Improving the Enabling Business Environment Introduction to the Financial Sector Program

1. Improving the Enabling Business Environment • Introduction to the Financial Sector Program • TA for a Modern Companies Act and Regulations • Companies and Intellectual Property Commission • Design a Scalable Fee Structure USAID Mission Pretoria, South Africa May 15 2010

2. Introduction to the Financial Sector Program (FSP) Program Objective: Expand access to high-quality, affordable financial products and services for SMEs Duration: May 2008-May 2013 Prime Contractor: Chemonics International, Inc. Key Results Areas: • Financial Services • SME Bankability • Knowledge Sharing • Enabling Environment

3. Background FSP Policy Component Primary Objective – to Improve Business Environment. • Improve 11 “core commercial laws and financial sector reforms” to improve business climate. • FSP is working closely with CCRD within the dti to replace old -1973 - Companies legislation – core to business environment. • Companies Act (2008) was drafted PRIOR to USAID involvement – writing the Regulations highlighted many major “errors” and dozens of small mistakes in the Act – hence “Rectification Bill” – causing delay... • FSP focuses on Companies Regulations, Forms and implementation mechanisms including Commissions and Fees.

4. FSP Policy Role in New Companies Legislation & Implementation: Specifically, FSP: • provides TA to Policy Design Process, drafting the Regulations and Forms. • Business Case for the Companies and Intellectual Property Commission established by the Act. • designed the Fee Structure for the Commission.

5. Guiding Policy Principles of New Companies Act & Regulations and Achievements - 1

6. Guiding Policy Principles of New Companies Act & Regulations and Achievements - 2

7. Guiding Policy Principles of New Companies Act & Regulations and Achievements - 3

8. Guiding Policy Principles of New Companies Act & Regulations and Achievements - 4

9. Process and Methodology The “Rectification” ACT adds additional steps but will likely avoid lots of Litigation. Companies Act and Regulations expected to be in force by end-October, 2010.

10. The Process-Transparent and Highly Participative • Public Private Dialogue - major stakeholders, include JSE, SAICA, SAIPA, IRBA, Auditor General, NT, SARS, Law Societies, BUSA, FSB, BASA, COSATU, STRATE, ACCA, TMA, KPMG, Deloitte, PWC, IoD, SACI, BDO, Contemporary Gazette, E&Y, King, leading private sector firms (Barloworld, PnP,etc.), leading law firms, Judges and academics. • Unprecedented opportunity to work with such a broad range of South African professionals and policy makers. Left to right: Prof. Farouk Cassim, Chairperson of the Financial Services Ombudsman Bowman Gilfillan, Prof. TshepoMongalo, University of Cape Town Department of Commercial Law, Pieter Stassen, Managing Director, The Contemporary Gazette; AnsieRamalho, IoD Centre for Corporate Governance; MpheaneLepaku, Co-ordinator, Trade & Policy, Congress of South African Trade Unions (COSATU) at the public-private dialogue November 2009.

11. Typical Comments from Participants: Zodwa Ntuli, DDG/CCRD at DTI, said she received many SMS, emails and calls from stakeholders congratulating DTI for the excellence and transparency of the process and for conducting such extensive public/private dialogue prior to drafting any documents. Pieter Stassen, MD - Contemporary Gazette “The Companies Act is one of our most important and complex laws and the dti is one of our busiest and most complex departments. Yet time was set aside to gain insight from some of the finest legal-business minds in our country. This approach of public/private dialogue shows a perfect balance of insight, long-term strategy, humility and innovation that is a surprise to find in a government department and a pleasure to behold! DTI actually made participants feel they were heard, glad that they attended and excited about future workshops.” Prof. Walter Geach, Graduate School of Business (KZN) “I found the meeting very useful and very informative. It is encouraging to see that the drafters of legislation and regulations consult widely in the drafting processes.”

12. The New Companies Legislation - Scope Ch. 1-2 “traditional company law” –incorporation, names,status (application to SOEs, NFP, etc.) , external companies, capitalization, securities registration, governance, winding up & deregistration. Ch. 3 – Enhanced Accountability and Transparency – Social and Ethics Committee, role and formats. Ch. 4 – Offering of Company Securities – all listing requirements, offering details, Prospectus and sub components. Ch. 5 – Fundamental Transactions and Takeover Regulations – special resolutions, experts, confidentiality, Takeover Panel established. Ch. 6 – Business Rescue – Business Rescue Practitioners, Practice regulations. Ch. 7 – Complaints, Applications and Tribunal Hearings Ch. 8 – Regulatory Agencies and Administration Annexes: FORMS & Interpretive Rules – 124 to date. Fee Schedules – Commission, Panels, Tribunals.

13. Fee Structure Guiding Principles

14. Impact on SMEs and Access to Credit

15. The Way Forward and Critical Success Factors • Legislation in force is beginning, not end. • Continued FSP support has been requested. • Need to CONSOLIDATE policy areas – i.e. NCA, insolvency, tax policy, King III, ethics committees, etc. • Need to support “Guidelines” and “Policy Note” drafting to insure policy consistancy. • Monitor implementation – i.e. fee structure and finally…

16. The Developmental Impact…. • Skill improvement for public sector - policy design, drafting, institutional design, forms, fees, etc. • FSP kept SME interests and needs central to policy making. • The Process – building trust between Government and Private sector – a critical element… • Last Companies Act in force nearly 40 years, this work will positively impact the South African Business Environment for decades to come.

17. Q & A Thank You