CONGRESS OF SOUTH AFRICAN TRADE UNIONS
Submission on the Amendment to the Insolvency Act as a part of the Judicial Matters Amendment Bill [B95-97]

COSATU applauds the amendment to the Insolvency Act which improves the position of workers whose employers become insolvent. We urge the Portfolio Committee on Justice to expedite the passage of the amendment through Parliament and see to it that the legislation comes into effect as soon as possible.

In terms of the amendment, upon insolvency of an employer, workers will have the first claim against the insolvent after payment has been made to liquidators and secured creditors. Workers will - up to a certain maximum amount to be set by the Minister of Justice - be entitled to payment of up to three months salary or wages, payment in respect of leave or holiday pay, and any retrenchment or severance pay due. Also workers will be entitled to payment of any contributions payable to funds, such as, pension and provident funds, and medical aid schemes.

This legislative amendment is part of the Ministry of Labour's five-year programme to transform the apartheid labour market and to see to it that workers have greater protection and security. This is particularly important in the current economic situation which sees numerous insolvencies, as well as fly by night operations, which leave workers totally destitute.

The amendment also brings South African law broadly into line with international standards as outlined in the International Labour Organisation's Convention on the Protection of Workers' Claims (Employer Insolvency) (173 of 1992). In particular, the amendment is in line with Article 6 of the Convention as it:
· Extends the category of workers' claims that are privileged, and
· Increases the privilege enjoyed by workers claims.

Nonetheless, in terms of international precedent, the amendment only constitutes a partial reform of law of insolvency and a more comprehensive review of this aspect of the law is required. For instance, legislation should require that proper notice of the possibility of insolvency is given to trade unions and procedures should be outlined to deal with this issue. This is important in order to facilitate a greater role for trade unions in the process of discussing how insolvencies are to be avoided and how they are to be fairly and efficiently regulated.

In conclusion, COSATU wishes to raise a concern regarding the delay in the passing of this amendment. Although the present amendment to the Insolvency Act was agreed to at Nedlac on 30 May 1996, it has taken almost two years for the matter to be passed into law. Many workers, who could have benefited from the legislation, if it had been passed expeditiously, have been prejudiced as a result of the delay.

In this light, COSATU is concerned that the Portfolio Committee on Justice should see to it that the Minister expedite his obligation to determine maximum amounts that must be paid out in terms of s98A (2)(a). The amendment cannot come into effect until after the Minister has made this determination and it would be a travesty if there should be any further delays in the implementation of this important piece of transformative legislation.