Introduction

1. Telkom SA Limited ("Telkom") welcomes the opportunity to make submissions to the Parliamentary Portfolio Committee on Trade and Industry on the National Credit Bill, 2005 ("the Bill").
2. Telkom would like to take part in any oral hearings that may be held pursuant to the invitation for comment, and would require a timeslot of thirty minutes.

Objects

3. Telkom supports the objects of the Bill as sited in the preamble and in the objects clause. For purposes of realising the objects of the Act however, and in order to avert unintended consequences from arising, Telkom seeks to point out certain elements of concern.

General

4. Whilst Telkom is in the business, inter alia, of providing telecommunications equipment and to render telecommunications services to its customers on a deferred payment basis, with interest being levied on accounts in arrears, it should not for that reason alone be perceived as constituting a credit provider proper. Whatever underlying deferred payment or credit arrangement there may be, its essence is and will always be incidental to Telkom’s principal business. What is true for Telkom, in our view applies equally to electricity and water reticulation utilities and the like.

Application of the Bill

5. It is felt pertinent to seek clarity concerning the application of the Bill, which, in its present formulation, creates some apparent uncertainty as to the extent of its application to telecommunications operators.
6. If applied to its full extent, telecommunications operators would inter alia be obliged to register as credit providers with the National Credit Regulator; failing which they may not enter into any credit agreement, and any agreement entered into notwithstanding will be unlawful and void. Clearly, such a situation would fall foul of the apparent intention of the Bill to regulate the consumer credit industry and the consumer credit market "proper".
7. Prior to the latest rendition of the definition of "credit facility" in particular, the intention was clearly to exclude providers of "incidental credit" from application of the credit lending industry regulatory parts of the Bill. Currently the position is somewhat obscured; hence the necessity for clarity of formulation.
8. Moreover, due application of the Bill to post-paid service agreements if a "fee, charge or interest is payable" is unfortunate and clearly an unintended consequence of the Bill. (s 8(4)(f)).

Credit Agreements

9. A number of related definitions overlap to create uncertainty as to the extent of the Bill’s application on telecommunications service providers. These include, inter alia, designation of the terms "credit agreement", "instalment agreement", "credit facility" and "credit transaction". What concerns us most is the latest rendition of the definition of "credit facility", insofar as it relates to the supply of goods and services.
10. In terms of section 4, the Bill applies in essence to every credit agreement between parties dealing at arm’s length. Moreover, any agreement or transaction pursuant to section 8(3) and 8(4) constitutes a "credit facility" or "credit transaction", both of which constitutes credit agreements "proper" within the application of the Act.
11. The subsequent inclusion of specific references to "goods and services" in the definition of "credit facility" is, in our view, unfortunate and responsible for much of the current perplexity for telecommunications operators. It overshadows to an extent the exclusions created under the definition of "incidental credit", to the extent that the "facility" and not the nature of the constituent "credit" determines to what extent the Bill applies to an operator.
12. We suggest that a credit facility in its proper meaning should refer to an agreement or instrument that outlines terms for the repayment of a debt pursuant to money’s advanced by a credit provider to or on behalf of a consumer. The accuracy of the inference in terms of manifest purpose is evident from references to the value of a credit facility (section 80), reduction and increase of the credit limit of a credit facility (sections 118 and 119) and the settlement value of a credit facility (section 113).
13. In fact, under the definition of "credit provider", "the party who extends credit under a credit facility" is contrasted with "the party who supplies goods or services under a discount transaction, incidental credit agreement or instalment agreement". It seems to indicate, does it not, that the intention is to treat the sale of goods and services, and more specifically, the rendition of essential type services by utilities on quite a different basis.
14. Telkom suggests that the provision of goods or services are correctly linked to discount transactions, incidental credit agreements or instalment agreements and also that the specific treatment of incidental credit under the exclusions provided for in section 5 of he Bill is therefore both logical and warranted.

 

 

 

Instalment Credit Agreement and Incidental Credit

15. Inasmuch as both utility services and incidental credit warrant differentiated treatment in terms of the Bill, Telkom suggests that it rationally follows that credit afforded pursuant to the provision of goods that are logically associated with and incidental to the rendition of utility type services should be treated as "incidental credit" for all purposes under the Bill.

Conclusion

16. As stated previously Telkom reiterates its support of the objects of the Bill; in particular, insofar as it relates to the promotion of fair and non-discriminatory access to consumer credit, the introduction of measures to prevent over-indebtedness and the curtailment of abuses by credit providers.
17. Moreover, Telkom restricted itself to only those provisions that would have the effect of markedly and unfairly affecting service delivery and cost.

____________________