Constitutional Development, during the annual banquet of the Association for
the Advancement of Black Insolvency Practitioners (AABIP), Cape Town
13 October 2006
Programme Director
Honourable Premier Ebrahim Rasool
Mr Jay Pema, National Chairperson of the Association for the Advancement of
Black Insolvency Practitioners
Distinguished guests
Members of the Association
Ladies and gentlemen
It is both an honour and a great pleasure for me to address you at this
important event on the occasion of the annual banquet of the Association for
the Advancement of Black Insolvency Practitioners (AABIP).
Ladies and gentlemen, the liquidation industry is an important cog in the
South African economy. It therefore stands to reason that the need to ensure
that the insolvency industry functions properly and efficiently is not only in
the interest of those involved in the industry, but of also of a range of other
stakeholders. In fact it is in the interest of society at large. It is in the
interest of the South African economy and society as a whole that insolvency
matters should be resolved fairly, efficiently and without delay. However, this
does not mean that we should liquidate business entities at all cost without
due regard of the consequences for our communities. It is unfortunate that the
insolvency system is geared towards immediate liquidation, rather than working
towards rescuing the businesses. In line with international trends, the
introduction of an effective business rescue model is long overdue.
Linked to the focus on liquidation instead of saving businesses, government
continues to receive reports of various undesirable practices in the insolvency
industry. Despite concerted efforts to stamp out these practices, the so-called
"engineered insolvencies" continue. These are instances where insolvency
practitioners, attorneys, creditors and debtors collude to initiate insolvency
proceedings with devastating impact on the rights of, for example, workers.
AABIP and the other voluntary associations for insolvency practitioners, have
the responsibility to tackle this practice head-on. It is practices of this
nature that dents the image of the industry.
Over the years, the insolvency industry was dominated by a handful of
players. The birth AABIP in 1998 was an important development in the insolvency
industry. Given our past tragic history, the need to establish a body
representing black insolvency practitioners was inevitable. The launch of the
Insolvency Practitioners Society of South Africa in 2001 was yet another step
in the right direction. A unified body is in a better position to tackle the
many and varied challenges facing the insolvency industry.
Many of you will recall that in July 2004, I appointed a Ministerial
Committee of Inquiry into the Liquidations Industry. The persistent allegations
of corruption and ineffective administration in the various Masters' offices,
amongst others, informed the decision to appoint this Ministerial Committee of
Inquiry. There had been concerns, over a long time, about the state of the
industry.
The findings of the Ministerial Committee indicate the challenges which I am
pleased that the Chief Master, Hassen Ebrahim is addressing. In fact the Chief
Master has embarked on a massive restructuring programme to ensure that the
Mastersâ Offices provide a prompt and efficient service to the public. He is
also looking at various policy options which are to be discussed at our next
Executive Committee meeting. The Chief Master is tackling a number of issues,
for example, improving administrative weaknesses. In order to improve the
administrative weaknesses in the Masters' offices in the country, various
interventions are being made to streamline the administrative systems. The
steps include, but are not limited to the following:
* new appointments
* training of staff
* increasing of administrative capacity of the Masters' offices.
Ladies and gentlemen, many of us are familiar with the problems that have
beset the liquidation industry for many years. In fact, many of the problems
manifesting themselves in the last few years are due to the fact that
transformation, in this sector of our economy, has taken place at a slow pace.
While some progress has been made in respect of diversity transformation,
changing the white male profile of the industry by increasing the number of
black insolvency practitioners, the number of women is still very low and it is
critical that we find some innovative ways to fast-track their involvement in
the industry. The diversity transformation achieved to date is mostly due to
the corrective action policy of appointing in each estate, a liquidator from a
previously disadvantaged group, which according to government policy includes
blacks, women and the disabled. However, although this policy has achieved much
good, it also inadvertently allowed for the development of undesirable
practices amongst black insolvency practitioners, especially, the ugly
phenomenon of fronting.
We continue to receive reports of allegations that some of the black
insolvency practitioners that are appointed as liquidators, pass over the
administration of the estates to established white firms of insolvency
practitioners. In this way skills and experience continue to remain in the
hands of historically advantaged practitioners. This form of fronting does not
only frustrate the transformation process, but it is a practice that needs to
be outlawed. The culprits need to be exposed and severely punished. AABIP
should take this upon itself to root out this practice.
In conclusion, the regulation of the industry must enjoy priority. A draft
regulatory framework has been prepared by the Chief Master and will shortly be
made available for comment. In this regard, I invite your organisation to
submit its comments and help us build a professional industry, which will
benefit the economy and our country as a whole.
Let us work together in building an industry of the best practitioners
displaying the highest level of professional ethics and honesty in the
discharge of their responsibilities and duties.
I thank you!
Issued by: Department of Justice and Constitutional Development
13 October 2006
Source: Department of Justice and Constitutional Development (http://www.doj.gov.za)
