Financial Sector Laws Amendment Bill: public hearings

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Finance Standing Committee

18 May 2021
Chairperson: Mr J Maswanganyi (ANC)
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Meeting Summary

Video: Standing Committee on Finance

The Standing Committee on Finance met on a virtual platform to hear public comment on the Financial Sector Laws Amendment Bill. Two organisations made presentations: the Congress of South African Trade Unions (COSATU) and Betweenity, an independent news ‘app’ that tracks competition law and policy developments in Africa.

COSATU supported the introduction of the Bill without delay. The Union had one concern relating to clause 166 in the Bill which was concerned with the ranking of recipients of a liquidated bank’s assets. COSATU strongly believed that secured lenders should not be ranked first as they had access to alternate funding. COSATU requested that pensioners, the unemployed, workers in general, particularly those working at that bank, be ranked first to receive their funds.

Betweenity proposed that an amendment be made to clause 19 which addressed Section 18 of the Competition Act. Betweenity proposed that, although the Bill gave the Governor of the Reserve Bank jurisdiction over any merger under the Financial Sector Regulation Act, the Bill should also give the Competition Regulator the opportunity to review such a merger within six months after the implementation of process 166S and to impose conditions, if so required.

There was no discussion of the merits or demerits of the proposals by the Committee.

Meeting report

Opening remarks

After a brief wait for a quorum, the Chairperson welcomed Members and everyone on the platform. He noted that the purpose of the meeting was to hear two submissions on the Financial Sector Laws Amendment Bill. The two organisations presenting were COSATU and Betweenity. The presentations would be followed by a discussion on issues raised.

The Chairperson excused himself briefly to attend to matters relating to the by-election in his constituency. He requested Ms P Abraham (ANC) to stand in as Acting Chairperson.

Presentation by the Congress of South African Trade Unions (COSATU)

Mr Matthew Parks, Parliamentary Liaison Officer , COSATU, made the presentation. He began by thanking the Committee for the opportunity to give input on the Bill.

Mr Parks declared that the Financial Sector Laws Amendment Bill was very necessary and long overdue. It would protect workers, pensioners, banks and the economy. When banks collapsed it was workers, pensioners, and depositors whose monies were lost. It was bank workers who were retrenched and whose pensions were stolen.

The context was the African Bank and VBS collapse where workers’ savings and pensions were lost. Mr Parks declared that, to state the obvious, when such things happened, the poor were hit the hardest. SMMEs were also hard hit and consequently retrenched workers and closed their doors. The problem with banks collapsing was an international occurrence, but in SA’s current economy, government could not pour funds into rescuing banks.

COSATU supported the Bill and it also supported the introduction of a depositor’s insurance but premiums had to be affordable and should not become a burden to the depositors.

COSATU’s main concern lay in clause 166(W)(2)(A, B & C). That clause was concerned about the ranking of claims in the case of a liquidated bank. It appeared that secured lenders, such as other banks, would be first in the queue. Ordinary depositors would be fourth in the queue. That was a huge concern. Workers and pensioners had no other sources of income and could not wait months to be re-imbursed.  Banks, etc. had other sources of income and could afford to take a hit. It was wrong and immoral and could not be in line with a progressive interpretation of the Constitution to force the poorest to wait longer than corporates that had access to funds.

COSATU proposed that unsecured loans be ranked number one in the queue and that the legislation specifically state that pensioners, the unemployed and workers, including the workers at the bank to be liquidated, be ranked number one in the queue. It also believed that the wording in the clause should be tightened up.

In conclusion, Mr Parks hoped that Parliament would not delay in passing the Bill and that the proposed amendment be included in the Bill.

Ms Abraham thanked COSATU and called on Betweenity to present.

Presentation by Betweenity

Ms Odie Strydom, Founder and Director, Betweenity, presented on behalf of the organisation. Her connectivity was very unclear and Members waited while she re-connected with greater success.

Odie Strydom began by providing the background to Betweenity.  

Ms Strydom stated that the focus of her comments was on clause 19 of the Bill dealing with an amendment to section 18 of the Competition Act (1998). Section 18 dealt with instances where the right of the Competition authorities to review mergers was “ousted” by the right of the Minister of Finance, particularly where a merger requiring approval fell under the Banks Act or the Financial Markets Act. The Bill gave the Governor of the Reserve Bank similar rights to the Minister to remove the jurisdiction of the Competition authorities where a merger took place in terms of section 166S of the Financial Sector Regulation Act, 2017.

Ms Strydom’s proposal was to give the Competition Regulator the opportunity to review the merger within six months after the implementation of process 166S and to impose conditions, if so required. The intention would be not to oust the Competition authorities but to delay it. Any conditions would be imposed in consultation with the Governor of the Reserve Bank. She proposed six arguments to support her position, one being banking legislation and irregularities in banks across Africa.

Deliberations

There was no discussion by Members.

Concluding statements

The Chairperson invited the presenters to conclude with any final points they wished to add.

Mr Parks stated that he would simply repeat his two points: firstly, that COSATU supported the legislation and secondly, that COSATU requested the wording related to the ranking of creditors in the case of a collapsed bank be amended to put pensioners, the unemployed and workers first in the queue.

Ms Strydom noted that different Regulators learnt from each other and that would get stronger in Africa under the African Continental Free Trade Area (AfCFTA). It would be great if the SA Reserve Bank and the Bill could set the example of retaining oversight and entrenching the need for such a Bill to retain the responsibility for ensuring the competitiveness of markets, in particular because it would save decades of economic distress. In the economic sector, ‘learning by doing’ often came at a very great economic cost and a country could lose decades of economic growth. Her point was that it would be great if African states could learn from one another, and if SA could take the lead.

Ms Abraham noted that the presenters had been given sufficient time to elaborate their points, especially because representatives of the Reserve Bank and National Treasury were in the virtual meeting to hear their input. She thanked the presenters who were always prepared to ensure that there was public participation in the legislation process. They made the Committee’s job that much easier.

 

Concluding remarks

The Secretary stated that the Committee would be meeting the following day to hear submissions on the Pension Funds Amendment Bill [B30 – 2020].

 

Ms Abraham thanked everyone, particularly the participants and closed the meeting.

 

The meeting was adjourned.

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