Is importing legislation good, bad or just ugly?
South Africa has a long history of importing legislation and sometimes regulators take the time to adapt it to local conditions, but sometimes they do not. This has been a significant topic of discussion over the past two years as various pieces of legislation are being developed in order to improve the state, and the performance, of the financial services industry.
This has resulted in industry stakeholders waiting with baited breath to see what the requirements will be.
A good example of legislation that was rushed through without being localised is the Financial Intelligence Centre Act (FICA). Effective in South Africa from July 2003, it was promulgated largely as a knee jerk reaction to the destruction of New York’s Twin Towers by terrorists on 9 September 2001. It was introduced to fight financial crime, such as money laundering, tax evasion and terrorist financing activities. FICA formed part of a bouquet of legislation including the Protection of Constitutional Democracy against Terrorist and Related Activities Act and the Prevention and Combating of Corrupt Activities Act.
Developed for a different environment
FICA, like so many other pieces of legislation, was developed for a first world environment where most people with bank accounts have a home and an electricity account. This is unfortunately not always the case in this country.
Writing your own legislation can also be problematic. At least you are not on the bleeding edge of legislation so new that it could have a high risk of not coming to fruition or being very difficult to implement.
However, when you write your own legislation, it is like writing software where you normally only have a working version when you get to version three. Version one is normally problematic and is quickly replaced by version two. Of course, you can write it bespoke for your own environment, but you miss out on piggy backing on work that has already been done.
However, if time is of the essence, adopting international legislation locally might be necessary, as was the case with FICA.
Assessing practicality is important
The reality is that it is far better to take principles from overseas legislation and then assess their impact and practicality on the local environment. If this process is not followed, it ends up with numerous amendments being made to the legislation and a lot of time being wasted.
A good example of this is Treating Customers Fairly (TCF). TCF was originally flighted in the UK and our local version is largely based on the principles and outcomes of the UK version. Thankfully, the Financial Services Board has not directly transplanted it in South Africa. There has been a decent period of local analysis and what was necessary to make it more relevant in this jurisdiction.
While TCF itself will not be enacted as legislation; it is closely aligned to the forthcoming market conduct regime under Twin Peaks. Our consumer protection legislation is also largely based on overseas legislation. This includes the Consumer Protection Act (CPA), and the National Credit Act (NCA), both of which took overseas concepts and localised them. The NCA in particular has been a very successful Act as it protected South African consumers from reckless borrowing, and largely insulated them from the worst fall-out of the financial crisis.
Protecting privacy is becoming important
Protection of Personal Information Act (POPI) is another example of legislation which is largely based on data protection legislation in the Eurozone. While the local version is based on the same principles, its final form is decidedly South African centric.
In conclusion, it is definitely a good idea to bring in international legislation that has proved successful, providing the local version is based on the principles of that legislation and then adapted for this environment. As a generalisation, it is bad to rush international legislation in, and quite ugly to simply copy and paste it.
