitoring Group): Click on each name for additional information.