Big business is fuming over the decision by trade, industry & competition minister Parks Tau to withdraw draft regulations to the National Credit Act (NCA) that it said would have eased access to credit for SMEs.
The draft regulations were withdrawn after a public outcry that the proposed amendments would also have allowed educational institutions to be listed as “originators of credit information” who report unpaid tuition fees and arrears to credit bureaus.
Business Unity South Africa (Busa) has now accused the minister of botching the policymaking process and caving in to political pressure to withdraw the draft amendments.
Busa CEO Khulekani Mathe told Business Times on Friday that due process was not followed when Tau withdrew the draft regulations after the department of trade, industry & competition (DTIC) received 20,000 submissions opposing the clauses on student credit information.
He said Tau's move would delay critical amendments to the NCA proposed by business to make it easier for smaller SMEs to access credit. Mathe said their submission did not venture into student debt and credit bureaus.
This withdrawal is a problem on a number of fronts because an instrument that was intended to allow smaller SMEs [below R1m] to access credit without onerous criteria is now on hold
— Khulekani Mathe, Busa CEO
“The department was persuaded, so they started working on the regulation. They put this document out, and while we were working on the responses and submissions, with many in support from our side, the withdrawal happened.
“This withdrawal is a problem on a number of fronts because an instrument that was intended to allow smaller SMEs [below R1m] to access credit without onerous criteria is now on hold. The actual amendment did not touch the issue of credit bureaus having access to information.”
The DTIC said it received more than 20,000 submissions against the proposal even before the deadline for public comment on September 12. A petition with 13,000 signatures also emerged demanding that the regulations include protections from blacklisting for those with outstanding student loans.
“Minister Tau's decision was informed by the overwhelming response, comprising more than 20,000 submissions,” the DTIC said in a statement withdrawing the draft regulations. “Most responses opposed changes to proposed regulations. The process has once more demonstrated the robust nature of South Africa's democracy, in which the public is able to engage with government in an open and transparent manner.
“Minister Tau has committed to undertaking a process which will consider the changes required to enhance the protection of students, while continuing with efforts aimed at improving access to finance for SMEs to plug the existing credit funding gap.”
The draft regulations were also rejected by organisations including the ANC and Cosatu which cited the “unintended consequences of blacklisting student debt and the subsequent impact upon the ability of students to find work”.
However, Busa said a major consideration for business during the consultation process was that the current credit system did not grant access to developmental credit to many SMEs with a turnover of R1m and below, as many were regarded as natural persons and not judicial persons.
A number of economic growth plans, including the National Development Plan (NDP), regard SMEs as the backbone of the country's economic growth and job creation vision, forecasting that SMEs could create 90% of the 11-million new jobs it envisages before 2030.
Mathe said the clauses on student debt were not new but were inserted in the NCA from its inception in 2006 — but were not used for the malicious intentions that critics read into them.
“Instead of the government explaining in detail that this amendment really affects a couple of words, they basically give in to the political question and withdraw it,” he said.
Mathe questioned the DTIC's claim that it had received 20,000 submissions, mostly opposing the draft regulations, saying the government could not thoroughly process that number of documents and submissions in one week, starting last Friday, and to suggest that they had assessed that many in such a short time was “simply not true”.
By handling the public comment process in the manner that he did, Tau had botched the policymaking process, Mathe charged. He said if 80,000 submissions were in favour of the amendments, there was no way the government could have studied those adequately.
“It is bad for policymaking if ministers can just do this sort of stuff. So we are disappointed by this action, but hope we can salvage the good out of this and get the amendments that will give effect to allowing more credit to SMEs and that is not a compromise.”
Mathe said Busa had not made a decision on whether it would seek legal remedies, but stressed that the policymaking and lawmaking processes needed to be protected. “Because if you don’t protect it, then what’s next? Any policy can be undermined on the flimsiest of grounds.
“In any given week, I mobilise teams to respond to one piece of policy legislation in Nedlac and the public domain. Why should I continue to do that when, after mobilising, the plug can just be pulled?”
The EFF said in a statement that while it welcomed the withdrawal, it did not regard it as an act of goodwill, as students were already “trapped” in a system in which universities withhold certificates and qualifications from graduates who owe fees.
“Instead of resolving this crisis, the ANC and DA sought to escalate it by handing over student debts to credit bureaus, to be sold for profit in the debt markets. This is how white monopoly capital is enriched, while the dreams of black youth are suffocated,” the EFF said.
“These regulations were designed to guarantee that young people in this country do not stand a chance to prosper in any way. As we argued in parliament yesterday, the link is clear: when young people are denied access to education, when they are trapped in debt, and when they are threatened with blacklisting, they are left vulnerable to human trafficking, drugs and alcohol abuse.”
According to Universities South Africa (USAf), an umbrella body representative of the country's 26 public universities, the total gross student loan debt owed to tertiary institutions had by this year reached a staggering R21.7bn.
Meanwhile, the ANC and Cosatu lauded the minister’s decision to withdraw the draft regulations. The ANC said its student body affiliate, Sasco, had said the regulations “did not reflect the policy of the ANC”.
“The regulations constituted a flagrant violation of access to higher education and the role of higher education in employment creation ... The ANC welcomes the withdrawal of the regulations. The ANC calls upon the private sector to contribute to the employment of young people and to facilitate their entrance into the labour market. Students should not be blacklisted for a debt owed to educational institutions.”
Matthew Parks, Cosatu’s parliamentary co-ordinator, said a more holistic debate was needed on how the country can increase access to economic resources for businesses and ordinary South Africans.
“Democracy is by its nature noisy, and South Africa’s is no exception. We are pleased that minister Tau responded with the necessary political maturity and humility to swiftly address the concerns sparked by the draft regulations,” Parks said. “This is precisely the kind of leadership needed to resolve society’s often complex and even contradictory challenges.”
He urged the government to pay particular attention to the plight of thousands of tertiary graduates who are struggling to find work, working-class families who no longer qualify for the National Student Financial Aid Scheme (Nsfas), and to give capacity to the sectoral education training authorities (Setas).
“These are all outside the responsibilities of a minister for trade, industry & competition but, as highlighted by the legitimate concerns raised, they need to be resolved to ensure graduates find work and are not suffocated with student debt.”
Additional questions sent to the DTIC had not been answered at the time of publication.
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