1. PROGRESS REPORT ON THE CONSUMER POLICY FRAMEWORK Presentation to the Portfolio Committee on Trade and Industry 22 June 2005 Magauta Mphahlele

2. PURPOSE OF THE PRESENTATION  To outline the steps followed in the drafting of and consultation on the consumer policy framework;  To provide an overview of the policy and the response to the policy proposals by various stakeholders; and  To outline the way forward with regards to revising the policy, drafting and consulting on the Bill

3. Steps in the policy making process 1. Research conducted in the various areas of consumer protection 2. Draft policy drafted 3. Provincial working group formed to review the policy 4. International and local experts consulted 5. Focus group workshops held with various stakeholders (Industry Associations, Sector Regulators, government departments) 6. Cabinet approval sought for the dti to engage in a broad consultative process 7. Presentation to Portfolio Committee 8. Policy Gazetted 9. Policy tabled at NEDLAC and task team formed 10. Public consultation workshops conducted in all the provinces 11. Comments from various stakeholders received and reviewed 12. Impact assessment of the Policy conducted

4. Research initiatives to identify the Problem:  International Legislative Benchmarking Study Reviewed the scope of consumer law in various countries including Argentina, Brazil, Chile, India, the UK, Finland and Canada)  South African National Consumer Survey Established the extent to which consumers are aware of their rights, the types of violations and consumer’s view of what could be done to improve access to redress  Review of Consumer Protection Measures in South Africa Reviewed current legislative and other mechanisms that protect consumers at National, Provincial, Local and Industry level  Case statistics from complaints resolution and investigations Trend analysis of cases based on number,type and sector as dealt with at National and Provincial level Background to the Policy: The Need For Reform

5. Legislative Framework  very fragmented and outdated, does not cover new market developments– the dti on its own administers up to 23 pieces of legislation that regulate various aspects of consumer protection. Various departments (health, Treasury, Transport) also responsible for consumer protection  There is uneven regulation, with heavy regulation in some industries and reliance on self regulation in some areas. Consumer Rights and Abuses  There is no statute that contains a clear statement on consumer rights. There is widespread abuse in the areas of advertising, contract terms, guarantees, selling methods (inertia,direct,pyramid,),product standards and liability, abuse of personal information, product disclosure etc.  Certain aspects of the purchasing cycle are not regulated, leaving consumers and businesses (especially small businesses) vulnerable and subject to widespread abuse. Access to Basic Goods and Services and Redress  Access to redress and essential products and services is limited for low income consumers  Enforcement capacity is limited and uncoordinated  Sanctions more criminal rather than administrative, limits redress  Rights within the public sector not enforceable due to voluntary public service Batho Pele principles Background to the Policy: Research Findings

6. Overview of Policy Proposals OBJECTIVE Promote a fair and Efficient market place for consumers Comprehensive consumer law that Regulates the whole purchasing Cycle and provides for basic rights MEASURE Provide a consistent, predictable, and effective regulatory framework Provide effective access to redress For consumers and small businesses Establish Consumer Commission That will be responsible for Compliance and enforcement Recognise and support the role of Activist and confident consumers Promote customer responsiveness In the private and public sector Harmonise consumer protection Laws in South Africa Alternative dispute resolution, Decriminalise sanctions, access, Enforce properly Funding and Capacity Building for NGOs Set mandatory standards for service delivery Review, repeal and harmonise various Acts

7. Summary of Comments InstitutionComment Labor (NEDLAC)Labor was concerned with the emphasis on driving competitiveness as it is their view that the developmental stage at which South Africa is warrants an emphasis on the right of access to basic goods and services Business (NEDLAC) Business supported most of the objectives but stressed that it was important to ensure freedom of commercial speech and to minimise compliance burdens on small business National Consumer Forum Law SocietyWanted clarity on how the new law would interact with professional bodies EskomQuestioned the role of current sector regulators in the telecommunications industry SANCUQuestioned the establishment of the National Credit Regulator as they saw it as an expensive but did not provide alternative

8. T he following can be deduced from the comments: There is general support for the need to undertake consumer law reform in South Africa A rights based approach to the law is supported The need to coordinate and strengthen the current enforcement approach and capacity With regards to the regulatory options to adress the identified problems the following could be deduced There is a difference of opinion between business,Consumer NGOs and labor, with regards to the regulatory. From the comments three regulatory options are argued for A hybryd of self regulation and governemnt intervention Asess capacity of current institutions and build capacity of NGOs to reach grass roots Maintaining current status quo but undertaking intensive consumer education and improving enforcement Analysis of Comments

9. Will repeal: –National Consumer Affairs (Unfair Business Practices) Act; –Sale and Service Matters’ Act; –Alienation of Land Act; –Trade Practices Act Will result in amendments to sector laws Overarching new consumer law

10. Practices to be Prohibited: –Misleading advertising and selling practices; bait advertising,referral selling,pyramid selling, third line forcing, inertia selling etc –Unfair terms in consumer contracts; Exclusion of liability, binding the consumer when the co.is at fault, restriction of consumer rights & remedies, unilateral variation of terms etc –Abuse of private and personal information; –Product safety and liability; Explicit recognition of a right to product safety in law; Overarching role of SABS; Liability on manufacturers & other parties Establishing consumer rights

11. Competitive issues & minimum mandatory requirements: –Product quality; Give consumers assurance that what is provided is fair and of an acceptable standard –Guarantees, Warranties and Aftercare; Where offered, must be honored –Disclosure and labeling; Product labeling and description of products &services; Price transparency; Country of origin; Terms and conditions pertaining to transaction –Rights in relation to essential services Establishing consumer rights

12. Concurrent provincial laws –No need for immediate change; –Eventually harminisation with national framework; –Policy level: MINMEC –Enforcement: national laws, regional laws and international mechanisms Concurrency with other regulators –Extend consumer protection to sectors; –Establish coordinating mechanisms at enforcement level Concurrency with provincial & Sector law

13. Proposed regulatory framework New national regulator and tribunal –Champion for consumer protection – proactive identification and prosecution of consumer abuses and contraventions; –deal primarily with national businesses, systemic problems and cross border issues; –cross-cutting responsibility for education; –provides single entry point for consumers (referrals and monitoring) Improving access to redress

14. Provincial consumer affairs & courts : –deal primarily with individual complaints against local/provincial businesses Sector regulators –Deal with consumer complaints and education in sectors SABS –Must deal with product safety issues; harmonization and co-ordination Improving access to redress

15. Other Mechanisms Service NGOs, target rural areas –Legal advice, counseling and mediation –MPCCc provincially –Government Supported Services (accreditation and monitoring) Alternative Dispute Resolution mechanisms: –Business complaints handling; –Statutory mechanisms;(ombuds, small claims court) –Industry voluntary mechanisms; Improving access to redress

16. Vision for consumer movement: –Service NGOs Product testing, product alerts, information dissemination etc. –Advocacy NGOs Research; Market monitoring; Policy inputs; Representation [class action] Government (and business) support –Funding & capacity-building programme –Specific powers in law –Recognition Developing the consumer voice

17. Private sector (voluntary measures) Corporate citizenship; Customer responsiveness; Effective complaints handling systems; Government support: –Standards (largely voluntary) –Current incentives –International and local best practices (guidelines, practice notes) –Recognition (business awards) Public sector Extend Batho Pele to local government (mandatory) Extend consumer protection to utility regulators; Foster coordination with Chapter 09 Institutions Equivalent application of consumer law in the public sector Promoting service excellence

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