A Call for the Transformation of the South African Insurance Industry: An Analysis of the Insurance Bill 2016

A Call for the Transformation of the South African Insurance Industry: An Analysis of the... Abstract This article comments on the South African Insurance Bill, 2016. It examines the constitutional obligations imposed on the legislature when enacting legislation using existing jurisprudence, it argues that the Insurance Bill is unconstitutional to an extent that it omits to incorporate, a transformation policy that is designed to transform the insurance industry and address the economic imbalances of the past. The article recommends that Parliament should include a clear transformation objective in the Insurance Bill. I INTRODUCTION AND BACKGROUND The Constitution of the Republic of South Africa, 1996 (the Constitution) is hailed as one of the most progressive constitutions in the world. Most importantly the Constitution, is known to be transformative,1 as it expressly provides the primary basis for transitioning from the injustices of the past2 to an ideal South Africa based on dignity, freedom and equality.3 In this regard, the epilogue to the Interim Constitution of 1993 is informative as it stated.4 This Constitution provides a historic bridge between the past of a deeply divided society characterised by strife, conflict, untold suffering and injustice, and a future founded on the recognition of human rights, democracy and peaceful co-existence and development opportunities for all South Africans, irrespective of colour, class, race, belief or sex. Equally informative is the preamble to the Constitution, which provides in pertinent part that [W]e, the people of South Africa, recognise the injustices of our past. . . [and] therefore … adopt this Constitution as the supreme law of the Republic so as to– heal the divisions of the past and establish a society based on democratic values, social justice and fundamental human rights; lay the foundations for a democratic and open society in which every citizen is equally protected by law; [and] improve the quality of life of all citizens and free the potential of each person... A number of scholars have written about the transformative nature of the Constitution and the meaning of transformative constitutionalism.5 For example, Klare sees transformative constitutionalism as ‘a long-term project of constitutional enactment, interpretation and enforcement committed to transforming a country’s political and social institutions and power relationships in a democratic, participatory and egalitarian direction.’6 He describes transformative constitutionalism as: an enterprise of inducing large-scale social change through non-violent political processes grounded in law. I have in mind transformation vast enough to be inadequately captures by the phrase ‘reform,’ but something short of or different from revolution in any traditional sense of the word. In the background is an idea of a highly egalitarian, caring, multicultural community, governed through participatory, democratic processes in both polity and large portions of what we now call the ‘private sphere.’7 Another perspective on the concept of transformative constitutionalism is associated with Sanele Sibanda, who advocates that the concept should be linked to the eradication of poverty.8 Sibanda argues that … in the South African context the failure to more directly and concretely connect the goals of the Constitution’s transformative vision with ideals of delivering truly egalitarianism outcomes and poverty eradication creates room for a charge to be levelled that asserts that as currently conceived constitutionalism is viewed as an end in itself, rather than as a means to an end. In the context of South Africa as a post-independence society that end was and must, surely, continue to be the political, social and economic liberation – especially for those whose current destitution is as a direct consequence of violent and racist policies of former governments.9 To add to this, the Constitutional Court has emphasized that the society envisioned by the Constitution is one based on the ‘values of human dignity, the achievement of equality and the advancement of human rights and freedoms.’10 The Constitutional Court has consistently held that the achievement of substantive equality is one of the fundamental objectives of the Constitution.11 It has also confirmed that the Constitution ‘recognizes that decades of systematic racial discrimination entrenched by apartheid legislation cannot be rid of without positive action being taken to achieve that result, especially given that the effects of discrimination may continue indefinitely unless confronted with a commitment to end it.’12 To illustrate this point, in National Coalition for Gay and Lesbian Equality v. Minister of Justice13 the Constitutional Court affirmed the importance of remedial measures to achieve substantive equality and stated: It is insufficient for the Constitution merely to ensure, through its Bill of Rights, that statutory provisions which have caused such unfair discrimination in the past are eliminated. Past unfair discrimination frequently has ongoing negative consequences, the continuation of which is not halted immediately when the initial causes thereof are eliminated, and unless remedied, may continue for a substantial time and even indefinitely. Like justice, equality delayed is equality denied. Therefore, section 9(2) of the Constitution encapsulates the commitment to achieve substantive equality and remedy the mischief of past discrimination. The section provides: Equality includes the full and equal enjoyment of all rights and freedoms. To promote the achievement of equality, legislative and other measures designed to protect or advance persons, or categories of persons, disadvantaged by unfair discrimination may be taken. As the Constitutional Court has acknowledged in a number of cases, measures that bring about transformation will inevitably affect some members of society adversely, especially those members of previously advantaged groups.14 However, this does not detract from the positive constitutional commitment to achieve substantive equality. There is no doubt that this commitment is more demanded in the insurance industry, where for decades the industry has been, and continues to be, dominated by companies controlled and owned predominantly by those who were privileged under apartheid and had exclusive access to the industry.15 It is for this reason that the Insurance Bill, which is currently being considered by Parliament,16 is significant to be examined based on the constitutional obligations of Parliament. Furthermore, the urgent need for economic transformation in South Africa has recently been highlighted by the President of South Africa, Jacob Zuma, in his 2017 state of the nation address. President Zuma explained the meaning of transformation as follows: We mean fundamental change in the structure, systems, institutions and patterns of ownership, management and control of the economy in favour of all South Africans especially the poor, the majority of whom are African and female as defined by the governing party which makes policy for the democratic government.17 It is against this background that, this article examines the Insurance Bill. There is another background that this article relies on. At the back foot of the global financial crisis, South Africa announced that it would reform its financial regulatory structure by adopting the twin peaks model of regulation.18 Following this decision, two important bills—the Financial Sector Regulation Bill 201619 and the Insurance Bill 201620—were introduced in Parliament to give effect to the new twin peaks model of financial regulation. This article does two things. Firstly, it examines the constitutional obligations imposed on the legislature when enacting legislation, and as pronounced by the Constitutional Court. In light of the court’s jurisprudence, the article argues that the Insurance Bill is unconstitutional to extent to that it omits to incorporate, as one of its key objectives, a transformation policy designed to transform the insurance industry and address the imbalances of the past. Secondly, the article recommends that Parliament should take lessons from its previous legislative interventions, particularly in the fishing and mining industries and include a clear transformation objective in the Insurance Bill. II WHAT IS PARLIAMENT’S OBLIGATION UNDER THE CONSTITUTION WHEN ENACTING LEGISLATION? Section 7(2) of the Constitution provides that ‘the state must respect, protect, promote and fulfil the rights in the Bill of Rights.’ Relatedly, section 8(1) of the Constitution provides that ‘the Bill of Rights binds the legislature, the executive, the judiciary and all organs of state.’ These provisions have been construed by the Constitutional Court to mean that ‘in some circumstances there would be a positive component which obliges the state and its organs to provide appropriate protection [of rights] to everyone through laws and structures designed to afford such protection.’21 Without further development of this jurisprudence, the Constitutional Court revisited this notion of positive obligations of the state in Rail Commuters Action Group and Others v. Transnet Ltd t/a Metrorail, where it ruled that ‘in some circumstances, the correlative obligations imposed by the rights in the Bill of Rights will require positive steps to be taken to fulfil the rights.’22 It would take another six years before the Constitutional Court in Glenister v. President of the Republic of South Africa23 finally developed this notion and elaborate on the source and scope of the positive constitutional obligations imposed on the state. Briefly, in Glenister v. President of the Republic of South Africa the Constitutional Court had to consider whether the Constitution imposes a positive duty on the State to establish an independent anti-corruption unit.24 The Constitutional Court held that section 7(2) of the Constitution ‘imposes a positive obligation on the state and its organs to provide appropriate protection to everyone through laws and structures designed to afford such protection.’25 It reasoned that implicit in section 7(2) is a positive constitutional obligation and requirement that the steps the state takes to respect, protect, promote and fulfil the rights in the Bill of Rights must be reasonable and effective.26 The Constitutional Court found that the steps taken by Parliament and the Executive to create an anti-corruption unit called the Directorate for Priority Crime Investigation (popularly known as the Hawks) that is not adequately independent from political actors would not constitute a reasonable step.27 The Constitutional Court further reasoned that since the bill of rights binds the legislature, through the instrument of section 8(1) of the Constitution, it followed that Parliament must give effect to the positive obligations section 7(2) imposes on the state.28 The same obligation is imposed on the Executive so that when it initiates legislation, in terms of section 85(2)(d) of the Constitution, it gives effect to the rights in the Bill of Rights.29 Based on the Constitutional Court’s ruling in Glenister v. President of the Republic of South Africa, I submit that passing the Insurance Bill without express and clear transformation objectives that seek to respect, protect, promote and fulfil the rights in the Bill of Rights, particularly the achievement of substantive equality, would be unreasonable and inconsistent with Parliament’s and the Executive’s obligations under section 7(2) read with section 8(1) of the Constitution. It is important to highlight that pursuant to their constitutional commitments and obligations to transformation and the achievement of equality, the Executive and Parliament have previously taken positive steps to transform other industries, such as, among others, the fishing and mining industries by adopting the Marine Living Resources Act 18 of 1998 and the Mineral and Petroleum Resources Development Act 28 of 2002, respectively.30 The former legislation contains express transformative objectives as required by the Constitution. Among its objectives, section 2 of the Marine Living Resources Act provides that the Minister and any organ of state shall in exercising any power under this Act, have regard to the following objectives and principles: (j) the need to restructure the fishing industry to address historical imbalances and to achieve equity within all branches of the fishing industry. In Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism, Ngcobo J upheld the validity of the transformation policy encapsulated in section 2(j) of the Marine Living Resources Act as follows: In enacting this provision, the legislature was acutely aware that the fishing policy of this country must function within and be guided by our constitutional system which guarantees ‘equal protection and benefit of the law.’ It realised too that the effects of the past inequities stemming from racial and other forms of discrimination have not remained in the past but have adversely affected the present fishing industry. It was also aware that there may be business practices in the fishing industry which are racially neutral on their face, but because of past overt social and economic discrimination, they are presently operating, in effect, to perpetuate these past inequities.31 Similarly, the Mineral and Petroleum Resources Development Act provides in section 2 that: the objects of this Act are to … (d) substantially and meaningfully expand opportunities for historically disadvantaged persons, including women and communities, to enter into and actively participate in the mineral and petroleum industries and to benefit from the exploitation of the nation’s mineral and petroleum resources.32 In the same way as the fishing industry reforms, the Constitutional Court in Agri South Africa v. Minister for Minerals and Energy33 approved the validity of the transformation objectives in section 2 of the Mineral and Petroleum Resources Development Act. In his acknowledgement and approval of the transformative objectives in the Mineral and Petroleum Resources Development Act, Mogoeng CJ remarked as follows: [B]y design, the [Minerals and Petroleum Resources Development Act] is meant to broaden access to business opportunities in the mining industry for all, especially previously disadvantaged people. It is not only about the promotion of equitable access, but also about job creation, the advancement of the social and economic welfare of all our people, the promotion of economic growth and the development of our mineral and petroleum resources for the common good of all South Africans.34 The above two cases help illustrate the scope of the obligations imposed on Parliament and the Executive towards the achievement of substantive equality in the insurance industry. It is against this background that the examination of the Insurance Bill must be construed. III COMMENTS ON SPECIFIC PROVISIONS OF THE INSURANCE BILL A Objectives of the Insurance Bill One of the major problems with the Insurance Bill is the way in which its objectives are set out. Section 3 of the Insurance Bill provides the following as its objectives: ‘Objective of Act 3. The objective of this Act is to promote the maintenance of a fair, safe and stable insurance market for the benefit and protection of policyholders, by establishing a legal framework for insurers and insurance groups that— (a) facilitates the monitoring and the preservation of the safety and soundness of insurers; (b) enhances the protection of policyholders and potential policyholders; (c) increases access to insurance for all South Africans; and (d) contributes to the stability of the financial system in general.’ Whereas it is commendable that the Insurance Bill makes reference to the necessity to promote the maintenance of a ‘fair’ insurance market and the establishment of a legal regime that increases access to insurance for all South Africans, these objectives fall short of the constitutional necessities to transform the insurance industry in order to address historical imbalances and achieve substantive equality within that industry. The problem is that the Insurance Bill does not make an express commitment to transform the insurance industry and include previously disadvantaged persons in the industry (as both consumers and business owners) as required in sections 7(2) and 9(2) of the Constitution. The literature on what constitutes sound regulation supports the propositions that good regulation should be problem focused and goal oriented.35 In a study conducted at a time of heightened concerns over the global economy, professor Haines confirms that research in the area of regulation provides evidence that sharply defined and suitably enforced regulation can achieve set goals.36 In the South African context, no financial services regulatory reform can constitutionally be pursued without being underpinned by transformation imperatives. I argue that it is an affront to the Constitution for the Insurance Bill to fail to problematize transformation in the insurance industry and set goals to solve those problems. Ngcobo J correctly observed in Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism, that ‘[o]ur Constitution recognizes that decades of systematic racial discrimination entrenched by apartheid [laws] cannot be eliminated without positive action being taken to achieve the result.’37 This observation is complimented by the holding in Glenister v. President of the Republic of South Africa, and other Constitutional Court cases—that there is a constitutional obligation in section 7(2) of the Constitution to take positive, reasonable and effective steps to respect, protect, promote and fulfil the rights in the Bill of Rights, without which renders any proposed legislation such as the Insurance Bill unconstitutional. Therefore, I submit that Parliament, pursuant to section 7(2) of the Constitution, has an obligation to incorporate into the Insurance Bill reasonable and positive steps to transform the insurance industry by making it one of the objectives of the Insurance Bill and include measures designed to achieve substantive equality. I further submit that the Insurance Bill will not pass the constitutional muster to the extent that it fails to incorporate express transformation objectives. More importantly, without such incorporation, Parliament will fail in its constitutional obligation to respect, protect, promote and fulfil the rights in the Bill of Rights. Furthermore, any steps taken by Parliament to pass the Insurance Bill in its current form will be ineffective and unreasonable and thereby render the Insurance Bill unconstitutional as there will be no pathway leading to the transformation of the insurance industry. In other words, just like the Constitutional Court in Glenister v. President of the Republic of South Africa found (that the steps taken to establish the Hawks without adequate independence were unreasonable, ineffective and unconstitutional), the Insurance Bill will likely be declared unconstitutional if passed without the incorporation of explicit goals to transform the insurance industry and address the imbalances of the past. It is common cause that the South African insurance industry has been and continues to be dominated by a few companies, whose ownership and control falls under those communities that were privileged under apartheid.38 There is a pressing need to ensure that access to this industry is deliberately opened up to companies controlled and owned by members of designated groups that were previously excluded from this industry. In Allpay Consolidated Investment Holdings (Pty) Ltd v. Chief Executive Officer of the South African Social Security Agency,39 the Constitutional Court found that ‘the transformation that our Constitution requires includes economic redress,’ and outlined a number of ways in which the Constitution seeks to achieve this.40 The Insurance Bill presents a good opportunity to reaffirm this principle and open up insurance business opportunities for persons previously disadvantaged by unfair discrimination. At the moment, the objective of the Insurance Bill falls short of the constitutional standard. It simply provides for the increase of access to insurance by all South Africans without specific reference to the need to remedy the imbalances of the past. It does not speak to the goal designed to increase insurance companies owned and controlled by people from designated groups as that term is defined under South African law.41 In my view, this omission is constitutionally fatal renders the Insurance Bill unconstitutional because it ignores the constitutional obligation to set those goals. B The Prudential Authority and Transformation Imperatives One of the innovative and brand-new aspects to South Africa’s insurance regulatory structure is that the Insurance Bill, read with the recently passed Financial Sector Regulation Bill, makes provision for the Prudential Authority, which is entrusted with the authority to supervise the insurance industry. Section 62 of the Insurance Bill summarizes the powers and functions of the Prudential Authority: ‘General powers and functions of Prudential Authority 62. (1) The Prudential Authority, in addition to other powers or functions conferred on the Prudential Authority by or in terms of any other provision of this Act or any other Act of Parliament— (a) must take steps the Prudential Authority considers necessary to implement a regulatory framework that supports the objectives of the Act, including supervising and enforcing compliance with this Act; (b) must take steps the Prudential Authority considers necessary to protect policyholders in their dealings with insurers; (c) must determine the form, manner and period (if a period is not specified in this Act) in which any documentation, information or report must be published, disclosed, provided or submitted, that an insurer or a controlling company is required to publish, disclose, provide or submit under this Act; and (d) may, at regular intervals, determine or amend any rate, parameter or percentage referred to or specified in this Act or a Prudential Standard relating to financial soundness by publishing a notice on the official web site. (2) The Prudential Authority, in performing the powers and functions provided for, by or under this Act, including the making of Prudential Standards, must have regard to— (a) the objective of this Act; (b) international regulatory and supervisory standards; and (c) the principle that requirements imposed on insurers or insurance groups and the exercise of supervisory.’ The problem with this provision is that it makes no reference to transformation in relation to the powers and functions of the Prudential Authority. To illustrate this point, the Prudential Authority is not legislatively required to take cognizance of the need to transform the insurance industry in the performance of its functions.42 This is deeply problematic given the social, political and economic history of South Africa, and the constitutional values and commitments contained in the Constitution. A vision and mission statement of every public institution in South Africa must be underpinned by need to promote transformation. Therefore, it is important for Parliament to reconsider this aspect of the Insurance Bill. It must be recalled and emphasized that the Insurance Bill is one aspect of the twin peaks legislation.43 It is by design that the executive initiated the Insurance Bill together with the Financial Sector Regulation Bill, which regulates financial institutions including insurance companies.44 Importantly, the Prudential Authority is intended to serve both the insurance industry and the financial services sector generally, including banks.45 The Financial Sector Regulation Bill lists the transformation of the financial services sector as one of its objectives. It thus reads as follows: ‘7. (1) The object of this Act is to achieve a stable financial system that works in the interests of financial customers and that supports balanced and sustainable economic growth in the Republic, by establishing, in conjunction with the specific financial sector laws, a regulatory and supervisory framework that promotes— … (f) financial inclusion; (g) transformation of the financial sector; and (h) confidence in the financial system. (2) When seeking to achieve the object of this Act the Reserve Bank and the financial sector regulators must not be constrained from achieving their objectives and responsibilities as set out in sections 11, 33 and 57.’ In section 1(1) of the Financial Sector Regulation Bill, transformation of the financial sector is defined to mean ‘transformation as envisaged by the Financial Sector Code for Broad-Based Black Economic Empowerment issued in terms of section 9(1) of the Broad-Based Black Economic Empowerment Act, 2003’. While the Financial Sector Regulation Bill makes provision for the transformation of the financial sector, I argue that given the distinct and comprehensive legislative framework in the Insurance Bill, that Bill should make specific commitments towards the insurance industry for which the Prudential Authority should be accountable. In other words, one should not assume that the transformation objectives in the Financial Sector Regulation Bill will be automatically applicable to the Insurance Bill and satisfy transformation obligations. Instead, the Insurance Bill should incorporate its own set of objectives unique to the insurance industry. What is more, the legislative scheme in the Financial Sector Regulation Bill and the Insurance Bill recognizes the distinctiveness of the two legal frameworks. For instance, sections 33 and 34 of the Financial Sector Regulation Bill contain an elaborate set of powers and functions of the Prudential Authority, which are distinct from those in section 62 of the Insurance Bill. Additionally, section 62(1) of the Insurance Bill specifically recognizes this distinctiveness in the two legislative schemes when it comes to the powers of the Prudential Authority. Hence, given that the Insurance Bill has outlined powers and functions of the Prudential Authority specific to the insurance industry, I argue that Parliament must equally outline transformation goals specific to the insurance industry in the Insurance Bill. IV EFFECTS OF INCORPORATING SPECIFIC TRANSFORMATION OBJECTIVES IN THE INSURANCE BILL Apart from the constitutional obligations that flow from section 7(2) read with section 8(1) of the Constitution that enjoin Parliament to take positive, reasonable and effective steps to transform the insurance industry, there is another basis for my thesis. As alluded to earlier, pursuant to its constitutional obligations, the Executive initiated and Parliament passed the Marine Living Resources Act. In the subsequent litigation that challenged the legality of section 2(j) of that Act, which contains a transformation policy objective, Ngcobo J in Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism found that section 2 of the Marine Living Resources Act ‘is a provision of general application and applies to the exercise of any power under the Marine Living Resources Act’ because it captures the purpose of that Act.46 Moreover, Ngcobo J held that the fact that transformation of the fishing industry was explicitly made part of the objectives of the Marine Living Resources Act pointed ‘to the conclusion that the Constitution and Marine Living Resources Act required any decision maker under that Act to do more than give lip service to transformation.’47 Ngcobo J emphasised that decisions taken under that Act by those entrusted with its implementation must address the need for transformation in a meaningful way and able to demonstrate that this has been done. Failure to do so is unlawful and any ensuing decision is open to attack.48 He further stated that this flowed from the fact that the foundational policy of the Marine Living Resources Act (section 2(j)) is to redress the imbalances of the past, and the Minister is bound to give effect to that policy. In the exercise of powers under the Marine Living Resources Act, Ngcobo J concluded: It follows that if the Minister were to fail to heed this injunction, he would be acting unlawfully and his decision would be open to attack. It is incumbent upon the Minister to put forward facts from which it will appear that he has indeed paid due regard to the need to promote transformation. A court reviewing the decision of the Minister has an obligation to ensure that the section has been complied with. Where there is a dispute as to whether the Minister has complied with section 2(j), the court considering the matter must examine the facts relied upon by the Minister as establishing compliance with section 2(j), and satisfy itself that there has been compliance with this provision.49 The principle that emerged in Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism is that transformation objectives that are expressly incorporated in an Act of Parliament must be given effect to. My call for the incorporation of specific transformation objectives is predicated upon this principle; that if incorporated in the Insurance Bill, transformation objectives must be given effect to by the Prudential Authority, the Minister of Finance, who administers the insurance legislation, or both. When transformation objectives are incorporated in the Insurance Bill, as per the suggestions in this article, this will produce at least four positive effects: (i) there will be no lip service given to issues of transformation in the insurance industry because the Prudential Authority and Minister of Finance will be legally bound to give effect to that goal and the constitutional injunction. (ii) transformation in the insurance industry will become legally enforceable through the courts. Just as Justice Ngcobo pointed out (in the context of the fishing industry) in Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism, courts and tribunals will have an obligation to review decisions of the Prudential Authority to ensure compliance with, among other things, the objectives of transformation. (iii) Parliament and the Judiciary will have a political and legal mechanism, respectively, to hold the executive, and in particular the Prudential Authority, to account in relation to the constitutional imperatives of transformation of the insurance industry.50 (iv) it will lay the foundation for economic transformation and redress for persons from designated groups in South Africa, through their effective inclusion as players in the insurance industry, which is required by the Constitution.51 Under the authority of Glenister v. President of the Republic of South Africa, I submit that transformation of the insurance industry and the need to address the imbalances of the past should be incorporated as some of the specific objectives of the Insurance Bill. I further submit that these objectives should be made part of the performance deliverables of the Prudential Authority. The incorporation of transformation imperatives and objectives in the Bill must subsequently require the Prudential Authority to adopt specific measures designed to protect and advance persons or categories of persons disadvantaged by the mischief of past unfair discrimination so as to promote the achievement of substantive equality, and to regularly report to Parliament on its achievements. V CONCLUDING REMARKS In light of the above analysis, I make the following recommendations for Parliament to consider. Firstly, the preamble or the long title of the Insurance Bill must be amended to give due regard to transformation. In other words, it must expressly state that it will give due regard to transformation. Furthermore, section 3 of the Insurance Bill must be amended to incorporate a provision whose goal should be to transforms the insurance industry to address historical imbalances in the insurance industry and achieve substantive equality. Whereas the inclusion of a statutory guarantee of due regard to transformation in the preamble to the Insurance Bill may not become legally enforceable when it becomes law, it has effective interpretive value. However, the inclusion of the above wording into section 3 of the Insurance Bill will make transformation of the insurance industry legally enforceable because that section is contemplated to become a provision of general application and will apply to the exercise of any power under the Insurance Bill. To put it differently, section 3 captures the objectives and purpose of the Bill. The legal significance of incorporating transformation into that section is that the Prudential Authority, as well the Minister of Finance, will be legally bound to give effect to the objective of transformation, and their failure to do so will be unlawful.52 As held in Bato Star Fishing (Pty) v. Minister of Environmental Affairs and Tourism, if the Minister of Finance or the Prudential Authority were to fail to heed to the goal of transformation in section 3, as recommended in this article, they would be acting unlawfully and their decisions would be open to attack. A court reviewing an impugned decision of the Minister of Finance or Prudential Authority will have an obligation to ensure that section 3 has been complied with.53 According to Justice Ngcobo’s reasoning in Bato Star Fishing (Pty) v. Minister of Environmental Affairs and Tourism, where transformation is incorporated as a foundational policy of an Act of Parliament, it becomes incumbent on the public functionary entrusted with its implementation to put forward facts from which it can be ascertained that the functionary has indeed paid due regard or taken measures designed to give effect to that policy.54 And where there is a dispute as to whether the public functionary has complied with the transformation policy, a court considering the matter must examine the facts relied upon by the functionary as establishing compliance with the legal provision. In the context of the proposed section 3 of the Insurance Bill, the Minister of Finance or the Prudential Authority will be subjected to this legal scrutiny if the recommendation above is acceded to by Parliament. More importantly, by acceding to this recommendation, Parliament will fulfil its constitutional obligation to take positive measures to promote, respect and protect substantive equality. Secondly, Parliament needs to give due regard of the pronouncements by the judiciary concerning the State’s obligation to transform South African society.55 In addition, Parliament needs to recognize that the financial sector policies of South Africa must function within and be guided by the Constitution, which guarantees equal protection and benefits of the law. It must realize that the effects of past racial discrimination have remained in the past but adversely affect the present state of the insurance industry. An example of this is that fact that since 1994, only four black owned and controlled insurance companies operate in the insurance industry with a market cap of less than 1 per cent of the insurance market;56 that while there may be business practices in the insurance industry which are racially neutral, nonetheless, because of past overt social and economic discrimination, these practices are presently operative in effect to perpetuate past inequalities.57 It is important that Parliament should take cognizance of its obligations in the Constitution to positively promote, respect and advance substantive equality. The former Deputy Chief Justice Moseneke explained this positive obligation as follows: in so many words, [our Constitution] enjoins us to take active steps to achieve substantive equality, particularly for those who were disadvantaged by past unfair discrimination. This was and continues to be necessary because, whilst our society has done well to equalise opportunities for social progress, past disadvantage still abounds.58 1 See, M Pieterse ‘What do we mean when we talk about transformative constitutionalism?’ [2005] SA Public Law 20, 155 (referring to the provisions of the Constitution that indicate that it is transformative, and cautioning against adopting a one-dimensional definition of transformative constitutionalism). 2 See, S v. Makwanyane 1995 (3) SA 391 (CC) (S. Afr.) at para. 262 (‘What the Constitution expressly aspires to do is to provide a transition from [the] grossly unacceptable features of the past to a conspicuously contrasting future founded on the recognition of human rights, democracy and peaceful co-existence and development opportunities for all South Africans, irrespective of colour, race, class, belief or sex’). 3 See Soobramoney v. Minister of Health (Kwazulu-Natal) 1998 (1) SA 765 (CC) (S. Afr.) at para. 8, where Chaskalson CJ stated: We live in a society in which there are great disparities in wealth. Millions of people are living in deplorable conditions and in great poverty. There is a high level of unemployment, inadequate social security, and many do not have access to clean water or to adequate health services. These conditions already existed when the Constitution was adopted and a commitment to address them, and to transform our society into one in which there will be human dignity, freedom and equality, lies at the heart of our new constitutional order. 4 See also, P Langa ‘Transformative Constitutionalism’ [2006] Stellenbosch Law Review 3, 351 at 352, (suggesting that the starting point to determine the meaning of transformative constitutionalism is through the reading of the Interim Constitution’s Epilogue or Postamble). 5 K Klare ‘Legal Culture and Transformative Constitutionalism’ [1998] South African Journal on Human Rights 14, 146; C Albertyn and B Goldblatt ‘Facing the challenges of transformation: Difficulties in the development of an indigenous jurisprudence of equality’ [1998] South African Journal on Human Rights 14, 248, S Sibanda ‘Not purpose-made! Transformative Constitutionalism, Post-independence Constitutionalism and the Struggle to Eradicate Poverty’ [2011] Stellenbosch Law Review 22, 482; T Roux ‘Transformative Constitutionalism and the Best Interpretation of the South African Constitution: Distinction without a Difference?’ [2009] Stellenbosch Law Review 20, 258; and S Ngcobo ‘South Africa’s Transformative Constitution: Towards an Appropriate Doctrine of Separation of Powers’ Stellenbosch Law Review 22, 37. 6 Klare above n 5 at 150. 7 Ibid. 8 Sibanda above n 5 at 482. 9 Ibid at 498. 10 See section 1(a) of the S. Afr. Const., 1996. 11 See, Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism 2004 (4) SA 490 (CC) (S. Afr.), at para. 74; Minister of Finance and Other v. Van Heerden 2004 (6) SA 121 (CC) (S. Afr.) para. 31 (‘what is clear is that our Constitution and in particular section 9 thereof, read as a whole, embraces for good reason a substantive conception of equality inclusive of measures to redress existing inequality.’); National Coalition for Gay and Lesbian Equality v. Minister of Justice 1999 (1) SA 6; 1998 (12) BCLR 1517 (CC)(S. Afr.) para 62 (‘Section 9 of the Constitution clearly contemplates both substantive and remedial equality. Substantive equality is envisaged when section 9(2) unequivocally asserts that equality includes ‘the full and equal enjoyment of all rights and freedoms.’ The State is further obliged ‘to promote the achievement of such equality’ by ‘legislative and other measures designed to protect or advance persons, or categories of persons, disadvantaged by unfair discrimination,’ which envisages remedial equality); South African Police Service v. Barnard 2014 (6) SA 123 (CC) (S. Afr.) para. 29 (reasoned that ‘at the point of transition, two decades ago, our society was divided and unequal along the adamant lines of race, gender and class. [Our Constitution] has a transformative mission… In so many words, it enjoins us to take active steps to achieve substantive equality, particularly for those who were disadvantaged by past unfair discrimination. This was and continues to be necessary because, whilst our society has done well to equalize opportunities for social progress, past disadvantage still abounds.’); City Council of Pretoria v. Walker 1998 (2) SA 363 (S. Afr.) para. 140 (held that the City ‘is obliged to develop a coherent and serious strategy which, looked at rationally and objectively, would be capable of advancing substantive equality and truly promoting the idea of a city of civic equals’); Daniels v. Campbell 2004 (5) SA 331 (CC); 2004 (7) BCLR 735 (CC) (S. Afr.) at para. 107 (ruled that the Intestate Succession Act and the Maintenance of Surviving Spouses Act ‘infringe[] the substantive equality and dignity commitments of our Constitution and must be declared unconstitutional and invalid’); AB and Another v. Minister of Social Development [2016] ZACC 43 (S. Afr.) (held that the right to equality provides a mechanism to achieve substantive equality which, unlike formal equality that presumes that all people are equal, tolerates difference). 12 Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs above n 13, at para. 74. 13 National Coalition for Gay and Lesbian Equality v. Minister of Justice above n13, at para. 60. 14 Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism, above n 13; Bel Porto School Governing Body v. Premier of the Province, Western Cape 2002 (3) SA 265 (CC) (S. Afr.) para. 7. But see, Minister of Justice and Constitutional Development and Another v. South African Restructuring and Insolvency Practitioners Association [2016] ZASCA 196 (S. Afr.) (declaring a policy issued by the Minister under section 18(1) of the Insolvency Act 24 of 1936 as irrational and unconstitutional because of its impact on the dignity of minority groups); and SA Restructuring and Insolvency Practitioners Association v. Minister of Justice and Constitutional Development & others, and another application 2015 (2) SA 430 (WCC) (S. Afr.). 15 Seee.g. Financial Services Board, 18th Annual Report of the Registrar on the Results of the Long-term Insurance Industry for the Period ending 2015 (noting that an aggregate 67.38% of the percentage of total assets in the long-term insurance in South Africa is held that four insurance companies being Liberty at 13.62%; MMI Holdings at 14.24; Old Mutual at 23.72% and Sanlam at 15.80%), available at https://www.fsb.co.za/Departments/insurance/Documents/LT%20Tables%202015.pdf. 16 Insurance Bill [B1-2016] (S. Afr.). 17 President Jacob Zuma: 2017 State of the Nation Address, 9 February 2017, available at http://www.gov.za/speeches/president-jacob-zuma-2017-state-nation-address-9-feb-2017-0000. 18 Minister of Finance, Pravin Gordhan, 2011 Budget Speech, available at http://www.treasury.gov.za/documents/national%20budget/2011/speech/speech2011.pdf. For a discussion of the twin peaks model of regulation, see Michael Taylor, ‘The Road from Twin Peaks and the Way Back’ (2009) 16 Connecticut Insurance Law Journal 61. See also Mtende Mhango ‘Twin Peaks is not for SA’ Fin24, 6 February 2014, available at http://www.fin24.com/Companies/Financial-Services/Twin-Peaks-is-not-for-SA-20140205; and Herbert Kawadza ‘Twin Peaks Regulation Deserves a Fair Chance’ Sunday Times, 21 September 2014, available at http://www.pressreader.com/south-africa/sunday-times/20140921/282677570503765. For some of the discussions documents issued by government about these reforms, see, National Treasury Implementing Twin Peaks Model of Financial Regulation in SA: Published for Public Comment by the Financial Regulatory Reform Steering Committee (2013), 1 February 2013, available at http://www.treasury.gov.za/twinpeaks/20131211%20-%20Item%203%20Roadmap.pdf; and National Treasury Policy Document, A Safer Financial Sector to Serve SA Better (2011), 23 February 2011, available at http://www.treasury.gov.za/documents/national%20budget/2011/A%20safer%20financial%20sector%20to%20serve%20South%20Africa%20better.pdf. 19 The Financial Sector Regulation Bill was passed by Parliament in June 2017 and now awaits the President’s signature. See http://www.sabinetlaw.co.za/finances/articles/parliament-passes-financial-sector-regulation-bill 20 See, D Millard ‘The Impact of the Twin Peaks Model on the Insurance Industry’ [2016] Potchefstroom Electronic Law Journal 6, 1. 21 See, Carmichele v. Minister of Safety and Security 2001 (4) SA 938 (CC) (S. Afr.), at para. 44. 22 Rail Commuters Action Group and Others v. Transnet Ltd t/a Metrorail 2005 (2) SA 359 (CC) (S. Afr.), at para. 69. 23 Glenister v. President of the Republic of South Africa 2011 (3) SA 347 (CC) (S. Afr.), at para. 189–190. 24 Ibid. 25 Ibid at para. 189. 26 Ibid at paras 189 and 194. 27 Ibid at para. 194 28 Ibid. See also, Rail Commuters Action Group and Others v. Transnet Ltd t/a Metrorail above n 28, at para. 69; Carmichele v. Minister of Safety and Security above n 27, at para. 44; and Investigating Directorate: Serious Economic Offences v. Hyundai Motor Distributors 2000(1) SA545 (CC) (S. Afr.), at para. 21 (ruling that ‘all statutes must be interpreted through the prism of the Bill of Rights. All law-making authority must be exercised in accordance with the Constitution [because the] Constitution is located in a history which involves a transition from a society based on division, injustice and exclusion from the democratic process to one which respects the dignity of all citizens, and includes all in the process of governance. As such, the process of interpreting the Constitution must recognise the context in which we find ourselves and the Constitution’s goal of a society based on democratic values, social justice and fundamental human rights. This spirit of transition and transformation characterises the constitutional enterprise as a whole.’). 29 See Glenister v. President of the Republic of South Africa and Others (Glenister I) 2009 (1) SA 287 (CC). 30 See, also the Preamble and chapter 1 of the Competition Act 1998; Consumer Protection 2008; National Credit Act 2005. 31 Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism above n 13, at para. 83. 32 As amended by the Mineral and Petroleum Resources Development Amendment Act 49 of 2008. 33 Agri South Africa v. Minister for Minerals and Energy 2013 (4) SA 1 (CC) (S. Afr.). 34 Ibid at para. 61. 35 F Haines, The Paradox of Regulation: What Regulation Can Achieve and What It Cannot 8 [2011]. 36 Ibid. 37 Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism above n 13 at para. 74. 38 See, Financial Services Board 18th Annual Report of the Registrar on the Results of the Long-term Insurance Industry for the Period ending 2015 (noting that 76.38% of the percentage of total assets in the long-term insurance in South Africa is held that four insurance companies being Liberty at 13.62%; MMI holdings at 14.24; Old mutual at 23.72% and Sanlam at 15.80%), available at https://www.fsb.co.za/Departments/insurance/Documents/LT%20Tables%202015.pdf 39 Allpay Consolidated Investment Holdings (Pty) Ltd v. Chief Executive Officer of the South African Social Security Agency 2014 (1) SA 604 (CC) (S. Afr.), at para. 46. 40 Id para. 46–52. See also Viking Pony Africa Pumps (Pty) Ltd t/a Tricom Africa v. Hidro-Tech Systems (Pty) Ltd and Another 2011 (1) SA 327 (CC) (S. Afr.), at para. 46 (held that ‘The complaint is that the historically disadvantaged individuals neither exercised control over the tendering enterprise nor were they actively involved in its management, to the extent commensurate with their degree of ownership. The converse is the requirement for awarding preference points in terms of regulation 13. It follows from this regulation that it is not enough merely to have the historically disadvantaged individuals holding the majority shares in a tendering enterprise. The exercise of control and the managerial power actually wielded by the historically disadvantaged individuals, in proportion to their shareholding, are what matter.’) 41 See, section 1 of the Broad-Based Black Economic Empowerment Act 53 of 2003, which defines ‘black people’ to mean ‘Africans, Coloureds and Indians;’ and section 1 Employment Equity Act 55 of 1998, which defines ‘Designated groups’ means ‘Black people, (i.e. Africans, Coloureds and Indians), women and people with disabilities who (a) are citizens of the Republic of South Africa by birth or descent; or (b) became citizens of the Republic of South Africa by naturalisation (i) before the commencement date (i.e. 27 April 1994); or after 26 April 1994 and who would have been entitled to acquire citizenship by naturalisation prior to that date but who were precluded by apartheid policies.’ 42 See e.g. section 29 of the Marine Living Resources Act which establishes the Fisheries Transformation Council, whose objective is ‘to facilitate the achievement of fair and equitable access to the [fishing rights]’(section 30); section 57 of the Mineral and Petroleum Resources Development Act, which establishes the Minerals and Mining Development Board whose function includes advising the Minister ‘on the transformation and downscaling of the Minerals and mining industry’ (section 58(1)(a)(iii)). 43 For a discussion of twin peaks financial regulation model see, Taylor n 22 above; E Pan ‘Four Challenges to Financial Regulatory Reform’ [2010] Villanova Law Review 55, 743; E Pan ‘Four Challenges to Financial Regulatory Reform’ [2010] Villanova Law Review 55, 743; R Jones ‘Back to Basics: Why Financial Regulatory Overhaul Is Overrated’ [2010] Entrepreneurial Business Law 4, 392; and B Michael, The Twin Peaks Regulatory Model: The Future of Financial Regulation, Banking Today April 2014, available at http://www.law.hku.hk/aiifl/wp-content/uploads/2014/09/Twin-Peaks.pdf. 44 See AJ Godwin and AD Schmulow ‘The Financial Sector Regulation Bill in Southern Africa, Second Draft: Lessons from Australia’ [2015] South African Law Journal 132, 756. 45 See section 1 of the Insurance Bill, which states that the Prudential Authority ‘has the meaning as defined in section 1 of the Financial Sector Regulation Act.’ Section 1 of the Financial Sector Regulation Act states that the Prudential Authority ‘means the authority established in terms of section 32.’ 46 Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism, above n 13, at para. 96. 47 Ibid at paras 99 and 110. 48 Ibid at para. 99. 49 Ibid at para. 103. 50 See e.g. 27four Investment Managers, Annual Survey (September 2016) at 3 and 17–18 (reporting that the total assets of the South African investment and savings is R8.9 trillion. Out of this, only 4.6% or R408.3 billion is managed by asset management companies that are controlled and owned by black South Africans who are from previously disadvantaged backgrounds). 51 See e.g. Agri SA v. Minister for Minerals and Energy, above n 37, at para. 61; Allpay Consolidated Investment Holdings (Pty) Ltd v. Chief Executive Officer of the South African Social Security Agency above n 42, at paras 46–55. 52 Bato Star Fishing (Pty) v. Minister of Environmental Affairs and Tourism above n 13 para. 99. 53 Bato Star Fishing (Pty) v. Minister of Environmental Affairs and Tourism above n 13 para. 103. 54 For a view of transformation measures in other sectors of the economy see, Broad-Based Black Socio-Economic Empowerment Charter for the South African Mining and Minerals Industry, promulgated in June 2017 with the primary objective to ‘[t]o facilitate sustainable transformation, growth and development of the mining and minerals industry [and to] give effect to section 100 (2) (a) of the MPRDA, section 9 of the Constitution and harmonise Government’s transformation policies by providing, among other things, that 30% of every mining business in South African should be black owned); and Policy on the Appointment of Insolvency Practitioners Government Gazette No 37287 (7 February 2014) (with the primary objective to address the imbalances of the past and transform the insolvency industry, make the insolvency industry accessible to individuals from previously disadvantaged communities; and promote the objectives of the Broad-Based Black Economic Empowerment Act 53 of 2003 by empowering black people who are insolvency practitioners). See also, Minister of Justice and Constitutional Development and Another v. South African Restructuring and Insolvency Practitioners Association and Others 2017 (3) SA 95 (SCA) (S. Afr.); and A Restructuring and Insolvency Practitioners Association v. Minister of Justice and Constitutional Development & others, and another application 2015 (2) SA 430 (WCC) (S. Afr.). where the Policy on the Appointment of Insolvency Practitioners was challenged on constitutional grounds and declared unconstitutional. 55 Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism, above n 13; City of Tshwane Metropolitan Municipality v. Afriforum 2016 (6) SA 279 (CC) (S. Afr.), at para. 165 (upholding the streets name changes bearing names of people from previously disadvantaged groups held that in a transformative Constitution oppressive racist history does not deserves any recognition); MEC for Education: Kwazulu-Natal v. Pillay 2008 (1) SA 474 (CC) (S. Afr.); (upholding the right of a learner to wear a nose-stud in recognition of the right to religious and cultural freedom); Government of the Republic of South Africa v. Grootboom 2001 (1) SA 46 (CC) (S. Afr.) (held that the government’s housing policy was unconstitutional because it failed to make provision for people in immediate and desperate need of shelter); Minister of Home Affairs v. Fourie 2006 (1) SA 524 (CC) (S. Afr.) (held that the Marriage Act 25 of 1961 was in conflict with the Constitution to the extent that it prevented same-sex couples from enjoying the same status, entitlements and responsibilities accorded to heterosexual couples. This violated their right to dignity as well as their right to equal protection of the law and their right not to be discriminated against unfairly); South African Police Service v. Barnard above n 14; Laubscher v. Duplan [2016] ZACC 44 (S. Afr.) (where the court adopted a contextual approach, which requires the court to afford as much protection as possible to same-sex partners who have chosen not to marry). 56 Seee.g. Financial Services Board, 18th Annual Report of the Registrar on the Results of the Long-term Insurance Industry for the Period ending 2015, available at https://www.fsb.co.za/Departments/insurance/Documents/LT%20Tables%202015.pdf. 57 Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism, above n 13 (recognising the same in the context of the fishing industry). 58 South African Police Service v. Barnard, above n 13, at para. 29. © The Author 2017. Published by Oxford University Press. All rights reserved. For permissions, please e-mail: journals.permissions@oup.com. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Statute Law Review Oxford University Press

A Call for the Transformation of the South African Insurance Industry: An Analysis of the Insurance Bill 2016

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Abstract

Abstract This article comments on the South African Insurance Bill, 2016. It examines the constitutional obligations imposed on the legislature when enacting legislation using existing jurisprudence, it argues that the Insurance Bill is unconstitutional to an extent that it omits to incorporate, a transformation policy that is designed to transform the insurance industry and address the economic imbalances of the past. The article recommends that Parliament should include a clear transformation objective in the Insurance Bill. I INTRODUCTION AND BACKGROUND The Constitution of the Republic of South Africa, 1996 (the Constitution) is hailed as one of the most progressive constitutions in the world. Most importantly the Constitution, is known to be transformative,1 as it expressly provides the primary basis for transitioning from the injustices of the past2 to an ideal South Africa based on dignity, freedom and equality.3 In this regard, the epilogue to the Interim Constitution of 1993 is informative as it stated.4 This Constitution provides a historic bridge between the past of a deeply divided society characterised by strife, conflict, untold suffering and injustice, and a future founded on the recognition of human rights, democracy and peaceful co-existence and development opportunities for all South Africans, irrespective of colour, class, race, belief or sex. Equally informative is the preamble to the Constitution, which provides in pertinent part that [W]e, the people of South Africa, recognise the injustices of our past. . . [and] therefore … adopt this Constitution as the supreme law of the Republic so as to– heal the divisions of the past and establish a society based on democratic values, social justice and fundamental human rights; lay the foundations for a democratic and open society in which every citizen is equally protected by law; [and] improve the quality of life of all citizens and free the potential of each person... A number of scholars have written about the transformative nature of the Constitution and the meaning of transformative constitutionalism.5 For example, Klare sees transformative constitutionalism as ‘a long-term project of constitutional enactment, interpretation and enforcement committed to transforming a country’s political and social institutions and power relationships in a democratic, participatory and egalitarian direction.’6 He describes transformative constitutionalism as: an enterprise of inducing large-scale social change through non-violent political processes grounded in law. I have in mind transformation vast enough to be inadequately captures by the phrase ‘reform,’ but something short of or different from revolution in any traditional sense of the word. In the background is an idea of a highly egalitarian, caring, multicultural community, governed through participatory, democratic processes in both polity and large portions of what we now call the ‘private sphere.’7 Another perspective on the concept of transformative constitutionalism is associated with Sanele Sibanda, who advocates that the concept should be linked to the eradication of poverty.8 Sibanda argues that … in the South African context the failure to more directly and concretely connect the goals of the Constitution’s transformative vision with ideals of delivering truly egalitarianism outcomes and poverty eradication creates room for a charge to be levelled that asserts that as currently conceived constitutionalism is viewed as an end in itself, rather than as a means to an end. In the context of South Africa as a post-independence society that end was and must, surely, continue to be the political, social and economic liberation – especially for those whose current destitution is as a direct consequence of violent and racist policies of former governments.9 To add to this, the Constitutional Court has emphasized that the society envisioned by the Constitution is one based on the ‘values of human dignity, the achievement of equality and the advancement of human rights and freedoms.’10 The Constitutional Court has consistently held that the achievement of substantive equality is one of the fundamental objectives of the Constitution.11 It has also confirmed that the Constitution ‘recognizes that decades of systematic racial discrimination entrenched by apartheid legislation cannot be rid of without positive action being taken to achieve that result, especially given that the effects of discrimination may continue indefinitely unless confronted with a commitment to end it.’12 To illustrate this point, in National Coalition for Gay and Lesbian Equality v. Minister of Justice13 the Constitutional Court affirmed the importance of remedial measures to achieve substantive equality and stated: It is insufficient for the Constitution merely to ensure, through its Bill of Rights, that statutory provisions which have caused such unfair discrimination in the past are eliminated. Past unfair discrimination frequently has ongoing negative consequences, the continuation of which is not halted immediately when the initial causes thereof are eliminated, and unless remedied, may continue for a substantial time and even indefinitely. Like justice, equality delayed is equality denied. Therefore, section 9(2) of the Constitution encapsulates the commitment to achieve substantive equality and remedy the mischief of past discrimination. The section provides: Equality includes the full and equal enjoyment of all rights and freedoms. To promote the achievement of equality, legislative and other measures designed to protect or advance persons, or categories of persons, disadvantaged by unfair discrimination may be taken. As the Constitutional Court has acknowledged in a number of cases, measures that bring about transformation will inevitably affect some members of society adversely, especially those members of previously advantaged groups.14 However, this does not detract from the positive constitutional commitment to achieve substantive equality. There is no doubt that this commitment is more demanded in the insurance industry, where for decades the industry has been, and continues to be, dominated by companies controlled and owned predominantly by those who were privileged under apartheid and had exclusive access to the industry.15 It is for this reason that the Insurance Bill, which is currently being considered by Parliament,16 is significant to be examined based on the constitutional obligations of Parliament. Furthermore, the urgent need for economic transformation in South Africa has recently been highlighted by the President of South Africa, Jacob Zuma, in his 2017 state of the nation address. President Zuma explained the meaning of transformation as follows: We mean fundamental change in the structure, systems, institutions and patterns of ownership, management and control of the economy in favour of all South Africans especially the poor, the majority of whom are African and female as defined by the governing party which makes policy for the democratic government.17 It is against this background that, this article examines the Insurance Bill. There is another background that this article relies on. At the back foot of the global financial crisis, South Africa announced that it would reform its financial regulatory structure by adopting the twin peaks model of regulation.18 Following this decision, two important bills—the Financial Sector Regulation Bill 201619 and the Insurance Bill 201620—were introduced in Parliament to give effect to the new twin peaks model of financial regulation. This article does two things. Firstly, it examines the constitutional obligations imposed on the legislature when enacting legislation, and as pronounced by the Constitutional Court. In light of the court’s jurisprudence, the article argues that the Insurance Bill is unconstitutional to extent to that it omits to incorporate, as one of its key objectives, a transformation policy designed to transform the insurance industry and address the imbalances of the past. Secondly, the article recommends that Parliament should take lessons from its previous legislative interventions, particularly in the fishing and mining industries and include a clear transformation objective in the Insurance Bill. II WHAT IS PARLIAMENT’S OBLIGATION UNDER THE CONSTITUTION WHEN ENACTING LEGISLATION? Section 7(2) of the Constitution provides that ‘the state must respect, protect, promote and fulfil the rights in the Bill of Rights.’ Relatedly, section 8(1) of the Constitution provides that ‘the Bill of Rights binds the legislature, the executive, the judiciary and all organs of state.’ These provisions have been construed by the Constitutional Court to mean that ‘in some circumstances there would be a positive component which obliges the state and its organs to provide appropriate protection [of rights] to everyone through laws and structures designed to afford such protection.’21 Without further development of this jurisprudence, the Constitutional Court revisited this notion of positive obligations of the state in Rail Commuters Action Group and Others v. Transnet Ltd t/a Metrorail, where it ruled that ‘in some circumstances, the correlative obligations imposed by the rights in the Bill of Rights will require positive steps to be taken to fulfil the rights.’22 It would take another six years before the Constitutional Court in Glenister v. President of the Republic of South Africa23 finally developed this notion and elaborate on the source and scope of the positive constitutional obligations imposed on the state. Briefly, in Glenister v. President of the Republic of South Africa the Constitutional Court had to consider whether the Constitution imposes a positive duty on the State to establish an independent anti-corruption unit.24 The Constitutional Court held that section 7(2) of the Constitution ‘imposes a positive obligation on the state and its organs to provide appropriate protection to everyone through laws and structures designed to afford such protection.’25 It reasoned that implicit in section 7(2) is a positive constitutional obligation and requirement that the steps the state takes to respect, protect, promote and fulfil the rights in the Bill of Rights must be reasonable and effective.26 The Constitutional Court found that the steps taken by Parliament and the Executive to create an anti-corruption unit called the Directorate for Priority Crime Investigation (popularly known as the Hawks) that is not adequately independent from political actors would not constitute a reasonable step.27 The Constitutional Court further reasoned that since the bill of rights binds the legislature, through the instrument of section 8(1) of the Constitution, it followed that Parliament must give effect to the positive obligations section 7(2) imposes on the state.28 The same obligation is imposed on the Executive so that when it initiates legislation, in terms of section 85(2)(d) of the Constitution, it gives effect to the rights in the Bill of Rights.29 Based on the Constitutional Court’s ruling in Glenister v. President of the Republic of South Africa, I submit that passing the Insurance Bill without express and clear transformation objectives that seek to respect, protect, promote and fulfil the rights in the Bill of Rights, particularly the achievement of substantive equality, would be unreasonable and inconsistent with Parliament’s and the Executive’s obligations under section 7(2) read with section 8(1) of the Constitution. It is important to highlight that pursuant to their constitutional commitments and obligations to transformation and the achievement of equality, the Executive and Parliament have previously taken positive steps to transform other industries, such as, among others, the fishing and mining industries by adopting the Marine Living Resources Act 18 of 1998 and the Mineral and Petroleum Resources Development Act 28 of 2002, respectively.30 The former legislation contains express transformative objectives as required by the Constitution. Among its objectives, section 2 of the Marine Living Resources Act provides that the Minister and any organ of state shall in exercising any power under this Act, have regard to the following objectives and principles: (j) the need to restructure the fishing industry to address historical imbalances and to achieve equity within all branches of the fishing industry. In Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism, Ngcobo J upheld the validity of the transformation policy encapsulated in section 2(j) of the Marine Living Resources Act as follows: In enacting this provision, the legislature was acutely aware that the fishing policy of this country must function within and be guided by our constitutional system which guarantees ‘equal protection and benefit of the law.’ It realised too that the effects of the past inequities stemming from racial and other forms of discrimination have not remained in the past but have adversely affected the present fishing industry. It was also aware that there may be business practices in the fishing industry which are racially neutral on their face, but because of past overt social and economic discrimination, they are presently operating, in effect, to perpetuate these past inequities.31 Similarly, the Mineral and Petroleum Resources Development Act provides in section 2 that: the objects of this Act are to … (d) substantially and meaningfully expand opportunities for historically disadvantaged persons, including women and communities, to enter into and actively participate in the mineral and petroleum industries and to benefit from the exploitation of the nation’s mineral and petroleum resources.32 In the same way as the fishing industry reforms, the Constitutional Court in Agri South Africa v. Minister for Minerals and Energy33 approved the validity of the transformation objectives in section 2 of the Mineral and Petroleum Resources Development Act. In his acknowledgement and approval of the transformative objectives in the Mineral and Petroleum Resources Development Act, Mogoeng CJ remarked as follows: [B]y design, the [Minerals and Petroleum Resources Development Act] is meant to broaden access to business opportunities in the mining industry for all, especially previously disadvantaged people. It is not only about the promotion of equitable access, but also about job creation, the advancement of the social and economic welfare of all our people, the promotion of economic growth and the development of our mineral and petroleum resources for the common good of all South Africans.34 The above two cases help illustrate the scope of the obligations imposed on Parliament and the Executive towards the achievement of substantive equality in the insurance industry. It is against this background that the examination of the Insurance Bill must be construed. III COMMENTS ON SPECIFIC PROVISIONS OF THE INSURANCE BILL A Objectives of the Insurance Bill One of the major problems with the Insurance Bill is the way in which its objectives are set out. Section 3 of the Insurance Bill provides the following as its objectives: ‘Objective of Act 3. The objective of this Act is to promote the maintenance of a fair, safe and stable insurance market for the benefit and protection of policyholders, by establishing a legal framework for insurers and insurance groups that— (a) facilitates the monitoring and the preservation of the safety and soundness of insurers; (b) enhances the protection of policyholders and potential policyholders; (c) increases access to insurance for all South Africans; and (d) contributes to the stability of the financial system in general.’ Whereas it is commendable that the Insurance Bill makes reference to the necessity to promote the maintenance of a ‘fair’ insurance market and the establishment of a legal regime that increases access to insurance for all South Africans, these objectives fall short of the constitutional necessities to transform the insurance industry in order to address historical imbalances and achieve substantive equality within that industry. The problem is that the Insurance Bill does not make an express commitment to transform the insurance industry and include previously disadvantaged persons in the industry (as both consumers and business owners) as required in sections 7(2) and 9(2) of the Constitution. The literature on what constitutes sound regulation supports the propositions that good regulation should be problem focused and goal oriented.35 In a study conducted at a time of heightened concerns over the global economy, professor Haines confirms that research in the area of regulation provides evidence that sharply defined and suitably enforced regulation can achieve set goals.36 In the South African context, no financial services regulatory reform can constitutionally be pursued without being underpinned by transformation imperatives. I argue that it is an affront to the Constitution for the Insurance Bill to fail to problematize transformation in the insurance industry and set goals to solve those problems. Ngcobo J correctly observed in Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism, that ‘[o]ur Constitution recognizes that decades of systematic racial discrimination entrenched by apartheid [laws] cannot be eliminated without positive action being taken to achieve the result.’37 This observation is complimented by the holding in Glenister v. President of the Republic of South Africa, and other Constitutional Court cases—that there is a constitutional obligation in section 7(2) of the Constitution to take positive, reasonable and effective steps to respect, protect, promote and fulfil the rights in the Bill of Rights, without which renders any proposed legislation such as the Insurance Bill unconstitutional. Therefore, I submit that Parliament, pursuant to section 7(2) of the Constitution, has an obligation to incorporate into the Insurance Bill reasonable and positive steps to transform the insurance industry by making it one of the objectives of the Insurance Bill and include measures designed to achieve substantive equality. I further submit that the Insurance Bill will not pass the constitutional muster to the extent that it fails to incorporate express transformation objectives. More importantly, without such incorporation, Parliament will fail in its constitutional obligation to respect, protect, promote and fulfil the rights in the Bill of Rights. Furthermore, any steps taken by Parliament to pass the Insurance Bill in its current form will be ineffective and unreasonable and thereby render the Insurance Bill unconstitutional as there will be no pathway leading to the transformation of the insurance industry. In other words, just like the Constitutional Court in Glenister v. President of the Republic of South Africa found (that the steps taken to establish the Hawks without adequate independence were unreasonable, ineffective and unconstitutional), the Insurance Bill will likely be declared unconstitutional if passed without the incorporation of explicit goals to transform the insurance industry and address the imbalances of the past. It is common cause that the South African insurance industry has been and continues to be dominated by a few companies, whose ownership and control falls under those communities that were privileged under apartheid.38 There is a pressing need to ensure that access to this industry is deliberately opened up to companies controlled and owned by members of designated groups that were previously excluded from this industry. In Allpay Consolidated Investment Holdings (Pty) Ltd v. Chief Executive Officer of the South African Social Security Agency,39 the Constitutional Court found that ‘the transformation that our Constitution requires includes economic redress,’ and outlined a number of ways in which the Constitution seeks to achieve this.40 The Insurance Bill presents a good opportunity to reaffirm this principle and open up insurance business opportunities for persons previously disadvantaged by unfair discrimination. At the moment, the objective of the Insurance Bill falls short of the constitutional standard. It simply provides for the increase of access to insurance by all South Africans without specific reference to the need to remedy the imbalances of the past. It does not speak to the goal designed to increase insurance companies owned and controlled by people from designated groups as that term is defined under South African law.41 In my view, this omission is constitutionally fatal renders the Insurance Bill unconstitutional because it ignores the constitutional obligation to set those goals. B The Prudential Authority and Transformation Imperatives One of the innovative and brand-new aspects to South Africa’s insurance regulatory structure is that the Insurance Bill, read with the recently passed Financial Sector Regulation Bill, makes provision for the Prudential Authority, which is entrusted with the authority to supervise the insurance industry. Section 62 of the Insurance Bill summarizes the powers and functions of the Prudential Authority: ‘General powers and functions of Prudential Authority 62. (1) The Prudential Authority, in addition to other powers or functions conferred on the Prudential Authority by or in terms of any other provision of this Act or any other Act of Parliament— (a) must take steps the Prudential Authority considers necessary to implement a regulatory framework that supports the objectives of the Act, including supervising and enforcing compliance with this Act; (b) must take steps the Prudential Authority considers necessary to protect policyholders in their dealings with insurers; (c) must determine the form, manner and period (if a period is not specified in this Act) in which any documentation, information or report must be published, disclosed, provided or submitted, that an insurer or a controlling company is required to publish, disclose, provide or submit under this Act; and (d) may, at regular intervals, determine or amend any rate, parameter or percentage referred to or specified in this Act or a Prudential Standard relating to financial soundness by publishing a notice on the official web site. (2) The Prudential Authority, in performing the powers and functions provided for, by or under this Act, including the making of Prudential Standards, must have regard to— (a) the objective of this Act; (b) international regulatory and supervisory standards; and (c) the principle that requirements imposed on insurers or insurance groups and the exercise of supervisory.’ The problem with this provision is that it makes no reference to transformation in relation to the powers and functions of the Prudential Authority. To illustrate this point, the Prudential Authority is not legislatively required to take cognizance of the need to transform the insurance industry in the performance of its functions.42 This is deeply problematic given the social, political and economic history of South Africa, and the constitutional values and commitments contained in the Constitution. A vision and mission statement of every public institution in South Africa must be underpinned by need to promote transformation. Therefore, it is important for Parliament to reconsider this aspect of the Insurance Bill. It must be recalled and emphasized that the Insurance Bill is one aspect of the twin peaks legislation.43 It is by design that the executive initiated the Insurance Bill together with the Financial Sector Regulation Bill, which regulates financial institutions including insurance companies.44 Importantly, the Prudential Authority is intended to serve both the insurance industry and the financial services sector generally, including banks.45 The Financial Sector Regulation Bill lists the transformation of the financial services sector as one of its objectives. It thus reads as follows: ‘7. (1) The object of this Act is to achieve a stable financial system that works in the interests of financial customers and that supports balanced and sustainable economic growth in the Republic, by establishing, in conjunction with the specific financial sector laws, a regulatory and supervisory framework that promotes— … (f) financial inclusion; (g) transformation of the financial sector; and (h) confidence in the financial system. (2) When seeking to achieve the object of this Act the Reserve Bank and the financial sector regulators must not be constrained from achieving their objectives and responsibilities as set out in sections 11, 33 and 57.’ In section 1(1) of the Financial Sector Regulation Bill, transformation of the financial sector is defined to mean ‘transformation as envisaged by the Financial Sector Code for Broad-Based Black Economic Empowerment issued in terms of section 9(1) of the Broad-Based Black Economic Empowerment Act, 2003’. While the Financial Sector Regulation Bill makes provision for the transformation of the financial sector, I argue that given the distinct and comprehensive legislative framework in the Insurance Bill, that Bill should make specific commitments towards the insurance industry for which the Prudential Authority should be accountable. In other words, one should not assume that the transformation objectives in the Financial Sector Regulation Bill will be automatically applicable to the Insurance Bill and satisfy transformation obligations. Instead, the Insurance Bill should incorporate its own set of objectives unique to the insurance industry. What is more, the legislative scheme in the Financial Sector Regulation Bill and the Insurance Bill recognizes the distinctiveness of the two legal frameworks. For instance, sections 33 and 34 of the Financial Sector Regulation Bill contain an elaborate set of powers and functions of the Prudential Authority, which are distinct from those in section 62 of the Insurance Bill. Additionally, section 62(1) of the Insurance Bill specifically recognizes this distinctiveness in the two legislative schemes when it comes to the powers of the Prudential Authority. Hence, given that the Insurance Bill has outlined powers and functions of the Prudential Authority specific to the insurance industry, I argue that Parliament must equally outline transformation goals specific to the insurance industry in the Insurance Bill. IV EFFECTS OF INCORPORATING SPECIFIC TRANSFORMATION OBJECTIVES IN THE INSURANCE BILL Apart from the constitutional obligations that flow from section 7(2) read with section 8(1) of the Constitution that enjoin Parliament to take positive, reasonable and effective steps to transform the insurance industry, there is another basis for my thesis. As alluded to earlier, pursuant to its constitutional obligations, the Executive initiated and Parliament passed the Marine Living Resources Act. In the subsequent litigation that challenged the legality of section 2(j) of that Act, which contains a transformation policy objective, Ngcobo J in Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism found that section 2 of the Marine Living Resources Act ‘is a provision of general application and applies to the exercise of any power under the Marine Living Resources Act’ because it captures the purpose of that Act.46 Moreover, Ngcobo J held that the fact that transformation of the fishing industry was explicitly made part of the objectives of the Marine Living Resources Act pointed ‘to the conclusion that the Constitution and Marine Living Resources Act required any decision maker under that Act to do more than give lip service to transformation.’47 Ngcobo J emphasised that decisions taken under that Act by those entrusted with its implementation must address the need for transformation in a meaningful way and able to demonstrate that this has been done. Failure to do so is unlawful and any ensuing decision is open to attack.48 He further stated that this flowed from the fact that the foundational policy of the Marine Living Resources Act (section 2(j)) is to redress the imbalances of the past, and the Minister is bound to give effect to that policy. In the exercise of powers under the Marine Living Resources Act, Ngcobo J concluded: It follows that if the Minister were to fail to heed this injunction, he would be acting unlawfully and his decision would be open to attack. It is incumbent upon the Minister to put forward facts from which it will appear that he has indeed paid due regard to the need to promote transformation. A court reviewing the decision of the Minister has an obligation to ensure that the section has been complied with. Where there is a dispute as to whether the Minister has complied with section 2(j), the court considering the matter must examine the facts relied upon by the Minister as establishing compliance with section 2(j), and satisfy itself that there has been compliance with this provision.49 The principle that emerged in Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism is that transformation objectives that are expressly incorporated in an Act of Parliament must be given effect to. My call for the incorporation of specific transformation objectives is predicated upon this principle; that if incorporated in the Insurance Bill, transformation objectives must be given effect to by the Prudential Authority, the Minister of Finance, who administers the insurance legislation, or both. When transformation objectives are incorporated in the Insurance Bill, as per the suggestions in this article, this will produce at least four positive effects: (i) there will be no lip service given to issues of transformation in the insurance industry because the Prudential Authority and Minister of Finance will be legally bound to give effect to that goal and the constitutional injunction. (ii) transformation in the insurance industry will become legally enforceable through the courts. Just as Justice Ngcobo pointed out (in the context of the fishing industry) in Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism, courts and tribunals will have an obligation to review decisions of the Prudential Authority to ensure compliance with, among other things, the objectives of transformation. (iii) Parliament and the Judiciary will have a political and legal mechanism, respectively, to hold the executive, and in particular the Prudential Authority, to account in relation to the constitutional imperatives of transformation of the insurance industry.50 (iv) it will lay the foundation for economic transformation and redress for persons from designated groups in South Africa, through their effective inclusion as players in the insurance industry, which is required by the Constitution.51 Under the authority of Glenister v. President of the Republic of South Africa, I submit that transformation of the insurance industry and the need to address the imbalances of the past should be incorporated as some of the specific objectives of the Insurance Bill. I further submit that these objectives should be made part of the performance deliverables of the Prudential Authority. The incorporation of transformation imperatives and objectives in the Bill must subsequently require the Prudential Authority to adopt specific measures designed to protect and advance persons or categories of persons disadvantaged by the mischief of past unfair discrimination so as to promote the achievement of substantive equality, and to regularly report to Parliament on its achievements. V CONCLUDING REMARKS In light of the above analysis, I make the following recommendations for Parliament to consider. Firstly, the preamble or the long title of the Insurance Bill must be amended to give due regard to transformation. In other words, it must expressly state that it will give due regard to transformation. Furthermore, section 3 of the Insurance Bill must be amended to incorporate a provision whose goal should be to transforms the insurance industry to address historical imbalances in the insurance industry and achieve substantive equality. Whereas the inclusion of a statutory guarantee of due regard to transformation in the preamble to the Insurance Bill may not become legally enforceable when it becomes law, it has effective interpretive value. However, the inclusion of the above wording into section 3 of the Insurance Bill will make transformation of the insurance industry legally enforceable because that section is contemplated to become a provision of general application and will apply to the exercise of any power under the Insurance Bill. To put it differently, section 3 captures the objectives and purpose of the Bill. The legal significance of incorporating transformation into that section is that the Prudential Authority, as well the Minister of Finance, will be legally bound to give effect to the objective of transformation, and their failure to do so will be unlawful.52 As held in Bato Star Fishing (Pty) v. Minister of Environmental Affairs and Tourism, if the Minister of Finance or the Prudential Authority were to fail to heed to the goal of transformation in section 3, as recommended in this article, they would be acting unlawfully and their decisions would be open to attack. A court reviewing an impugned decision of the Minister of Finance or Prudential Authority will have an obligation to ensure that section 3 has been complied with.53 According to Justice Ngcobo’s reasoning in Bato Star Fishing (Pty) v. Minister of Environmental Affairs and Tourism, where transformation is incorporated as a foundational policy of an Act of Parliament, it becomes incumbent on the public functionary entrusted with its implementation to put forward facts from which it can be ascertained that the functionary has indeed paid due regard or taken measures designed to give effect to that policy.54 And where there is a dispute as to whether the public functionary has complied with the transformation policy, a court considering the matter must examine the facts relied upon by the functionary as establishing compliance with the legal provision. In the context of the proposed section 3 of the Insurance Bill, the Minister of Finance or the Prudential Authority will be subjected to this legal scrutiny if the recommendation above is acceded to by Parliament. More importantly, by acceding to this recommendation, Parliament will fulfil its constitutional obligation to take positive measures to promote, respect and protect substantive equality. Secondly, Parliament needs to give due regard of the pronouncements by the judiciary concerning the State’s obligation to transform South African society.55 In addition, Parliament needs to recognize that the financial sector policies of South Africa must function within and be guided by the Constitution, which guarantees equal protection and benefits of the law. It must realize that the effects of past racial discrimination have remained in the past but adversely affect the present state of the insurance industry. An example of this is that fact that since 1994, only four black owned and controlled insurance companies operate in the insurance industry with a market cap of less than 1 per cent of the insurance market;56 that while there may be business practices in the insurance industry which are racially neutral, nonetheless, because of past overt social and economic discrimination, these practices are presently operative in effect to perpetuate past inequalities.57 It is important that Parliament should take cognizance of its obligations in the Constitution to positively promote, respect and advance substantive equality. The former Deputy Chief Justice Moseneke explained this positive obligation as follows: in so many words, [our Constitution] enjoins us to take active steps to achieve substantive equality, particularly for those who were disadvantaged by past unfair discrimination. This was and continues to be necessary because, whilst our society has done well to equalise opportunities for social progress, past disadvantage still abounds.58 1 See, M Pieterse ‘What do we mean when we talk about transformative constitutionalism?’ [2005] SA Public Law 20, 155 (referring to the provisions of the Constitution that indicate that it is transformative, and cautioning against adopting a one-dimensional definition of transformative constitutionalism). 2 See, S v. Makwanyane 1995 (3) SA 391 (CC) (S. Afr.) at para. 262 (‘What the Constitution expressly aspires to do is to provide a transition from [the] grossly unacceptable features of the past to a conspicuously contrasting future founded on the recognition of human rights, democracy and peaceful co-existence and development opportunities for all South Africans, irrespective of colour, race, class, belief or sex’). 3 See Soobramoney v. Minister of Health (Kwazulu-Natal) 1998 (1) SA 765 (CC) (S. Afr.) at para. 8, where Chaskalson CJ stated: We live in a society in which there are great disparities in wealth. Millions of people are living in deplorable conditions and in great poverty. There is a high level of unemployment, inadequate social security, and many do not have access to clean water or to adequate health services. These conditions already existed when the Constitution was adopted and a commitment to address them, and to transform our society into one in which there will be human dignity, freedom and equality, lies at the heart of our new constitutional order. 4 See also, P Langa ‘Transformative Constitutionalism’ [2006] Stellenbosch Law Review 3, 351 at 352, (suggesting that the starting point to determine the meaning of transformative constitutionalism is through the reading of the Interim Constitution’s Epilogue or Postamble). 5 K Klare ‘Legal Culture and Transformative Constitutionalism’ [1998] South African Journal on Human Rights 14, 146; C Albertyn and B Goldblatt ‘Facing the challenges of transformation: Difficulties in the development of an indigenous jurisprudence of equality’ [1998] South African Journal on Human Rights 14, 248, S Sibanda ‘Not purpose-made! Transformative Constitutionalism, Post-independence Constitutionalism and the Struggle to Eradicate Poverty’ [2011] Stellenbosch Law Review 22, 482; T Roux ‘Transformative Constitutionalism and the Best Interpretation of the South African Constitution: Distinction without a Difference?’ [2009] Stellenbosch Law Review 20, 258; and S Ngcobo ‘South Africa’s Transformative Constitution: Towards an Appropriate Doctrine of Separation of Powers’ Stellenbosch Law Review 22, 37. 6 Klare above n 5 at 150. 7 Ibid. 8 Sibanda above n 5 at 482. 9 Ibid at 498. 10 See section 1(a) of the S. Afr. Const., 1996. 11 See, Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism 2004 (4) SA 490 (CC) (S. Afr.), at para. 74; Minister of Finance and Other v. Van Heerden 2004 (6) SA 121 (CC) (S. Afr.) para. 31 (‘what is clear is that our Constitution and in particular section 9 thereof, read as a whole, embraces for good reason a substantive conception of equality inclusive of measures to redress existing inequality.’); National Coalition for Gay and Lesbian Equality v. Minister of Justice 1999 (1) SA 6; 1998 (12) BCLR 1517 (CC)(S. Afr.) para 62 (‘Section 9 of the Constitution clearly contemplates both substantive and remedial equality. Substantive equality is envisaged when section 9(2) unequivocally asserts that equality includes ‘the full and equal enjoyment of all rights and freedoms.’ The State is further obliged ‘to promote the achievement of such equality’ by ‘legislative and other measures designed to protect or advance persons, or categories of persons, disadvantaged by unfair discrimination,’ which envisages remedial equality); South African Police Service v. Barnard 2014 (6) SA 123 (CC) (S. Afr.) para. 29 (reasoned that ‘at the point of transition, two decades ago, our society was divided and unequal along the adamant lines of race, gender and class. [Our Constitution] has a transformative mission… In so many words, it enjoins us to take active steps to achieve substantive equality, particularly for those who were disadvantaged by past unfair discrimination. This was and continues to be necessary because, whilst our society has done well to equalize opportunities for social progress, past disadvantage still abounds.’); City Council of Pretoria v. Walker 1998 (2) SA 363 (S. Afr.) para. 140 (held that the City ‘is obliged to develop a coherent and serious strategy which, looked at rationally and objectively, would be capable of advancing substantive equality and truly promoting the idea of a city of civic equals’); Daniels v. Campbell 2004 (5) SA 331 (CC); 2004 (7) BCLR 735 (CC) (S. Afr.) at para. 107 (ruled that the Intestate Succession Act and the Maintenance of Surviving Spouses Act ‘infringe[] the substantive equality and dignity commitments of our Constitution and must be declared unconstitutional and invalid’); AB and Another v. Minister of Social Development [2016] ZACC 43 (S. Afr.) (held that the right to equality provides a mechanism to achieve substantive equality which, unlike formal equality that presumes that all people are equal, tolerates difference). 12 Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs above n 13, at para. 74. 13 National Coalition for Gay and Lesbian Equality v. Minister of Justice above n13, at para. 60. 14 Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism, above n 13; Bel Porto School Governing Body v. Premier of the Province, Western Cape 2002 (3) SA 265 (CC) (S. Afr.) para. 7. But see, Minister of Justice and Constitutional Development and Another v. South African Restructuring and Insolvency Practitioners Association [2016] ZASCA 196 (S. Afr.) (declaring a policy issued by the Minister under section 18(1) of the Insolvency Act 24 of 1936 as irrational and unconstitutional because of its impact on the dignity of minority groups); and SA Restructuring and Insolvency Practitioners Association v. Minister of Justice and Constitutional Development & others, and another application 2015 (2) SA 430 (WCC) (S. Afr.). 15 Seee.g. Financial Services Board, 18th Annual Report of the Registrar on the Results of the Long-term Insurance Industry for the Period ending 2015 (noting that an aggregate 67.38% of the percentage of total assets in the long-term insurance in South Africa is held that four insurance companies being Liberty at 13.62%; MMI Holdings at 14.24; Old Mutual at 23.72% and Sanlam at 15.80%), available at https://www.fsb.co.za/Departments/insurance/Documents/LT%20Tables%202015.pdf. 16 Insurance Bill [B1-2016] (S. Afr.). 17 President Jacob Zuma: 2017 State of the Nation Address, 9 February 2017, available at http://www.gov.za/speeches/president-jacob-zuma-2017-state-nation-address-9-feb-2017-0000. 18 Minister of Finance, Pravin Gordhan, 2011 Budget Speech, available at http://www.treasury.gov.za/documents/national%20budget/2011/speech/speech2011.pdf. For a discussion of the twin peaks model of regulation, see Michael Taylor, ‘The Road from Twin Peaks and the Way Back’ (2009) 16 Connecticut Insurance Law Journal 61. See also Mtende Mhango ‘Twin Peaks is not for SA’ Fin24, 6 February 2014, available at http://www.fin24.com/Companies/Financial-Services/Twin-Peaks-is-not-for-SA-20140205; and Herbert Kawadza ‘Twin Peaks Regulation Deserves a Fair Chance’ Sunday Times, 21 September 2014, available at http://www.pressreader.com/south-africa/sunday-times/20140921/282677570503765. For some of the discussions documents issued by government about these reforms, see, National Treasury Implementing Twin Peaks Model of Financial Regulation in SA: Published for Public Comment by the Financial Regulatory Reform Steering Committee (2013), 1 February 2013, available at http://www.treasury.gov.za/twinpeaks/20131211%20-%20Item%203%20Roadmap.pdf; and National Treasury Policy Document, A Safer Financial Sector to Serve SA Better (2011), 23 February 2011, available at http://www.treasury.gov.za/documents/national%20budget/2011/A%20safer%20financial%20sector%20to%20serve%20South%20Africa%20better.pdf. 19 The Financial Sector Regulation Bill was passed by Parliament in June 2017 and now awaits the President’s signature. See http://www.sabinetlaw.co.za/finances/articles/parliament-passes-financial-sector-regulation-bill 20 See, D Millard ‘The Impact of the Twin Peaks Model on the Insurance Industry’ [2016] Potchefstroom Electronic Law Journal 6, 1. 21 See, Carmichele v. Minister of Safety and Security 2001 (4) SA 938 (CC) (S. Afr.), at para. 44. 22 Rail Commuters Action Group and Others v. Transnet Ltd t/a Metrorail 2005 (2) SA 359 (CC) (S. Afr.), at para. 69. 23 Glenister v. President of the Republic of South Africa 2011 (3) SA 347 (CC) (S. Afr.), at para. 189–190. 24 Ibid. 25 Ibid at para. 189. 26 Ibid at paras 189 and 194. 27 Ibid at para. 194 28 Ibid. See also, Rail Commuters Action Group and Others v. Transnet Ltd t/a Metrorail above n 28, at para. 69; Carmichele v. Minister of Safety and Security above n 27, at para. 44; and Investigating Directorate: Serious Economic Offences v. Hyundai Motor Distributors 2000(1) SA545 (CC) (S. Afr.), at para. 21 (ruling that ‘all statutes must be interpreted through the prism of the Bill of Rights. All law-making authority must be exercised in accordance with the Constitution [because the] Constitution is located in a history which involves a transition from a society based on division, injustice and exclusion from the democratic process to one which respects the dignity of all citizens, and includes all in the process of governance. As such, the process of interpreting the Constitution must recognise the context in which we find ourselves and the Constitution’s goal of a society based on democratic values, social justice and fundamental human rights. This spirit of transition and transformation characterises the constitutional enterprise as a whole.’). 29 See Glenister v. President of the Republic of South Africa and Others (Glenister I) 2009 (1) SA 287 (CC). 30 See, also the Preamble and chapter 1 of the Competition Act 1998; Consumer Protection 2008; National Credit Act 2005. 31 Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism above n 13, at para. 83. 32 As amended by the Mineral and Petroleum Resources Development Amendment Act 49 of 2008. 33 Agri South Africa v. Minister for Minerals and Energy 2013 (4) SA 1 (CC) (S. Afr.). 34 Ibid at para. 61. 35 F Haines, The Paradox of Regulation: What Regulation Can Achieve and What It Cannot 8 [2011]. 36 Ibid. 37 Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism above n 13 at para. 74. 38 See, Financial Services Board 18th Annual Report of the Registrar on the Results of the Long-term Insurance Industry for the Period ending 2015 (noting that 76.38% of the percentage of total assets in the long-term insurance in South Africa is held that four insurance companies being Liberty at 13.62%; MMI holdings at 14.24; Old mutual at 23.72% and Sanlam at 15.80%), available at https://www.fsb.co.za/Departments/insurance/Documents/LT%20Tables%202015.pdf 39 Allpay Consolidated Investment Holdings (Pty) Ltd v. Chief Executive Officer of the South African Social Security Agency 2014 (1) SA 604 (CC) (S. Afr.), at para. 46. 40 Id para. 46–52. See also Viking Pony Africa Pumps (Pty) Ltd t/a Tricom Africa v. Hidro-Tech Systems (Pty) Ltd and Another 2011 (1) SA 327 (CC) (S. Afr.), at para. 46 (held that ‘The complaint is that the historically disadvantaged individuals neither exercised control over the tendering enterprise nor were they actively involved in its management, to the extent commensurate with their degree of ownership. The converse is the requirement for awarding preference points in terms of regulation 13. It follows from this regulation that it is not enough merely to have the historically disadvantaged individuals holding the majority shares in a tendering enterprise. The exercise of control and the managerial power actually wielded by the historically disadvantaged individuals, in proportion to their shareholding, are what matter.’) 41 See, section 1 of the Broad-Based Black Economic Empowerment Act 53 of 2003, which defines ‘black people’ to mean ‘Africans, Coloureds and Indians;’ and section 1 Employment Equity Act 55 of 1998, which defines ‘Designated groups’ means ‘Black people, (i.e. Africans, Coloureds and Indians), women and people with disabilities who (a) are citizens of the Republic of South Africa by birth or descent; or (b) became citizens of the Republic of South Africa by naturalisation (i) before the commencement date (i.e. 27 April 1994); or after 26 April 1994 and who would have been entitled to acquire citizenship by naturalisation prior to that date but who were precluded by apartheid policies.’ 42 See e.g. section 29 of the Marine Living Resources Act which establishes the Fisheries Transformation Council, whose objective is ‘to facilitate the achievement of fair and equitable access to the [fishing rights]’(section 30); section 57 of the Mineral and Petroleum Resources Development Act, which establishes the Minerals and Mining Development Board whose function includes advising the Minister ‘on the transformation and downscaling of the Minerals and mining industry’ (section 58(1)(a)(iii)). 43 For a discussion of twin peaks financial regulation model see, Taylor n 22 above; E Pan ‘Four Challenges to Financial Regulatory Reform’ [2010] Villanova Law Review 55, 743; E Pan ‘Four Challenges to Financial Regulatory Reform’ [2010] Villanova Law Review 55, 743; R Jones ‘Back to Basics: Why Financial Regulatory Overhaul Is Overrated’ [2010] Entrepreneurial Business Law 4, 392; and B Michael, The Twin Peaks Regulatory Model: The Future of Financial Regulation, Banking Today April 2014, available at http://www.law.hku.hk/aiifl/wp-content/uploads/2014/09/Twin-Peaks.pdf. 44 See AJ Godwin and AD Schmulow ‘The Financial Sector Regulation Bill in Southern Africa, Second Draft: Lessons from Australia’ [2015] South African Law Journal 132, 756. 45 See section 1 of the Insurance Bill, which states that the Prudential Authority ‘has the meaning as defined in section 1 of the Financial Sector Regulation Act.’ Section 1 of the Financial Sector Regulation Act states that the Prudential Authority ‘means the authority established in terms of section 32.’ 46 Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism, above n 13, at para. 96. 47 Ibid at paras 99 and 110. 48 Ibid at para. 99. 49 Ibid at para. 103. 50 See e.g. 27four Investment Managers, Annual Survey (September 2016) at 3 and 17–18 (reporting that the total assets of the South African investment and savings is R8.9 trillion. Out of this, only 4.6% or R408.3 billion is managed by asset management companies that are controlled and owned by black South Africans who are from previously disadvantaged backgrounds). 51 See e.g. Agri SA v. Minister for Minerals and Energy, above n 37, at para. 61; Allpay Consolidated Investment Holdings (Pty) Ltd v. Chief Executive Officer of the South African Social Security Agency above n 42, at paras 46–55. 52 Bato Star Fishing (Pty) v. Minister of Environmental Affairs and Tourism above n 13 para. 99. 53 Bato Star Fishing (Pty) v. Minister of Environmental Affairs and Tourism above n 13 para. 103. 54 For a view of transformation measures in other sectors of the economy see, Broad-Based Black Socio-Economic Empowerment Charter for the South African Mining and Minerals Industry, promulgated in June 2017 with the primary objective to ‘[t]o facilitate sustainable transformation, growth and development of the mining and minerals industry [and to] give effect to section 100 (2) (a) of the MPRDA, section 9 of the Constitution and harmonise Government’s transformation policies by providing, among other things, that 30% of every mining business in South African should be black owned); and Policy on the Appointment of Insolvency Practitioners Government Gazette No 37287 (7 February 2014) (with the primary objective to address the imbalances of the past and transform the insolvency industry, make the insolvency industry accessible to individuals from previously disadvantaged communities; and promote the objectives of the Broad-Based Black Economic Empowerment Act 53 of 2003 by empowering black people who are insolvency practitioners). See also, Minister of Justice and Constitutional Development and Another v. South African Restructuring and Insolvency Practitioners Association and Others 2017 (3) SA 95 (SCA) (S. Afr.); and A Restructuring and Insolvency Practitioners Association v. Minister of Justice and Constitutional Development & others, and another application 2015 (2) SA 430 (WCC) (S. Afr.). where the Policy on the Appointment of Insolvency Practitioners was challenged on constitutional grounds and declared unconstitutional. 55 Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism, above n 13; City of Tshwane Metropolitan Municipality v. Afriforum 2016 (6) SA 279 (CC) (S. Afr.), at para. 165 (upholding the streets name changes bearing names of people from previously disadvantaged groups held that in a transformative Constitution oppressive racist history does not deserves any recognition); MEC for Education: Kwazulu-Natal v. Pillay 2008 (1) SA 474 (CC) (S. Afr.); (upholding the right of a learner to wear a nose-stud in recognition of the right to religious and cultural freedom); Government of the Republic of South Africa v. Grootboom 2001 (1) SA 46 (CC) (S. Afr.) (held that the government’s housing policy was unconstitutional because it failed to make provision for people in immediate and desperate need of shelter); Minister of Home Affairs v. Fourie 2006 (1) SA 524 (CC) (S. Afr.) (held that the Marriage Act 25 of 1961 was in conflict with the Constitution to the extent that it prevented same-sex couples from enjoying the same status, entitlements and responsibilities accorded to heterosexual couples. This violated their right to dignity as well as their right to equal protection of the law and their right not to be discriminated against unfairly); South African Police Service v. Barnard above n 14; Laubscher v. Duplan [2016] ZACC 44 (S. Afr.) (where the court adopted a contextual approach, which requires the court to afford as much protection as possible to same-sex partners who have chosen not to marry). 56 Seee.g. Financial Services Board, 18th Annual Report of the Registrar on the Results of the Long-term Insurance Industry for the Period ending 2015, available at https://www.fsb.co.za/Departments/insurance/Documents/LT%20Tables%202015.pdf. 57 Bato Star Fishing (Pty) Ltd v. Minister of Environmental Affairs and Tourism, above n 13 (recognising the same in the context of the fishing industry). 58 South African Police Service v. Barnard, above n 13, at para. 29. © The Author 2017. Published by Oxford University Press. All rights reserved. For permissions, please e-mail: journals.permissions@oup.com.

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Statute Law ReviewOxford University Press

Published: Sep 19, 2017

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