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Familiarise yourself with the key features of the new Credit Act.

The National Credit Act No. 34 of 2005 (“the Act”) is new legislation which seeks to regulate the credit industry throughout South Africa, from pawn brokers to large banks, and also to protect the common consumer.

Credit agreements that fall squarely within the ambit of the Act are small agreements up to R15 000.00 and intermediate agreements between R15 000.00 and R250 000.00.

However, the Act does not apply to large agreements in excess of R250 000.00 in terms of which the consumer is a juristic person whose asset value or annual turnover is below R1 million.

The application of the Act is limited in respect of juristic entities whose asset value or annual turnover exceeds R1 million, and incidental credit agreements relating to overdue accounts for services rendered or goods supplied.

The Act commenced on 1 June 2006 and will be implemented in various stages.

The first stage of the Act relates to the registration of credit providers with the National Credit Regulator. The deadline to register as a credit provider was 31 July 2006 and any credit provider that has not registered may not provide credit.

The second stage of the Act came into effect on 1 September 2006. This part of the Act deals with provisions pertaining to the regulation of credit bureaus and the establishment of the National Consumer Tribunal, which is a body tasked with considering applications and investigating allegations of prohibited conduct.

The remainder of the Act comes into effect on 1 July 2007 and will implement the restrictions on credit agreements and the manner in which defaulting credit consumers can be pursued through legal proceedings.

Key features which the Act attempts to address are:

  • Language in credit agreements must be simple, understandable and available in any of the official languages;
  • A credit provider is obliged to give a quote to credit consumers setting out all costs, which is binding for 5 days;
  • Advertising and marketing must include prescribed information on the cost of credit;
  • A credit provider may not engage a consumer at their work or home premises unless invited to do so;
  • Reasons must be provided if a credit application is declined;
  • Credit limits may not be automatically increased without the consumer’s prior consent;
  • Reckless lending is prohibited and agreements falling foul may be set aside;
  • Interest and fees are regulated on all credit agreements; and
  • Records kept with credit bureaus are strictly controlled and consumers have the right to a copy of their credit record.

Debt counselling is introduced to facilitate restructuring of debts for over-indebted consumers.

Grant Herholdt is a Director of Durban law firm Garlicke & Bousfield Inc. (

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Make sure your fixed term contracts are in order.

In the much publicised case of the Executive Mayor of the City of Cape Town Municipality there are some important learning lessons that come out in fixed term contracts from this case.

The Executive Mayor, at the time, extended the City of Cape Town’s Municipal Manager’s fixed term contract by a one year period. After the municipal elections and a change in political parties the newly appointed Mayor and City Council challenged the validity of the extended appointment before the High Court. The Municipal Manager himself challenged the constitutionality of the council’s action in attempting to remove him from his office.

In the cases of Mgoqi v City of Cape Town & Another; and the City of Cape Town v Mgoqi & Another (2006) 27 ILJ 1422 (C) these matters are decided upon.  Interestingly the High Court held that the power to appoint the municipal manager was with the City Council and that the legislation made no provision for the council to delegate that power to the Executive Mayor. The extension of the contract of the Municipal Manager was therefore invalid. The Court rejected the defense of the Municipal Manager that by termination of his services the City of Cape Town Municipality had violated his constitutional right to fair labour practice and therefore had constructively dismissed him.

What would have been interesting and a different challenge is if it had been based on the fact that a reasonable expectation had been created and not on the basis of the validity of the previous Mayor’s extension of his contract.

Hypothetically if the Municipal Manager performed well in his contract of employment for a three year period and lets assume they also had a performance management system in place which indicated that he had performed very well in his job, and the new City Council then did not renew his contract, on these set of facts he could then argue that a reasonable expectation of renewal had been created. It is this basis of challenge that lies at the heart of many fixed term contracts. The legal framework for this challenge has been created under the dismissal heading of section 186 of the Labour Relations Act No. 66 of 1995, as amended.  More and more challenges are being made by people who have had numerous extensions of fixed terms contracts and where in the time of the contract expectation of renewal have been created.

Jonathan Goldberg is the Chief Executive Officer of Global Business Solutions ( He is an accredited senior commissioner of the Commission for Conciliation, Mediation and Arbitration, and serves on the IMSEC and Tokiso Dispute Resolution panels.

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Traditional Health Practitioners Act is rejected by Constitutional Court.

The highly debated and publicised “Traditional Health Practitioners Act 35 of 2004” (the THP Act) was declared unconstitutional and thus invalid in the recent Constitutional Court judgment of Doctors for Life International v Speaker of the National Assembly & Others (Case CCT 12/05).

The THP Act was but one of the statutes whose validity was challenged by Doctors for Life International (DFL). DFL argued that Parliament failed to fulfil its constitutional obligation to facilitate public involvement when it passed four Bills, all of which related to health issues. These Bills are: the Sterilisation Amendment Bill; the Traditional Health Practitioners Bill; the Choice on Termination of Pregnancy Amendment Bill; and the Dental Technicians Amendment Bill.

However, DFL’s complaint was confined to the process followed by the National Council of Provinces (NCOP).

The Traditional Health Practitioners Act in particular was passed into law on 7 February 2005. The Act was “intended to bring about new dispensation of regulating traditional health practitioners”. From the outset, the Bill to the THP Act sparked great public interest, in particular from the view of employers and employees alike.

The Act provided for the establishment of Interim Traditional Health Practitioners Council with which traditional healers would be able to register themselves.

Once registered with this recognised body, traditional healers would be able to issue legitimate sick notes to employees, which would, in turn, comply with the requirements of section 23(2) of the Basic Conditions of Employment Act 75 of 1997. It was this issue which caused the most concern amongst employers, with fears raised that this could lead to further abuses of sick leave and higher levels of absenteeism.

In noting that there had been tremendous public interest in the THP Act, and the socio-economic relevance of the passing of this Act to South Africa’s transformation, the Constitutional Court was of the opinion that public participation in the passing of this legislation was imperative to the validity of the Act. The constitution places a duty on Parliament to ensure that there is public participation, to some degree, in the law making process.

The Court pointed out that, “the very purpose in facilitating public participation in legislative and other processes is to ensure that the public participates in the law making process consistent with our democracy.”

In creating law, the goal that our legislature is to strive towards is public participation – as to legislate otherwise would only be in contradiction of principles, which underlie our democracy - being amongst others transparency and accountability.

In satisfying this duty of public participation in the law making process all that is required of the legislature is that they act reasonably in the affording of opportunity for public comment and involvement.

In the law making process however, the Court found that there had been insufficient or unreasonable levels of public participation at provincial level – especially when viewed in light of the underlying rationale of the Act, the injustices that it sought to correct and the widespread implications of its provisions once enacted.

The importance of public participation in the THP Act was further impressed by the “decision of the National Council of Provinces that public hearings would be held in provinces and the view of most provincial legislatives that public hearings were required”.

As six of the nine provinces did not hold public hearings nor were written submissions invited, the Court held that the duty of the National Council of Provinces to facilitate public involvement with regard to the enactment of the Act in the Bill format had not been fulfilled sufficiently. As a result, the conduct of the National Council of Provinces was deemed inconsistent with the constitution and therefore invalid. This order invalidating the statutes has been suspended for a period of 18 months to enable Parliament to re-enact these statutes in a manner that is consistent with the constitution.

The effect of this judgment is that in order for the THP Act to be seen as valid, it is imperative that the public participation process is seen as reasonably complying in relation to the importance, and the impact the enactment of the Act will have. This will have to occur before the THP Act will be legitimately passed into law.

In the employment field in particular, this means a further delay in the establishment of the Interim Traditional Health Practitioners Council, which would afford traditional healers the opportunity of issuing legitimate sick notes for purposes of sick leave.

Ndumiso Voyi is an Associate of specialist law firm, Leppan Beech Inc. (

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Sympathy to an employee accused of theft may prove costly.

It is a sad truth, but it's not always wise to be sympathetic to an employee who has been caught with fingers in the jam jar. It might even prove costly, particularly if the recipient of the benevolence calls in the CCMA.

Leaving aside whether the employer is committing the offence of compounding by failing to complain of a criminal offence to the SAPS, it's not unusual for an employer to decide against reporting a theft by an employee.

Instead, many employers deal with the problem by suggesting to the employee that a resignation would be a good idea. In return, the employee is assured that the SAPS will be none the wiser. Usually, that would be the end of the matter as it is a satisfactory arrangement to both the parties.

Unfortunately, there can be a catch to this seemingly straightforward exchange.

Take the case of Daniels and Cape Promotional Manufacturing (Pty) Ltd 2006 27 ILJ 196 (CCMA). A number of wallets at the workplace went missing. The employer established that Ms Daniels was responsible for their disappearance. When confronted, she admitted her guilt and was given the option of either explaining herself to the SAPS or resigning. She chose the latter and signed a letter of resignation, prepared for her immediate signature.

This procedure was not to the liking of Ms Daniels. Instead of manifesting remorse or gratitude at having no criminal charges levied against her, she referred the matter to the CCMA, complaining that she had been constructively dismissed and that her employer had forced her to sign the letter of resignation.

The Commissioner at the CCMA found that "the pressure to resign was significant", given the threat of the police. He also found that no shop steward had been invited to assist Daniels and she had not been given sufficient time to ponder upon her plight before being required to sign the letter of resignation.

The Commissioner accepted that Daniels had in fact stolen the wallets. Yet, such a finding did not mean victory for the employer who must have been flabbergasted by developments.

It was the Commissioner's view that a choice of facing a disciplinary inquiry or signing a letter of resignation would have been fair and not constituted constructive dismissal. However, Daniels had not been given an opportunity to state her case. He concluded that the constructive dismissal was substantively fair, that is, there was good reason for the dismissal, but that it was procedurally unfair. He awarded two weeks' remuneration as compensation.

The message from the Daniels case is clear. It illustrates the dangers of a loud backfire for what might appear to be an act of generosity by the employer. Managers will have to tread carefully when offering the choice of facing the consequences of a criminal act or placing a signature on a letter of resignation.

Fortunately, there are other ways in which an employer may deal with the type of issues in the Daniels case, but legal advice is recommended.

Martin Oosthuizen is an attorney with Shepstone & Wylie Attorneys' labour law department (

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Survival these days depends for most of us on earning a living.

Occasionally disputes arise between the parties when an employee believes that he has not been paid properly.

The Labour Relations Act makes a distinction between remuneration and benefits. Simply put, remuneration means the money paid for the work done, but benefits however are not defined in the Act and it has been left to the Labour Court to determine whether an amount constitutes a benefit.

Examples of benefits are a housing subsidy, medical aid or a provident fund.

The distinction is important because if a dispute concerns remuneration, this will be determined by the Labour Court. No difficulties arise here.

If the dispute concerns a benefit, however, the employee must first prove that what he is claiming does in fact constitute a benefit. Should he fail in this first test, then the CCMA will not have jurisdiction to hear the dispute and the case will be thrown out.

The difficulty facing the Labour Court when determining a benefit is that if it gives the concept a wide definition then it could become embroiled in making new terms of employment for the parties which they have not agreed to. If the concept is given a restrictive definition, then employees may find that they have no forum in which to have their dispute determined.”

The current position of the Labour Appeal Court is that a benefit must arise out of the contract of employment.

This causes grave difficulties for employees, who believe that they are entitled to a benefit such as a travelling allowance or housing allowance, which is not specifically provided for in their contract of employment.

Decisions of the Labour Court (which are subordinate to the Labour Appeal Court), are critical of this restrictive approach. In its view, the concept of remuneration is wide enough to include benefits. In addition, where an employer has discretion to grant a benefit, that discretion must be exercised fairly. This would ordinarily mean that the employer must consult with its employees before exercising its discretion. Where the contract is silent with regard to a benefit and the employee is able to show that he has a legitimate expectation that the benefit would be granted, then the CCMA ought to have jurisdiction to determine the dispute.

It is therefore critical for an employee who intends challenging his employer regarding the provision of a benefit to show that the benefit does arise out of the contract of employment. It is possible that this term could be verbal or implied by the party’s conduct. This is a technical area of our law and legal assistance should be obtained.

Dave Vinnicombe is a Director at Durban law firm, Garlicke & Bousfield Inc. (

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