Press Release from the Competition Commission Competition Commission refers a case of collusion against oil companies
The Competition Commission today referred a case of price fixing and market division regarding the supply of diesel, against Chevron SA (PTY) LTD, Engen Limited, Shell SA (PTY) LTD, Total SA (PTY) LTD, Sasol Limited, BP SA Limited and South African Petroleum Industry Association (“SAPIA”) to the Competition Tribunal for adjudication.
The first six respondents, who are members of SAPIA, are oil companies active in the production, marketing and distribution of various petroleum products in South Africa. This referral flows from wide ranging investigations by the Commission into possible collusive conduct in liquid fuels. The investigation started in January 2009 based on information received from various sources.
The investigation revealed collusive conduct through extensive exchanges of commercially sensitive information by the respondent oil companies. According to the Commission’s investigation, this information exchange started in the late 1980s, and, from 2005, was largely through SAPIA.
The information exchanged was monthly sales volumes of each oil company, per product category, to defined groups of customers in each magisterial district. The various product categories included petrol, diesel, illuminating kerosene, heavy furnace oil, bitumen, liquid petroleum gas and lubricants, and specific grades within these categories. The information at this level of detail allowed the oil companies to closely track each other’s sales and to align their strategies in the market, eliminating competition between themselves. This also enabled them to divide or allocate markets by deciding not to enter, or compete for, certain geographic markets or customer groupings given the activity of other oil companies in such markets.
The diesel price is not regulated but there is a maximum Wholesale List Selling Price (“WLSP”) published by the Department of Energy. The oil companies used the WLSP as their list price, and their conduct prevented competitive discounting off this benchmark. The oil companies intended, inter alia through the information exchange, to protect historically high profit margins. The Commission’s investigation also uncovered wide-ranging understandings about how the industry should operate. This included influencing regulation of the industry and undermining entry to maintain the status quo.
The ability to identify sales by specific company was particularly important when Sasol ended the Main Supply Agreement and was growing its sales in the market. The information enabled the oil companies to prevent this change leading to price competition in the market.
The Commission concluded that the oil companies had engaged in price fixing and market division in contravention of section 4(1)(b) of the Act.
This conduct had a far reaching effect given that commercial customers of diesel include farmers, the road freight industry, the transport industry, and the fishing and mining industries, amongst others.
This referral concerns the production, marketing and distribution of diesel in its various grades, in particular regarding sales of diesel to commercial customers (as opposed to retail diesel sales). The Commission is still investigating possible contraventions of the Act by the respondents in the other product categories.
The Commission has requested the Tribunal to levy an administrative penalty amounting to 10% of total turnover of the respondent’s turnover in and export from South Africa in the preceding financial year.
Background on the petroleum industry
The history of the petroleum industry is important in understanding the significance of the conduct referred in this investigation. In 1954 government secured the conclusion of agreements known as the Sasol Supply Agreements (“SSA”) or the MSA between Sasol and the other oil companies. These agreements effectively constituted a government-brokered and sanctioned form of private regulation, obliging the oil companies to service their marketing requirements in the inland region by purchasing all of Sasol’s production volumes pro-rata to their market shares.
The price of these volumes was based on the "in-bond landed cost" ("IBLC"), calculated on the basis of an import parity price for fuel products. The essence of the MSA was that the oil companies would purchase Sasol’s production of petroleum products up to certain maximum volumes from defined sources of supply, and Sasol would not market petroleum products save for certain exceptions.
In 1988, the Competition Board, a predecessor to the Commission, granted a broad exemption under the Maintenance and Promotion of Competition Act, 96 of 1979 (“Maintenance and Promotion of Competition Act”) to the respondent oil companies and others, that allowed horizontal collusion on prices, conditions of supply, market sharing, and collusive tendering. This exemption was extended from time to time until the Maintenance and Promotion of Competition Act was repealed and replaced by the Competition Act no. 89 of 1998. The broad exemption remained in operation until 31 August 2000. A further specific exemption in relation to the application of the MSA applied until August 2002. The MSA terminated on 31 December 2003. It is notable that the specific exemption relating to the MSA did not allow for the level of disaggregated data being exchanged in the case referred here.
Following the termination of the MSA, Sasol was effectively allowed to compete directly with the other oil companies, including in the diesel market. The identity of specific oil companies was therefore important in the oil companies being able to monitor whether sales or market share changes in a given region or customer grouping were as a result of Sasol increasing its sales. By being able to distinguish suppliers the oil companies could prevent the change in Sasol’s market participation leading to price competition in the market as a whole.
While the diesel price is not regulated, diesel has been included in a set of “controlled” products specified by the Department of Energy (“the DoE”), formerly the Department of Minerals and Energy (“the DME”). The DoE publishes a maximum price for diesel, the Wholesale List Selling Price (“WLSP”). The respondent oil companies were involved in the process of regularly reviewing the WLSP, between them and with the then DME, which included discussions and determinations around the elements that form part of the price build-up of diesel and other non-regulated products. The IBLC, which later became the Basic Fuel Price (“BFP”), was based on import parity principles and in turn was used to build up to the WLSP. The oil companies, by agreement or understanding, adopted the WLSP as their list price for commercial diesel.
Price fixing is about ensuring that competitive discounting from collectively understood pricing points is avoided. The incentive to discount is to achieve higher sales; by tracking the market shares of each company any attempt to compete away customers by one oil company can be picked up and countered by the others. Such arrangements therefore undermine the incentive to compete in the first place.
The disaggregated sales information exchanged between oil companies in the case being referred here removed any element of surprise in strategic decision making and functioned as a reliable substitute to direct cartel interactions insofar as it made monitoring of rivals possible. This, together with the history of coordinated behaviour and other characteristics that exist in the petroleum industry, made achieving cartel outcomes post the exemption period possible.
In general, an assessment of information exchange involves understanding the characteristics of the market, for instance, strategic information exchanged in concentrated, oligopolistic markets and in markets with homogenous products may be considered problematic. The type of information shared is also considered. Commercially sensitive, non-public information, with a high level of disaggregation (for instance, firm-specific or individualised information, by product segment, customer segment, or geography) may allow achieving or sustaining collusive outcomes. The age of information exchanged is important, with recent information retaining greater strategic value. The frequency of exchange and market coverage is also considered – the more regularly information is exchanged by a large proportion of competing market participants, the more likely that it could lead to anticompetitive outcomes. These factors would be looked at together and in context of the evolution of the industry. This is particularly so if the industry was formerly regulated or exempted from competition law, as is the case here.
Keitumetse Letebele, Head: Communications
012 394 3183 / 082 783 3397/ firstname.lastname@example.org
Corporate & Commercial Update, Know all the costs of home ownership, reported in Business Report
Ensure you know all the costs of home-ownership.
This article was first published in the third-quarter 2012 edition of Personal Finance magazine
Back in 2000, at the age of 32, Joe bought his first home. If Joe had been better prepared before jumping into the property market, he would probably be reaping greater benefits now, 12 years later.
Armed with a smallish deposit, Joe found a house he liked and signed an offer to purchase on the day he saw it. The seller immediately accepted the offer, which was only just below the asking price.
Joe had not known much about the extra costs involved, so it came as a shock when he received a hefty bill from the conveyancing attorneys.
When he moved in a few months later, he became aware of defects he should have picked up when viewing the house. Too late, Joe realised that he probably could have negotiated a lower price with the seller. Being under-prepared, he had over-paid.
1. TYPES OF OWNERSHIP
The two kinds of property ownership that you, as a first-time buyer, are most likely to have to choose between are sectional title and freehold title.
A sectional title scheme usually takes the form of a block of flats, a complex of townhouses or cluster homes, made up of a number of residential units within a larger common property. You become the owner of a unit, which, together with your undivided share of the common property, forms your “section”. You also may have exclusive use of a part of the common property, such as a parking bay.
You pay a monthly levy towards shared costs, including maintaining the common property, insurance and security. Your levy is based on your “participation quota”, which takes into account the size of your section relative to the other sections.
You are billed directly for municipal rates and electricity. Water is usually a shared cost, but in some schemes sections have their own water meters.
Samuel Seeff, chairman of Seeff, says the levy is based on the actual expenses of running the building or complex. “If the running costs are low, the levy on a R1-million unit, for example, can be as low as R500. On the other hand, if the complex has things like elevators, swimming pools and security guards, the levy can go up to R1 500, but can be significantly higher in upmarket and luxury areas,” he says.
The Sectional Titles Act sets out how sectional title schemes must be run. Briefly, you are automatically a member of the body corporate, which consists of all the owners in the scheme. A group of trustees is elected from among the owners at an annual general meeting and represents the body corporate. The trustees are responsible for managing the scheme, although many schemes outsource day-to-day management to a managing agent.
Johann le Roux, executive director of levy finance company Propell, says the trustees have to ensure that all owners and occupiers comply with two sets of rules: management rules, which deal with administration, meetings and the collection of levies; and conduct rules, which relate to the conduct of owners and occupiers. A rule may be amended only by special or, in the case of management rules, unanimous resolution at a general meeting.
Apart from your regular monthly levy, the trustees have the authority to implement a special levy to fund an unplanned common expense, without having to hold a general meeting. Le Roux says this would normally happen in an emergency, such as the repair of a burst water pipe, where the trustees would have to act quickly.
Before buying into a scheme, you need to be satisfied that it is well run and that the rules suit you. It is important to see the last audited financial statement, the current budget and the minutes of the last annual general meeting. This will give you an idea of the state of the scheme’s finances and whether you can expect levies to increase and whether a hefty special levy is on the cards. You also need to find out if owners’ levies are in arrears.
It is also important, once an owner, that you become involved, attend meetings and even offer yourself for election as a trustee.
“The crux is that you become part of a residential community. Owners need to look out for each other in order to ensure not only the smooth running of the scheme, but also to promote a pleasant living environment with increasing property values,” Le Roux says.
Individual freehold title ownership generally applies to freestanding houses but also to certain cluster developments. (If you want to buy into a cluster or gated development, it is important to establish which type of ownership applies.) It means you fully own – and are fully responsible for – the property you buy.
You generally have a greater degree of privacy and freedom than if you were in a sectional title scheme.
As the owner of a freehold property, you must pay homeowner’s insurance, municipal rates and for water, sewerage, refuse removal and electricity.
Note that freehold cluster developments may be governed by homeowners’ associations, which can involve financial obligations and rules.
2. WHAT CAN YOU AFFORD?
Aside from budgeting for a deposit and the once-off costs of buying a property, you need to assess your expected monthly expenses, comparing what you are paying as a tenant renting a property with what you would be paying as an owner. You need to take into account your bond repayments, the monthly levy if the property is sectional title, maintenance costs, insurance, rates, water and electricity.
All the costs rise with inflation, except your bond repayment, which depends on the prevailing interest rate (if you have not fixed your rate).
Interest rates, which are at a 38-year low, are likely to rise at some point in the future, so it is important to factor a higher rate into your budget calculations. For example, if you have a R900 000 home loan, at the current prime rate of nine percent, over 20 years you would be paying R8 097 a month, excluding bank fees. If the rate went up to 12 percent, for example, your home loan repayments would increase to R9 909.
As a first-time buyer, you may have access to a housing subsidy:
* Government subsidy. Depending on your income level, you may qualify for a government subsidy. In February, the national Budget mentioned an improved subsidy for first-time buyers. The 2012 Budget Review states: “Substantial increases to the finance-linked individual subsidy programme will be introduced … the subsidy value that households earning between R3 500 and R15 000 per month can access has increased from R54 000 to R83 000 on a maximum property value of R300 000.”
* Employer subsidy. Some employers offer housing subsidies to their employees – usually a fixed amount a month towards your loan repayments.
Property as an investment
Owning a home should be regarded as a long-term proposition. If you buy and sell over shorter periods, you are unlikely to make much out of your property as an investment because of all the costs involved.
Making a profit on a property in the short term depends on the market and whether you can add value, Seeff says. “In the period 2005 to 2007, it often happened that properties were bought and sold at a profit only one year later. Given the current market, however, this is not easily achievable. The transactions we currently see as profitable all entail adding value to the property – for example, purchasing an old house and renovating it.”
On the appreciation of property over the long term, Bill Rawson, founder of Rawson Properties, says: “In any economy subject to inflation, labour and material costs will rise year after year. New housing will therefore be more expensive next year and the year after that in perpetuity, provided that the basic demographics of the area do not change.
“The latest First National Bank (FNB) figures indicate that, in cash terms, South African residential property has risen 220 percent since 2000. That’s a pretty good growth rate.”
When looking at property prices in a particular area, don’t simply compare the asking prices in advertisements. What a seller asks and what he or she actually gets can be two very different things.
At present, the market favours the buyer. “In the current market,” Seeff says, “we see properties selling for between 85 and 95 percent of the asking price.”
On gauging value, Rawson says it is essential to do your research. “Carefully check out the sales prices achieved in the area you favour and talk to estate agents. Be prepared to pay higher for something that really pleases you rather than lose it.”
3. FINDING A HOME
Decisions on the type of property you buy and the area in which it is situated should be made with a long-term view in mind. Two additional issues you need to consider are:
* Existing or new. You can buy either an existing home or a new (off-plan) home from a developer that, more likely than not, has not been built yet. An off-plan home is likely to be more expensive than an existing home of the same size.
The Absa website offers the following advice for off-plan buyers: “Ensure you are dealing with a reputable developer who has a proven track record (investigate the developer’s credentials before making a commitment to buy). Also, establish whether the developer is using the services of a reputable builder.”
* Repossessed homes. A way of getting into the property market cheaply is to buy a repossessed home from a bank. “Distressed” properties, where the owner is unable to pay back the loan, are first put up on auction, and only as a final step are they repossessed. It is not easy for first-time buyers to buy on auction because of the high upfront costs, but repossessed homes should be considered. The banks have lists of such properties on their websites.
Rawson says distressed homes offer great opportunities right now – but you must know what you are doing. “You may have to spend an extra 20 percent or more on renovation. You may have to evict a stubborn tenant and you are unlikely to see all the problems in a property which has, perhaps, been neglected. Once these risks are accepted, the low price of distressed properties can make them brilliant buys with huge value-increasing potential.”
Using an estate agent
Experienced estate agents have a thorough knowledge of their area and will line up appropriate properties for you to view. The agent will facilitate the sale and should be on hand to deal with hitches in the transfer-of-ownership process. Agents must be registered with the Estate Agency Affairs Board and have a valid fidelity fund certificate, and they are bound by a code of conduct. You have recourse to the board if you believe an agent has acted unethically.
Thoroughly inspect the property
Among things to look for are:
* Structural integrity. Adrian Goslett, chief executive of RE/MAX of Southern Africa, warns that certain “fixer-uppers” can be a nightmare if the structural integrity has failed.
“Structural cracks, which are deep and appear on both sides of the wall, can indicate that the foundation has failed or that there is severe structural damage. Buyers should look out for heavy filler work on the walls, diagonal cracks running from the corners of windows or door frames and deformation along roof lines. If in doubt, ask a structural engineer to inspect the property,” he says.
Your estate agent should be able to refer you to a structural engineer, or you can find a list of competent engineers on the Joint Structural Division website (www.jsd.co.za). Expect to pay from R2 000 to around R4 000 for an inspection and report.
* Leaking roof or water damage. “Having water in places it shouldn’t be is never a good thing for a home. Water damage or rising damp can be costly to repair,” Goslett says. “Look for areas in the home where the paint is scaling or bubbling, as these are usually indications that there is damp in the walls or ceilings. If you are unsure, you can get a plumber to check the property.”
Are the building plans legal?
Goslett advises that you inquire at the local municipality to ascertain whether the buildings on the property are legal and built to the required standards.
4. YOUR DEPOSIT
You improve your chances of obtaining a home loan from a bank – and are more likely to get it at a better rate – if you can put down a deposit, and the bigger it is the better, because you will owe less. And a seller may also be more inclined to accept your offer if you can put down a decent deposit.
The banks differ on what they offer, but with an easing in lending criteria, loans of 100 percent of the selling price are available, as are loans of more than 100 percent to cover your additional costs, such as transfer costs and bond registration fees. All loans are subject to what you can afford and your credit profile (see below).
Note that you may pay a slightly higher interest rate on a loan of more than 80 percent because of a relatively higher risk to the bank.
* Absa. Absa encourages you to put down a deposit but provides loans of up to 100 percent of the property value. It provides home loans of up to 110 percent to its Affordable Housing clients who earn below R15 000 a month, subject to conditions.
* FNB. For all loans up to R2 million, FNB will consider a maximum loan of 100 percent.
* Nedbank. On loans of up to R1.5 million, non-Nedbank clients qualify for a maximum loan of 90 percent and Nedbank clients qualify for a maximum loan of 100 percent, subject to the loan amount applied for and your risk rating.
* Standard Bank. Of loans of up to R1.5 million Standard Bank offers a maximum loan of 100 percent. The bank also offers loans of 104 percent to first-time buyers who buy a property valued at R1 million or less, if you approach the bank directly and do not go through a bond originator.
5. GETTING A HOME LOAN
Your home loan (also known as a mortgage bond, mortgage or bond) is bonded to your property and is registered, together with your title deed documents, at the Deeds Office. It is a secured loan, and the security is the property itself, so if you get into arrears with your repayments, the bank has the right to sell your home to recoup its money.
The National Credit Act (NCA), which took effect in June 2007, tightened the conditions for getting a loan and shifted more responsibility onto the banks to ensure that the people to whom they grant loans can afford to pay them off.
Before the NCA, when you applied for a home loan, banks simply looked at your income. The rule of thumb was that your repayments should not exceed 30 percent of your gross income (your total household income before deductions and tax). Now you must provide detailed information about your income and expenditure, and full details of any debts you have.
Banks will look at your day-to-day expenses. They will also do a credit check. If you are relatively free of debt and/or if they regard you as a low credit risk, you could qualify for a bigger loan or get a better rate on your loan.
You must provide the following:
* Identity document;
* Salary slip;
* Bank statements for the three months prior to the loan application;
* Proof of your residential address, as required by the Financial Intelligence Centre Act; and
* Full details of your household expenses – joint expenses and joint income if you are married.
The bank will check your credit information, which is held by the four major credit bureaus: Compuscan, Experian, Transunion and XDS. Each bureau has a credit record on you (to which you have access – you can request one free report a year) containing details about your loans, credit cards, and bank and store accounts, showing how much credit you are using and the total credit available to you.
Your record will also show if have any adverse listings or judgments against you. A judgment remains on your record for five years.
Your payment profile is part of your credit record that only credit providers can access and it reflects what type of credit customer you are. For example, you could be recorded as a “slow payer”, even though you have not actually missed any payments.
Banks look mainly at how you are paying off your credit, but your credit extension limits are also taken into account.
Interest rate and charges
The NCA also introduced maximum interest rates and initiation fees on home loans.
* Interest rate. The maximum interest rate you can be charged is the repo rate (currently 5.5 percent) multiplied by 2.2 plus five percentage points (17.1 percent a year at current rates). However, most people qualify for a loan at around the bank prime rate (currently nine percent). People regarded as very low risk (high earners with low debt and a good credit record) may get one percentage point below prime, while those seen as high risk may be charged up to six percentage points above prime, or 15 percent.
* Bond initiation fee and monthly service fee. The NCA sets the maximum initiation fee at R1 000 plus 10 percent of the amount of the loan over R10 000, capped at R5 000 excluding VAT. The bank will also charge a monthly service fee of no more than R50, excluding VAT (see “Bank charges on home loans”, below).
* Property evaluation fee. This is included in the initiation fee. The bank sends a property valuer, who verifies that the value of the property provides sufficient security against the loan. Note that the valuer does not necessarily inspect the structural condition of the building, and the bank cannot be held liable for any structural defects.
You can formally apply for a home loan only once your offer to purchase has been accepted by the seller. However, while searching for a home you can obtain pre-approval for a loan of a certain amount from a bank or through a bond originator. This will narrow down your range of properties to view and should strengthen your position as a buyer.
Note that pre-approval does not guarantee you a loan. And although banks may do a thorough assessment before granting a pre-approved amount, this may differ from the final amount granted.
Praven Subbramoney, head of pricing, product, marketing and customer experience, FNB Home Loans, says: “The pre-approved amount is highly dependent on the information declared upfront by the customer. Very often, customers tend to omit expenses, which will affect their affordability and, by implication, the loan amount they are approved for. Eventually, when a customer does sign an offer to purchase and more comprehensive information is provided by the customer or sourced on behalf of the customer, the expenses are adjusted and the loan amount is revised accordingly. This can unfortunately lead to discrepancies between pre-approval and final loan amounts.”
Term of loan
The standard term for first-time buyers is 20 years. However, when homes became less affordable to first-time buyers, the banks began offering 25- and 30-year home loans.
On a longer repayment period, you don’t pay a great deal less a month, but you pay far more in interest overall. For example, assuming a nine-percent rate, on a R900 000 loan your monthly repayments will be R8 097 over 20 years and R7 241 (a difference of only R856) over 30 years. Over 20 years the total interest paid will amount to R1 043 408; over 30 years, it will be R1 706 977, a hefty R663 569 more.
If a longer-term loan is your only option, it is advisable to restructure it at a later stage, reducing the term, when you are able to afford higher repayments.
Types of loans
The banks offer various types of home loans. The main features are:
* Variable loan. This gives you access to excess capital you have paid into the home loan account to use for other purposes.
* Fixed-rate versus variable-rate loan. On a standard loan, your interest rate varies in line with the prevailing prime rate. On a fixed-rate loan, your rate is fixed for a certain period.
With interest rates at a 38-year low, having a fixed-rate bond is an attractive proposition, Goslett says. Generally, the fixed rate is between 1.5 and two percentage points above the prime rate, he says. This means the fixed rate will provide a buffer if there is a sharp hike before the contract term is over. “However, given the current economic conditions,” he says, “it is highly unlikely that the interest rate will increase dramatically over the next five years, and it is more likely to stay fairly steady or increase marginally.”
Fixed-rate agreements are generally for a period of between two and five years. You may incur a penalty if you cancel the agreement early.
Bank or bond originator?
You can either apply directly to a bank for a home loan or you can use a bond originator. Bond originators can save you a lot of trouble and time by gathering your documentation and approaching the banks on your behalf, with a view to getting you a favourable rate. They will disclose to you all offers from all the lenders they have approached.
Note that not all originators approach all lenders. Also note that the deal may not necessarily be better than if you approach the banks yourself.
Bond originators earn commission from the lenders, so there is no cost to you. Unlike financial advisers, they have no obligation to disclose their commission to you.
If your offer to purchase is subject to your obtaining a bond, the seller may prefer that you go through a bond originator to expedite the sale.
6. THE OFFER TO PURCHASE
Once you have found a property you want to buy, you submit an offer to the seller, through the estate agent, in an offer to purchase.
It’s important to note that the offer to purchase, usually a standard document, once signed by both the buyer and the seller, becomes a binding contract that sets out the terms of the sale. The document may contain clauses that do not suit you, and you may want to amend it or add conditions. It is therefore vital that you read and understand the document thoroughly before signing it, and that the estate agent, who may be anxious to secure the sale, does not pressurise you into signing something you do not fully understand. You also have the right to take a copy of the offer to purchase to a lawyer to check it over before you sign it.
According to Goslett, the more specific the offer to purchase is, the better. If all aspects of the sale have been covered, he says, there will be very little room for either the buyer or seller to contest anything later.
Apart from the offer amount, the most important aspects of the offer to purchase are:
* Conditional or “subject to” clauses. You can make the contract conditional on certain events or actions. If you are taking out a home loan, you must make sure that the contract is subject to your being granted a loan. It is common to set a time period on this clause – it can vary from seven to 60 days.
* 72-hour clause. A 72-hour clause, often included, allows the seller to look for an alternative buyer even after accepting your offer, if the offer is subject to conditions such as the approval of a home loan. If the seller accepts another offer, you will have 72 hours to fulfil the conditions.
* Fixtures and fittings. Most offers to purchase state that the property is sold with its fixtures and fittings. These are items that are permanently attached to the property and include built-in cupboards and light fittings. However, sellers and buyers may disagree on what is permanent, so if there is a fixture you want included in the sale, you should identify it. Similarly, the seller may identify an item he or she would like to remove from the property.
* Voetstoots clause. Offer-to-purchase agreements include a voetstoots clause, which means you agree to buy the property “as is”, with its latent defects (see “Dealing with defects”, below).
* Occupation and possession. The dates of occupation and possession are usually included in the offer to purchase. Ideally, the date you take occupation should be the same as the date of possession (when the property is transferred into your name). If you move into the home before it officially becomes yours, you will be charged occupational rent for the interim period until the date of transfer. Similarly, if the seller has not moved out by the date of possession, you can charge him or her occupational rent. The rate, which must be included in the offer to purchase, is usually set at a market-related rental.
* Repairs or renovations. If you want the seller to repair defects or finish any renovations before you take possession, you should make this a condition in the offer to purchase.
All amendments to the contract must be signed by you the buyer, the seller and the estate agent. Once the offer to purchase has been accepted by the seller, and both buyer and seller have signed it, it becomes the sale agreement or “deed of sale”. If not accepted by the seller by a certain deadline, the document becomes null and void.
If you renege on the deal after the seller has accepted your offer and signed it, the seller can sue you for damages, including the estate agent’s commission.
For an example of a standard offer-to-purchase document and what it entails, you can download one free of charge at www.freelegaldocs.co.za
You are entitled to a cooling-off period of five working days if the property you are buying is selling for R250 000 or less. According to the Land Alienation Act of 1981, during this period you have the right to withdraw your offer to purchase without incurring any penalties. Under the new Consumer Protection Act (CPA), you may have the right to a five-day cooling-off period regardless of the selling price under certain conditions (see “The CPA and buying property”, below).
The seller’s obligations
* The seller must provide you, the buyer, with an electrical compliance certificate. This certificate, paid for by the seller, is issued by a registered contractor and verifies that the property’s electrical installations are in order.
* You can also request an entomologist (beetle) certificate, which states that the property is free of certain pests, such as wood-borer beetle. For older houses in coastal areas, it is customary to include this requirement in the offer to purchase.
* You can also request a plumber’s certificate, which verifies that the property’s water installations are in order. This is a compulsory requirement for the City of Cape Town.
* The seller must have moved out by your occupation date, preferably leaving the home in an acceptable condition for you to move in. On leaving the property in an acceptable condition, Seeff says: “In law there is no such obligation on the seller, but it can be negotiated by the parties and made a term of the offer to purchase.”
7. DEALING WITH DEFECTS
There are two types of defects: ones that are clearly visible on a normal inspection of the property (patent defects) and underlying ones that cannot be ascertained on a normal inspection and that the seller may or may not know about (latent defects).
Defects the seller knows about must be disclosed to you before you sign the offer to purchase. In reality though, it can be difficult to prove whether a seller knew of a defect or not, or that he or she deliberately misled you.
The voetstoots clause in the sale agreement protects the seller from being liable for latent defects.
But the CPA puts an onus on the agent to ensure that the seller discloses defects (see “The CPA and buying property”). Many agents now compile detailed disclosure reports to be incorporated in sale agreements, so that there can be no dispute later.
By taking the initiative, you, the buyer, can avoid a lot of trouble and expense later. Thoroughly inspect the property. If you suspect latent defects, or even if you don’t, hire a qualified professional to do an inspection and submit a report.
8. RISK COVER
* Homeowner’s insurance. If you take out a home loan, you are required to have homeowner’s insurance, which covers the property and the permanent structures on it. This differs from householder’s insurance, which covers your home contents.
The bank providing you with the home loan will probably encourage you to take out homeowner’s insurance with its affiliated insurer. You are entitled to take out insurance with an external insurer of your choice, but if you do, some banks, although not exceeding the NCA limit of R57, will charge a higher monthly bond administration fee.
On sectional title properties, the body corporate is responsible for insurance on the property as a whole. The homeowner’s insurance is included in your levy.
* Life assurance. This is normally, though not always, required to cover the loan in the event of your death. If you have an existing life policy you can cede it to the bank for the duration of the loan, or you can take out a separate home loan protection policy.
9. ONCE-OFF COSTS
Apart from the agreed purchase price, you must pay property transfer, bond initiation and bond registration costs, as well as some lesser costs (see “Table: once-off fixed costs”; link at the end of this article).
* Transfer duty. On a property of more than R600 000, you have to pay a tax (transfer duty) based on the purchase price. You do not pay transfer duty if you buy from a registered VAT vendor and the sale is part of the seller’s business activities – for example, if you buy from a developer or at an auction – but you pay VAT, which you don’t otherwise. You are still liable for conveyancing and bond registration fees.
* Conveyancing fees, which are charged by the transfer attorney.
* Bond initiation fee (see “Bank charges on home loans”, below).
* Bond registration fees, which are charged by the bond attorney. Sometimes banks, as a special offer to attract clients, will reduce or waive your liability for these fees.
* Deeds Office transfer and bond registration levies, charged by the Deeds Office.
* Pro rata municipal rates and clearance certificate. A variable cost. Most municipalities require between four and six months’ rates paid upfront. You must also pay for a rates clearance certificate.
* Sectional title insurance certificate. On a sectional title property, you may have to provide the bank with a certificate showing that the property is insured. The policy is issued to the body corporate and the certificate will cost you about R500.
* Sectional title levy clearance certificate. You need to get this from the trustees to show that the seller’s levies have been paid up to a certain date. There is normally a fee for the certificate.
* Occupational rent. Another variable cost. If you move in before the transfer date, you will be charged at the rate stipulated in the offer to purchase.
10. THE LEGAL PROCESS
If you are buying an existing home with a bond from a seller who has a bond, three sets of attorneys are involved, although a single attorney may carry out more than one function:
1. Transfer attorney (appointed by the seller, although this can be negotiated): arranges transfer of the property into the buyer’s name through the Deeds Office; pays pro rata rates to the municipality and obtains a rates clearance certificate; pays transfer duty; arranges for the payment of occupational rent;
2. Bond attorney (normally appointed by your bank, but again open to negotiation): registers your bond through the Deeds Office; and
3. Cancellation attorney (appointed by the seller’s bank): cancels the seller’s bond.
The Deeds Office – there is one in each province – holds the following documents:
* A full description of the property;
* The current deed of sale on the property;
* Full details of the current owner; and
* Full details of the bond on the property.
When a property is sold, a new deed of sale is required. Ownership is transferred to the buyer, the current home loan on the property is cancelled, with the amount owing on the bond deducted from proceeds of the sale, and the new owner’s bond is registered with the property.
The municipality will require a pro rata amount for rates, which may include charges for water and sewerage. It will then issue a rates clearance certificate.
The process is as follows (the information has been condensed from that on the Standard Bank website):
Step 1. Your signed offer to purchase is accepted and signed by the seller, and the document becomes a binding “deed of sale”.
Step 2. If a deposit is required, it should be paid into an interest-bearing trust account, preferably that of the transfer attorney. Do not pay your deposit to any other party, such as the seller, or directly to the agent. Make sure you find out your interest rate and what protection is offered and that you get a receipt.
Step 3. Apply directly to your bank or through a bond originator for a bond. They will need a copy of the offer to purchase and all the documents listed in point 5, and will then do a credit assessment and a property valuation.
Step 4. On approval, the bank sends you a grant quotation notifying you that the bond has been approved. If you are using a bond originator, the bank will notify the bond originator directly. You have five days to accept the bank’s offer, once you receive it.
Step 5. The bank appoints an attorney to register your bond and the seller appoints a transfer attorney. The title deed and bond cancellation figures are requested from the seller’s bank. A rates clearance certificate is requested from the municipality.
Step 6. The transfer and bond attorneys require you to sign the documents at their offices. You must pay in full the transfer and bond registration fees and the pro rata municipal rates. Payments to the Deeds Office and municipality are handled by the attorneys.
Step 7. After the transfer, bond registration and bond cancellation documents have been signed by buyer and/or seller and the costs paid, the documents are prepared by the respective attorneys for lodging with the Deeds Office.
Step 8. The documents are lodged at the Deeds Office by arrangement with all the attorneys. The Deeds Office takes two to three weeks to check the documents before they are ready for registration.
Step 9. Your bond is registered and the property transferred into your name. The seller’s bond is cancelled and settled. Funds are paid to the relevant parties, with your bank paying over the bond amount.
Allow about three to four months for the registration of your bond and transfer of ownership.
Delays could be caused by, among other things: you or the seller not providing all the necessary information or bank details; a hold-up in the transfer attorney obtaining a rates clearance certificate; a delay in you paying your deposit or your transfer and/or bond costs; and you or the seller delaying signing the transfer and/or bond documents.
BANK CHARGES ON HOME LOANS Prices always need to be checked with the institution applicable)
* Absa. Absa’s initiation fee is 10 percent of the value of the loan to a maximum of R5 700, including VAT. If you apply for a further advance (say, for renovations) no further fee applies. The monthly fee is R34.20 for MyHome home loans and R57 for all other home loans. Customers with a new Value Bundle current account qualify for cash back of up to R20 a month on their Absa home loan account.
* First National Bank (FNB). FNB’s initiation fee is a flat R5 700, including VAT, on all home loans. The monthly administration fee is R57.
* Nedbank. The initiation fee for all first-time home loans is R5 700, including VAT. Nedbank’s monthly service fee is R47 for a client with Nedbank homeowner’s insurance and R57 for a client with external insurance.
* Standard Bank. The initiation fee on all home loans is R5 700, including VAT. The monthly administration fee is R51, including VAT.
THE CPA AND BUYING PROPERTY
The Consumer Protection Act (CPA), which came into effect in April 2011, has wide implications for the property industry in terms both of improved rights for consumers buying property and more onerous demands on estate agents, developers and sellers.
Two aspects that affect you as a buyer relate to the cooling-off period and the voetstoots clause.
Says Bill Rawson of Rawson Properties: “There have been several high-level conferences on [the CPA], one of which, addressed by senior Estate Agency Affairs Board managers, indicated that it will change the whole way in which property is marketed, will make the voetstoots clause redundant and will put estate agents as part of the supply chain. Others have said that there will be little change and that the Code of Conduct to which all estate agents sign agreement, if observed, covers the full spectrum of the CPA. Only court cases (in the next few years) will clarify matters.”
The CPA may allow you a cooling-off period when you buy any property directly marketed to you by an estate agent, Claire McGee, an attorney with Shepstone & Wylie, says, regardless of its price. Direct marketing is when an agent approaches you directly, rather than you responding to an advertisement.
McGee says that, in the case of direct marketing, the Act gives you the right to cancel the sale within five working days of taking occupation of the property.
This would mean having to reverse the property transfer and claw back the entailed costs, which could involve protracted litigation. However, you may be more successful in claiming a cooling-off period of five days within signing the offer to purchase, as is currently the case with properties of less than R250 000.
Jaco Rademeyer of Jaco Rademeyer Estates in Port Elizabeth, who has an LLB focusing on contract law, is of the view that the CPA does not cover the deed of sale between the seller and buyer, as this is a once-off transaction and is not conducted in the stipulated “ordinary course of business”. Therefore, he says, the voetstoots clause, which eliminates the seller’s liability for latent defects, is excluded from the Act.
“You, the buyer, may contest latent defects, but the burden of proof is on you to show that the seller knew of, or intentionally concealed the defect, which makes it an extremely difficult case to win.”
Nevertheless, Rademeyer says, the CPA makes it impossible for developers and estate agents to rely on the voetstoots clause to exclude their liability for defects.
Claire Cowan (nee McGee), Partner
Contact: 031 575 7404 and email@example.com
Customs @ Wylie Update, The questions is – Are striking workers a force beyond control, reported in Freight & Trading Weekly
Another call for force majeure, and another question of whether it can be a valid claim. In this case, the fuel company, Shell, has declared force majeure on fuel deliveries in Gauteng province, due to a two-week strike by truck drivers, the company said last Friday. "There is fuel available across the country so the issue is not fuel supply but the challenge is delivering it
I The issue of a strike prohibiting delivery would have to be written into their contracts with their buyers.'
safely to our retail sites," the company said in an emailed response to questions. The report on this says that force majeure refers to a measure that covers the company and its customers should delivery of fuel not occur due to circumstances beyond their control. But are striking workers a
force beyond your control? That was the question that FTW posed when Transnet Port Terminals (TPT) last month declared force majeure over a strike at its Pier 1 container terminal in Durban. But, when this happened, a number of voices in the private sector freight industry questioned whether they actually had the right to deny claims from contracted clients because of strike action by their own work force. And the two legal contacts of FTW, Quintus van der Merwe of Shep stone & Wylie and Andrew Robinson of Norton Rose – both specialists in the freight and trade areas of business – gave us their views on the force majeure issue. Both confirmed that the term force majeure within the context of SA law did not have any precise definition, nor was it recognised as any special doctrine. Its significance in respect of our law depends on its use as an express term in a contract. So, in both the case of TPT and that of Shell, the
issue of a strike prohibiting delivery would have to be written into their contracts with their buyers. And it would have to be fall within the concept of "supervening impossibility of performance" – where an obligation cannot be performed due to a cause beyond the performer's reasonable control. The three causes for this that are usually recognised are: Act of God, vis maior
and casus fortuitus – all of which are, very distinctly, forces beyond one's control. The main question was whether TPT/Shell could claim that the strike was out of their control – which effectively stated that they were not in control of their own work forces. The two lawyers were agreed. "It could be difficult for employers to declare force majeure when their own labour is on strike."
Quintus van der Merwe, Partner & Head of Customs @ Wylie
Contact: 031 575 7306 and firstname.lastname@example.org
PMR Africa 2012 award for top Legal firm in KwaZulu-Natal
PMR Africa has completed its annual provincial survey on the KwaZulu-Natal Province. The purpose of the survey is:
to profile the KwaZulu-Natal Province as a growth point and potential investment area for foreign and local developers and investors,
to measure companies, institutions, government entities and individuals on their contribution to the economic growth and development of the province, levels of managerial expertise and implementation of corporate governance,
to measure companies, institutions and government entities' competencies,
to measure brand awareness and to measure marketing efforts. The ratings are based on the perceptions of the respondents.
The companies, institutions, municipalities and provincial government departments were rated against the following criteria:
Companies/institutions that have done most to enhance the economic growth and development of the province over the past 12 months, levels of managerial expertise, implementation of corporate governance, brand awareness and levels of innovation.
The respondents were asked to nominate and rate companies and institutions doing most in their respective sectors over the past 12 months to stimulate the economic growth and development of KwaZulu-Natal Province and who have demonstrated exceptional managerial and corporate governance qualities during the same period.
The respondents were asked to nominate and rate single companies/institutions in business sectors on their contribution to the economic growth and development of the province.
The respondents were asked to nominate and rate achievers in business categories based on their contribution to the economic growth and development of the province. The respondents nominated and rated:
Ad campaigns, shopping centres, impressive new property developments (built within the past 2 years), most exciting/interesting heritage sites or historical buildings, effective South African Police Service (SAPS) stations, business persons they feel deserve special recognition for outstanding service and contribution to the economic growth and development of KwaZulu-Natal Province over the past 12 months, companies and institutions doing most over the past 12 months to enhance BEE, enhance tourism and conservation, fight HIV/Aids, fight crime, promote arts and culture and promote the production and manufacturing of local goods/products.
The respondents were asked to nominate and rate casinos/entertainment centres, executive guesthouses, executive hotels, executive restaurants, golf courses, holiday resorts, national parks and game reserves and private game farms and reserves.
The respondents were asked to nominate and rate pro-active mayors as well as municipalities in the province doing most:
For social upliftment, to attract foreign investment, to attract local investment, to attract tourism, for job creation, to fight crime and to clean the environment.
The respondents were asked to nominate and rate pro-active political leaders in KwaZuluNatal Province as well as provincial government departments doing most: for prosperity and growth, for achieving goals over the past 12 months, to accelerate service delivery, to eradicate poverty and for providing the best customer service to the public.
Business consultants Deloitte
Car rental companies Avis Rent – A – Car Europcar Budget Rent A Car
Catering equipment and supplies Chipkins Catering Supplies
4.17 4.10 4.00
4.30 4.25 4.00
Cleaning companies Servest Cleaning Super Clean Bidvest Prestige Group
Section 1: Business Sectors
4.05 4.00 4.00 3.88
Commercial vehicle dealerships McCarthy Inyanga Empangeni MAN Truck and Bus Centre Pinetown
Community newspapers The Rising Sun
Accounting/Auditing firms PricewaterhouseCoopers Deloitte KPMG Ernst & Young
Advertising agencies/companies (print, radio, TV etc.) Ogilvy Durban (Pty) Ltd African Mediums
Advertising agencies/companies (outdoor) Primedia Outdoor Outdoor Media Advertising Consultants cc
Communications and marketing services TBWA Hunt Lascaris Durban (Pty) Ltd Splendid Marketing and Communications
Conference/Convention centres ICC Durban Sibaya Casino & Entertainment Kingdom
4.38 4.17 3.50
Agriculture (dairy farming) Fairfield Dairy (Pty) Ltd
Agriculture (poultry) Rainbow Farms (Pty) Ltd
Construction companies Group Five Coastal (Pty) Ltd WBHO Construction (Pty) Ltd Aveng Grinaker-LTA
4.30 4.10 4.00 4.00
Agriculture (sugar) Tongaat Hulett Sugar IIlova Sugar Limited
Asset management firms Investec Limited
Courier companies UTI SA (Pty) Ltd (Durban) DHL Express Globeflight Skynet Worldwide Express
Banks First National Bank, a division of FirstRand Bank Limited Nedbank Limited Standard Bank of South Africa Limited Absa Bank Limited
Building materials suppliers Cashbuild Empangeni Central Builders Warehouse Riverhorse Park Build it KZN
Development agencies seda KwaZulu-Natal
Executive caterers Welile Caterers and Florists CHC Catering
4.13 Fast food & restaurant chain outlets 4.00 Nandos Chicken Land 3.89 Famous Brands (Pty) Ltd t/a Steers
4.15 4.10 4.00 3.75
OVERALL RATING OVERALL RATING Food manufacturers/Processors Legal firms Tigerbrands Snacks, Treats and Beverages 4.23 Shepstone & Wylie Attorneys Unilever SA (Pty) Ltd 4.15 Cox Yeats Norton Rose
4.10 4.00 3.90
4.10 3.93 3.83
4.20 4.17 4.00 4.00
4.08 4.00 3.80
4.29 4.20 4.10 4.00 3.90 3.80 3.80 3.80
Footwear manufacturers Sabre Footwear (Pty) Ltd t/a Bata
Forestry companies Mandl South Africa Sappi
Freight forwarders DHL Global Forwarding SA (Pty) Ltd
Furniture manufacturers Grafton Everest
Gas providing companies Afrox Ltd BP Southern Africa LPG Global
Institutions for higher education/tertiary institutions UNISA KwaZulu-Natal University of KwaZulu-Natal Durban University of Technology
Insurance companies (life) Old Mutual Metropolitan Life Liberty Life Sanlam Life Insurance
Insurance companies (short term) Mutual & Federal Insurance Company OUTsurance Santam Ltd
Investment services Old Mutual First National Bank, a division of FirstRand Bank Limited Absa Bank Limited Investec Limited Nedbank Limited Liberty Life Sanlam Life Insurance Standard Bank of South Africa Limited
Local newspapers The Witness Daily News The Mercury lsolezwe
Local radio stations – general entertainment and music Gagasi 99.5 FM East Coast Radio Ukhozi FM
Local radio stations – news and current affairs East Coast Radio Ukhozi FM Gagasi 99.5 FM
Local transport companies Durban Public Transport Bus Services: Durban People Mover
Meat processing companies Eskort Limited
Mining companies in operation Richards Bay Minerals (RBM)
Motor vehicle dealerships for CARS, LCV's and SUV's McCarthy Toyota Kingsmead Durban Alpine Volkswagen Pinetown
Office automation companies Nashua Durban Canon Business Centre
Panel beaters Durban Panel Beaters
Payroll systems Softline VIP
4.21 4.10 4.00 3.90
4.35 4.30 4.20
4.38 4.25 4.20
4.00 3.90 3.90
4.36 4.30 4.00 3.75
Pension/Retirement fund administrators Old Mutual Liberty Corporate Alexander Forbes Financial Services Sanlam Life Insurance
3.75 Personnel recruitment agencies 3.70 Quest Staffing Solutions 3.60 Kelly
IT consulting companies Dimension Data GijimaAst Marveltec IT Solutions
IT sales and service companies Incredible Connection Marveltec IT Solutions Matrix Warehouse Computers
Pest control companies Rentokil Initial (Pty) Ltd Pest Control Specialists Service Master
OVERALL RATING OVERALL RATING Pulp and paper companies 3.75 Mondi South Africa 3.60 Sappi 3.50
Pharmaceutical companies (wholesalers/retailers) Dis-Chem Pharmacy Sparkport Pharmacy New Clicks/Clicks Organisation Alpha Pharm
Ports Port of Durban Operator: Transnet Port Terminals Port of Richards Bay Operator: Transnet Port Terminals
Private clinics/Hospitals Netcare St Augustines Hospital Life Westville Hospital Netcare Parklands Hospital Mediclinic Pietermaritzburg Hillcrest Private Hospital
Private schools Hilton College Crawford Preparatory La Lucia
Real estate agents Pam Golding Properties RE/MAX Heritage Seeff Properties Wakefields Real Estate (Pty) Ltd
Retail stores (clothing) Edgars Stores 4.12 Woolworths Truworths 4.00 Mr Price Group Ltd
Retail stores (food) The SPAR Group Ltd Woolworths Shoprite Checkers Pick n Pay Supermarkets (Pty) Ltd
4.30 4.00 3.86 3.50
4.27 4.20 4.15 4.00 3.80
4.00 3.90 3.80 3.70
4.30 4.28 4.14 4.10
4.31 4.20 4.15 4.00
4.23 4.16 4.00 3.95 3.90 3.80
Security companies Blue Security Chubb Security ADT Security Mzansi Electronics Marshall Security Enforce Security
Seed cuitivar providers Pannar Seed
Ship repair companies DCD – Dorbyl Venco
Shipping companies Mediterranean Shipping Company (MSC) Grindrod Ltd
Stationery suppliers Waltons Stationery (Pty) Ltd
Tractor and farming implement dealerships Mascor
Transport companies (passenger) operating to and from the province Unitrans Passenger t/a Greyhound Autopax Passenger Services (Pty) Ltd t/a Translux and City to City Intercape
Transport companies (removal) Stuttaford Van Lines (Pty) Ltd Biddulphs International Elliott International
Travel agents HRG Rennies Travel Flight Centre SA (Pty) Ltd Pentravel
4.17 4.00 4.00
4.00 3.90 3.80
Suppliers of agricultural equipment and products Coastal Farmer's Co-Op
Tyre retail suppliers 4.30 Tiger Wheel & Tyre Hi-Q Automotive
Suppliers of fertilizer products Foskor Richards Bay
Bridgestone South Africa Retail t/a Supa Quick Auto Centres
4.00 3.91 3.80
4.15 4.10 3.80
Suppliers of heavy duty equipment Bell Equipment Company South Africa (Pty) Ltd Barloworld Equipment – Earth Moving Equipment
Suppliers of hygiene equipment and products Bidvest Steiner
Telecommunication companies MTN South Africa (Pty) Ltd Vodacom Group
Television stations/Channels general entertainment and music SABC 3 SABC 1 Mzansi fo Sho Electronic Media Network Limited t/a M-Net
Television stations/Channels – news and current affairs SABC 3 SABC 1 Mzansi fo Sho SABC 2
Vehicle tracking and recovery companies Altech Netstar KZN Tracker Cartrack
Waste management companies Durban Solid Waste (DSW) Wasteman Pietermaritzburg EnviroServ Waste Management (Pty) Ltd
Single companies/institutions in business sectors rated on their contribution to the economic growth and development of the KwaZulu-Natal Province
4.16 4.04 3.90
4.19 4.00 3.50
Airports King Shaka International Airport 4.25
Textile companies Gelvenor Textiles
Airline companies operating to and from the province
South African Airways (SAA) 4.20 Kulula.com
Tour operators Thompsons Holidays
Companies/institutions doing most to fight crime Blue Security ADT Security Chubb Security
Companies/institutions held in high esteem as good corporate citizens based on their corporate social responsibility initiatives and investments over the past 12 months First National Bank, a division of FirstRand Bank Limited Willowton Oil & Cake Mills Old Mutual
Companies/institutions doing most to protect the environment Ezemvelo KZN Wildlife Sappi
4.21 4.10 4.00
4.37 4.00 3.67
Alcoholic beverage companies The South African Breweries Limited
Non-alcoholic beverage companies Coca-Cola Fortune
Pharmaceutical companies (manufacturers) Aspen Pharmacare
Tyre manufacturers Dunlop Tyres – Apollo Tyres South Africa (Pty) Ltd
Water providing companies Umgeni Water
Section 3: Category achievers rated on their contribution to the economic growth and development of the KwaZulu-Natal Province
Companies/institutions doing most to enhance the Government's New Growth Plan Durban Chamber of Commerce
Companies/institutions doing most to create jobs Foskor Richards Bay 4.12
Admired petroleum/Diesel brands Engen Petroleum Ltd Shell South Africa (Pty) Ltd BP Southern Africa (Pty) Ltd
Advertising campaigns First National Bank, a division of FirstRand Bank Limited MTN South Africa (Pty) Ltd
Companies/institutions doing most to enhance the interests of the physically challenged/disabled Department of Social Development
Companies/institutions doing most to enhance the interests of elderly citizens The Association of the Aged (TAFTA)
4.07 3.95 3.93
Companies/institutions doing most for arts and culture KwaZulu-Natal Society of Arts 4.00
Companies/institutions doing most to enhance and develop the manufacturing of local goods and products Tongaat Hulett Sugar 4.00
Companies/institutions doing most for BEE First National Bank, a division of FirstRand Bank Limited Tongaat Hulett Sugar seda KwaZulu-Natal Foskor Richards Bay
Companies/institutions doing most to enhance tourism and conservation Ezemvelo KZN Wildlife KwaZulu-Natal Tourism Authority t/a Tourism KwaZulu-Natal
Companies/institutions doing most to enhance the interests of women Transnet
Effective South African Police Service (SAPS) stations Durban North Police Station Westville Police Station
Exciting/interesting heritage/historical sites/buildings King Shako Heritage Route Durban City Hall
Outstanding service and contribution to the economic growth and development of the KwaZulu-Natal Province by business persons over the past 12 months Vivian Reddy, Chairman of the Edison Corporation Group
4.00 3.90 3.80 3.65
Section 5: Local Government (Mayors, Municipalities) OVERALL RATING
Pro-active mayors over the past 12 month CIIr James Nxumalo, Executive Mayor of eThekwini Municipality
Municipalities doing most for social upliffment eThekwini Municipality Msunduzi Municipality uMhlathuze Local Municipality KwaDukuza Municipality
4.32 4.25 4.00 3.70
Casinos/Entertainment centres Sibaya Casino & Entertainment Kingdom Golden Horse Casino & Hotel Suncoast Casino & Entertainment World
Municipalities doing most to attract foreign investment Durban Investment Promotion Agency (DIPA) FOR eThekwini Municipality uMhlathuze Local Municipality
Shopping centres Gateway Theatre of Shopping La Lucia Mall Pavilion Shopping Centre
Section 4: Executive Lifestyle
4.38 4.25 4.20
4.04 3.95 3.90 3.86
4.10 4.00 3.90
4.30 4.25 4.20 4.15 4.00
4.38 4.20 4.00
4.30 4.20 4.00
Municipalities doing most to attract local investment Durban Investment Promotion Agency (DIPA) FOR eThekwini Municipality KwaDukuza Municipality Msunduzi Municipality uMhlathuze Local Municipality
Municipalities doing most to attract tourism eThekwini Municipality KwaDukuza Municipality
Municipalities doing most for job creation eThekwini Municipality uMhlathuze Local Municipality
Municipalities doing most to fight crime eThekwini Municipality 4.35
Municipalities doing most to clean the environment eThekwini Municipality Newcastle Local Municipality
Section 6: Provincial Government (Pro-active political leaders and Provincial government departments)
OVERALL RATING Pro-active political leaders during the past 12 months Dr. Bonginkosi Meshack Radebe, MEC: Agriculture, Rural Development and Environmental Affairs, KwaZulu-Natal Province 4.25
Continued on page 69
Executive guest houses Sica's Guest House
Executive hotels (4 stars plus) The Hilton Durban The Oyster Box Suncoast Towers and Sunsquare Suncoast Hotels Protea Hotel – Umhlanga Ridge Southern Sun Elangeni
Executive lodges Fairmont Zimbali Lodge and Resort
Executive restaurants The Grillroom at the The Oyster Box Little Havana Restaurant Umhlanga Harvey's Restaurant
Family restaurants Spur Steak Ranches Ocean Basket
Golf courses Mount Edgecombe Country Club Victoria Country Club Durban Country Club
Holiday resorts Drakensburg Sun Resort
National parks and game reserves Hluhluwe-Imfolozi Park
Private game farms/Reserves Tab a Game Reserve
Provincial government departments doing most overall for prosperity and growth Department of Social Development Department of Economic Development and Tourism
Provincial government departments that have been most effective in achieving their goals over the past 12 months Department of Economic Development and Tourism Department of Health Department of Social Development
Provincial government departments doing most to accelerate service delivery Department of Human Settlements Department of Education Department of Social Development
Provincial government departments doing most to eradicate poverty Department of Human Settlements
Provincial government departments doing most to provide the best customer service to the public Department of Social Development
ge and medium-sized companies, municiand provincial government departments in lu-Natal Province. terviews were conducted during April, May 012. Random provincial sample of 175 respondents of CEO's, MD's, business owners, company directors and managers, senior government officials based in KwaZulu-Natal Province. Interviews were carried out telephonistructured questionnaires. Back-checks were ccted cLes of e fieldwork, response codi
Research Report and Provincial Profile:
5 A KwaZulu-Natal provincial profil0 proviir competitive
insight of strategic value is available, featuring the ratings of all surveyed companies, departments and institutions. This report is compiled as an executive summary with profiles and accompanying tables and graphs. The report interprets and ties together the various aspects of all the data sourced through the survey as detailed above. The report contains information on the province's economic 4.0(, profile.
4.15 4.00 4.00
4.00 3.90 3.90
Corporate & Commercial News Update, Pannar, deal set to close as reported in the Witness
Customs @ Wylie Update, reported in Freight & Trading Weekly
The vagaries of Customs classification often call for skills beyond those of the Customs expert — and a recent case involving Distell's winebased aperitifs is a case in point. While Distell ultimately lost its appeal to have the product classified as a non-spirituous beverage,
It is not clear from the judgement what the required ratio of fermented to distilled product should be.'
Johannesburg-based Shepstone & Wylie partner Freek van Rooyen, who was involved in the case, believes that the outcome is not clear cut. "The base product is a stripped, fermented wine to which is added distilled spirits and flavourants," said Van Rooyen. Sars ruled that the product
be classified as "other spirituous beverages," while Distell contended that it should be classified as "vermouth and other wine of fresh grapes flavoured with plants and other aromatic substances, alternatively a mixture of fermented beverages and non alcoholic beverages". Needless to say spirits pay a substantially higher rate of excise duty than fermented products. According to Van Rooyen, the question centred around whether a fermented product stripped of all its essential characteristics retained the status of a fermented product or not. The Supreme Court of Appeal held that the stripped product could no longer be considered a wine and took on the essential characteristics of a spirituous beverage when, in the fortification process, a distilled product was used to fortify the product. "But it is not clear from the judgement," says Van Rooyen, "what the required
ratio of fermented to distilled product should be that would result in its classification as a spirituous beverage. If, for example, you take 750 millilitres of stripped fermented product and a half a tot of distilled spirits, should this new product be considered to be a spirituous beverage?" For the moment, however, Distell will need to cough up the additional duty.
Freek van Rooyen, Partner
Contact: 011 290 2540 and email@example.com
Conveyancing & Property Law Update, Durban Property owners outraged over proposed land alienation, reported in Property Poser.co.za
Several Durban residents stand to lose their homes and businesses as the city is preparing to expropriate their land for its ambitious R25-billion public transport system.
Property owners received a nasty surprise when they read a notice published in The Mercury on Friday that said the eThekwini Municipality wanted to seize their land.
Durban North resident Goolam Hoosen, 62, was devastated when he learnt that his factories and office blocks in Briardene, valued at R24 million, were among the properties destined to be demolished.
“I have worked my entire life for this business and would have liked to leave a legacy for my children. This property is my children’s inheritance,” he said.
Hoosen’s property in Sea Cow Lake Road comprises four factories and an office block.
In October he bought a residential property adjacent to his factories and said the city approved his special consent application for the property to be rezoned to light industrial.
“I submitted building plans in January and they came back with a few minor adjustments and we attended to those. I have invested millions into my business. I’m building four new factories, a managerial dwelling and offices,” he said.
Hoosen would consult his attorney about his rights.
“My family were victims of the Group Areas Act. We were first moved from Riverside and then we were moved from Mayville. We cannot tolerate forced removals 18 years after democracy,” he added.
If the city gets its way, all the properties earmarked for expropriation will be wiped off the map.
The first phase of the Integrated Rapid Public Transport Network has been given the green light.
The project is similar to the Bus Rapid Transit system pioneered in Cape Town and then introduced in Gauteng.
Last month, the city’s transport unit was granted the authority to negotiate the acquisition of land needed for the project by private treaty or expropriation. Construction would begin in March, with the aim that phase one would be up and running by 2016.
Fifty-one properties – including residential, vacant land, commercial as well as a few government properties – would be affected.
These are mainly in the northern parts of the city, in areas such as KwaMashu, Durban North, Newlands and Cunnavason (Newlands East).
The properties are to be used for bus depots and terminals.
Rose Lushozi, 82, of KwaMashu Section E, was shocked when The Mercury told her the city had published a notice of intention to expropriate her home.
“I am not aware of the city’s plans, but I will call the police if anyone comes to demolish my house. Does the municipality think this home does not have an owner? They are crazy and will never take away my house,” she protested.
The notice showed that not only Lushozi’s home would be affected, but those of four of her neighbours, none of whom was aware that their properties were to be expropriated.
Sifiso Msomi, a partner in the property department at Shepstone and Wylie Attorneys, said expropriations had to comply with requirements set out in section 25 of the constitution.
“Accordingly, expropriations must be for a public purpose or in the public interest, and must be accompanied by compensation.”
For a valid expropriation four requirements had to be met, namely: there must be an authority for the expropriation; it must be for a public purpose or in the public interest; it must be effected in a way that is procedurally fair; and compensation must be paid.
The municipality’s advert states that any inconvenience, or anxiety that the expropriation procedure may cause is regretted and that every effort will be made to help those affected.
Those affected have 30 days from the day of the notice to submit written objections.
The municipality did not respond to a list of questions asking whether the owners would be compensated, how much had been budgeted for the expropriations, and if it had contacted those affected before the notice was published.
Sifiso Msomi, Partner
Contact: 031 575 7105 and firstname.lastname@example.org
Employment & Pension Law, Strikers’ Union told to pay legal bills, reported in the Mercury
Labour issues THE JOHANNESBURG Labour Court, in Tsogo Sun Casinos (Pty) Ltd t/a Monte Casino versus FSWU & Others, has marked its displeasure at the conduct of a trade union and striking employees. During the strike, the employees engaged in crimes, including assault, theft, damage to property and blocking access to and egress from the employer's premises. Despite the SAPS's intervention, the employees continued to engage in these unlawful acts. As a result, the employer sought an interdict from the Labour Court to prevent the employees from engaging in criminal activities during the strike. By approaching the court on an urgent basis, the employer incurred legal fees. The employer was therefore adamant, during its argument in court, that the employees and their trade union should be held liable for the legal costs incurred. The court concluded that the trade union and the employees were liable jointly and severally for the legal costs incurred by the employer. In coming to this conclusion, the court made the following findings: The union made no attempt to intervene or prevent the unlawful conduct. The right to engage in collective bargaining is not a licence to engage in collective brutality. That the striking employees earned a relatively low income was of no consequence. The striking employees conducted themselves in a fashion that had serious consequences for the employer as well as for the public. The employer hopes this judgment will deter employees from engaging in unlawful activities during a strike and if not, at the very least, encourage trade unions to prevent their members from engaging in unlawful activities.
Siobhan Viljoen, Associate Partner
Contact: 011 290 2540 and email@example.com
Customs @ Wylie Update, reported in Freight & Trading Weekly
Recent activities by the customs division of the SA Revenue Service (Sars) are likely to have a critically adverse effect on importers of goods from foreign lands, according to Quintus van der Menve, partner and trade specialist at lawyers, Shepstone and Wylie. "Customs," he told FTW, "assists in maximising the collection of revenue vital to the functioning of our country and also protects the borders against illicit trade. "That said, customs — as part of its mandate and vision — states that it is committed to facilitating trade." But recent times have once again highlighted a Sars focus on maximising revenues and preventing non-compliance. "This," he added, "clashes somewhat dramatically with
customs' undertaking to facilitate trade." There is no doubt that customs is regularly faced with goods that have been under-declared, incorrectly classified or which may be the subject of a deliberate attempt at the evasion of payment of revenues, Van der Menve added. "But the problem is that the revenue authorities tend, on occasion, to have a 'knee-jerk' reaction. "Anyone involved in the importation of textiles in recent months will attest to the fact that the quest for eradicating illicit trade has had a dramatic effect on the many honest businessmen who are simply trying to get ahead in business." Van der Merwe suggested that there appeared to be a Sars project in which large numbers of containers were stopped, and clearing agents or importers were called on to produce documents to enable Sars to form a risk assessment of the goods. "Some of these 'shopping lists' for documents run into several pages long," he said. "Often documents are called for to be provided by overseas suppliers who frankly have no interest in the problems of the buyer or the importer once the goods have been sold. An example is the request for intricate costings, which most suppliers are reluctant to give their customers." Van der Merwe added that, "rather perplexingly", it appears that customs has a policy of refusing to release the goods against payment of provisional payments. "The net result is that the goods cannot be moved until customs' risk assessment has been finalised."
The difficulty he saw here was that, due to a large number of stops and a limited number of personnel, these queries had been taking an inordinately long time to resolve. "In the meantime," he said, "the importer is obliged to pay the storage costs of the container, as well as the hire (demurrage) payable on containers that are not turned in to the shipping line in time." These costs collectively must run into millions, Van der Merwe estimated,. Although customs' legislation and the Kyoto Convention (to which SA is a signatory) does provide for release of goods against payment of provisional payments, as well as the possibility of an embargo release, he noted that most containers remained in
container depots until Sars was able to resolve the numerous queries. "Another problem is that many of the goods subjected to stops are ultimately destined for delivery to chain stores," Van der Merwe said. "A lot of these goods, in turn, are seasonal. The result is substantial frustration all along the logistics chain — cancellation of certain contracts and late delivery penalties, all of which have to be borne by the importer. The result is often that the goods, when released, are being delivered at a loss to the importer." It may occur to readers that surely someone who feels aggrieved has the right to approach the courts for appropriate relief. But Van der Merwe pointed out that, where you are talking about a container of goods
Quintus van der Merwe … Customs hurting the goose that lays the golden egg.
only worth R500 000, which may result in a profit of 10% of the value of such goods, it is hardly worth approaching a court for relief where the legal costs will outweigh any favourable result "The net result is costing our economy huge amounts of money," he told FTW "It is therefore critical that the revenue authorities find a way to efficiently deal with such stops — failing which, they may ultimately be hurting the goose that lays the golden egg."
Quintus van der Merwe, Partner and Head of Department for Customs @ Wylie
Contact: 031 575 7306 and firstname.lastname@example.org
Competition Commission’s evidence found wanting in Pannar merger appeal, Jennifer Finnigan Competition Law
WHAT is most interesting about the Competition Commission's recent application for leave to appeal to the Supreme Court of Appeal against the Competition Appeal Court's (CAC) decision to approve the Pioneer/Pannar merger is what it doesn't mention.
According to the commissioner, the appeal will challenge the way in which the CAC applied the "failing firm" defence and, importantly, the costs order granted against the commission. The appeal ignores the fact that the CAC's judgment recognises that the failing firm defence was not available to Pannar. While the commission seems to have accepted that Pannar was in decline, its argument (supported by the tribunal) was that Pannar's germplasm was so valuable that another seed company would inevitably buy it. That assumption was the key to the CAC's judgment. The CAC looked at the commission's preferred alternatives to the merger and concluded that, on the facts, those alternatives were not realistic. The CAC commented that the commission's theory that Pannar could find a less anti-competitive buyer amounted to "exploitation of the vulnerability of a target firm by the competition authorities".
The CAC's judgment recognises the position into which Pannar has been forced by the merger investigation. It commented: "The vulnerability of Pannar, and its inevitable decline in the market, have been exposed in the proceedings before the commission and the tribunal … its ability to negotiate … [an] alliance must have been considerably weakened in the interim…" The commission seems to have missed these facts. The commission's appeal on the failing firm issue seems to centre on the fact that having built its case on the premise that Pannar could and would be able dig itself out of the hole into which it was gradually slipping by merging with someone more acceptable to the commission, the commission doesn't want to bear the onus of proving that case. Everyone seems to accept that Pannar was in decline and was at risk of exiting the market without a merger. The commission's real complaint is that it tried to show that two other mergers were realistic possibilities, but on the evidence the CAC found that it had failed. Don't forget that the CAC took a good look at the commission's concern about competition. It said that while the commission's approach to increased concentration in a market was generally correct, thatwas not always the case, especially in a market in which "the demise of one of the competitors is inevitable". The CAC cautioned against turning "a blind eye to the reality of the situation". It found that in the seed development market, while price was important, maintaining "innovation competition" is also critical. The CAC applied international law methods of analysing competition in markets characterised by high levels of innovation and change and found that the Pioneer/Pannar merged firm could better compete with Monsanto. This was likely to lead to more innovation in that market and that was a great result for the consumer. The CAC's judgment carefully and objectively analyses the evidence that the commission used to make its case. That evidence was found wanting. The commission now seeks to appeal that it is not its job to prove its case. An interesting proposition……
Jenny Finnigan, Partner and Competition Law specialist can be contacted on 031 575 7406 or email@example.com