[B 23 B 2003]
(Introduced in the National Assembly as a section 76 Bill; explanatory summary of the Bill published in Government Gazette No. 24628 of 27 March 2003)
SUBMISSION by the LAW REVIEW PROJECT
7. Finally, we suggest a need for a regulatory impact assessment before the Bill is passed into law:
7.1 The first aspect of such an assessment would be a cost-benefit analysis of the proposed Bill.
7.2 The second relates to compliance costs associated with implementation of the Bill once it becomes law.
7.3 The third concerns the need to set criteria on how to assess the efficacy of the Bill. This is a monitoring function.
Constitutionality of the Bill
The rule of law
8. The rule of law is a binding Foundational Provision of our Constitution. Accordingly:
8.1 Rule of law. There must be compliance in all laws with the rule of law as opposed to the rule of man, which means that rights and duties must be clear from and established by laws and not the exercise of executive power.
8.2 Certainty and objectivity. For rights and obligations to be determined by laws instead of executive discretion, laws must be clear so that people know their rights and obligations with unambiguous certainty.
Some provisions of the Bill envisage rights and obligations to be determined by the exercise of arbitrary discretion rather than explicit provisions or objective criteria according to which powers must be exercised.
Guidance principle to comply with the rule of law
9. Many sections in the Bill confer unfettered discretionary power. As a general rule such powers need to be circumscribed in the legislation itself in order to comply with current constitutional jurisprudence. It is not that discretions may not be conferred. The principle is that when discretions are conferred they must be supported by the legislature’s guidelines on how an official, functionary, administrator and even a Minister may exercise those discretions.
10. The guidance principle requires all discretionary power to be accompanied by objective criteria according to which it may or must be exercised. Accordingly the following sections, inter alia, require guidelines:
10.1 Section 7 concerning the prescribed distance from a school. Other considerations need also to be addressed. Firstly, what about businesses in high-rise buildings where there are schools on other floors of the building? Secondly, if liquor cannot be sold to minors under 18 years of age, is the section not too exacting on the administration? Who will police this provision? How will it be policed? Surely it will be too costly for inspectors to police? These issues are not impossible to address, but they do require guidelines to be set out in the Bill. This requirement becomes urgent when one considers the effect of section 11(b).
10.2 Section 14 concerns the determination of an application for registration. It is the crux of the Bill. Yet there are no objective criteria by which the Minister makes the decisions. Giving reasons after the fact of a refusal accords with the Constitution. But that is insufficient when the very criteria by which an application must stand or fall are not objectively determinable in advance. Here the legislature must provide strict guidelines as decided in the Dawood and Janse van Rensburg cases in the Constitutional Court.
10.3 If one considers that in terms of section 13 the Minister may "require further information", it is critical to set out the type of "further information" which may legitimately be requested. If these criteria are not set out in the Bill, the determination of applications will remain shrouded in mystery.
10.4 The other sections which will require proper criteria to be set out in the Bill for the above reasons are sections 14(6), 16(2), 17(6), 19 and 24(5). Respectively they deal with the Minister’s imposition of terms and conditions, the transfer of registrations which require the same procedures as an application, the variation of terms and conditions of registration, the criteria required to be stipulated by the Minister for fees, and, the Minister’s permission to manufacturers to sell liquor. It is important to point out that with regard to section 14 it will be absolutely necessary to stipulate criteria. The Minister, or the person to whom the powers are delegated, would be able "to change the goalposts" constantly unless the criteria are clearly specified in advance. This is a rudimentary facet of the rule of law.
11. The leading cases on the need for criteria and guidelines are Janse van Rensburg NO and Another v Minister of Trade and Industry and Another NNO 2001 (1) SA 29 (CC) at paragraphs  and  and Dawood and Another v Minister of Home Affairs and Others 2000 (3) SA 936 (CC) at paragraphs  and .
The separation of powers
12. The Constitution requires a separation of powers. This means that legislation cannot delegate the power to make substantive law. It can and usually does create the power to regulate the implementation of the law. Laws must have sufficient substance for the essential content of the law to be known without having to refer to the regulations or to await the exercise of executive discretion. Regulations may regulate how laws are applied, but may not themselves be the source of the law.
To repeat the principle on discretions: when legitimate discretions are conferred by Parliament they must be supported by the legislature’s guidelines on how an official, functionary, administrator and a Minister must exercise those discretions. This is a vital feature of the doctrine of the separation of powers. The legislature must make the law. The executive must administer the law. The same principle applies to regulations. It is not proper to accord the executive or the administration plenary powers to legislate.
13. Section 52 is a good example of the subtlety of applying these principles in practice. It illustrates how substantial discretion can be lawful whilst seemingly minor discretion may not, depending on the nature of the discretion.
Section 52(3) gives the Minister the power to declare "any substance" to be "beer", "liquor", "a methylated spirit" or "sorghum beer". This is a wide discretion. However it is automatically limited in scope because it deals with liquor, and the power must be exercised in accordance with the constitutional principle of rationality. Any person aggrieved by a declaration would have the right to have it reviewed. The test would be a scientific one regarding the objective nature of "liquor" and "beer". This discretion, though far-reaching, is therefore probably lawful. It would put the matter beyond doubt if a simple qualification is added confining the power to substances conforming to the scientific or commonly accepted meaning of these words added.
14. Section 52(4) is quite different in nature. This sub-section purports to give the Minister, inter alia, powers to restrict and regulate the "importation ... or use of methylated spirit". Such a power is too widely conferred. In fact the legislature needs either to make the law concerning the "importation" of methylated spirit or to establish criteria by which the Minister may regulate it. Yet why would one want the Minister to make that law? Surely we need the "voice" of Parliament here and not the "voice" of the executive? The entire sub-section 52(4) is probably invalid. Accordingly section 29 is probably also invalid.
Respect for the competencies of the provinces
15. Some sections in the Bill contemplate Parliament encroaching on the exclusive competence of the provincial legislatures. If such an encroachment is permitted under section 44(2) of the Constitution it will be valid. Section 44(2) contemplates the norms and standards required by the legislature and, in the event of unreasonable action by a province, setting such province in order. If section 44(2) is not applicable, any encroachment on exclusive competence is invalid.
16. The sections which cause concern are:
16.1 Section 2(1)(a)(iii). This section purports to regulate retail and micro-manufacturing in the absence of provincial legislation: like section 3(2) its purpose seems to be to force provinces to legislate, failing which the Bill will apply by default. But why can the provinces not continue, in the interim, to rely on Act 27 of 1989, with which they are much more familiar and under which liquor is already governed and under which liquor is already regulated (see comments on the repeal of Act 27 of 1989 below).
16.2 Section 3(3) implies that a the mere assertion that a law governs national "norms and standards" renders it so. This is doubtful. Were it true, it would render the relevant clauses in the Constitution meaningless. It would negate all provincial and local government competencies. If one considers the text of section 44(2) of the Constitution, can it be said that "inaction" by a province is "unreasonable action"? Surely the Constitution contemplates a province choosing to maintain existing law, or choosing to leave a matter over which it has exclusive competence unregulated. Regarding liquor, a province which passes no new law is choosing to have its liquor trade governed under the 1989 Act. It national government repeals that Act - assuming for the time being that it may repeal an Act in respect of which it has no legislative competence – a province which passes no new law is choosing to have its liquor trade governed by common law and other laws regulating trade or the conduct of intoxicated people. The Constitutional provisions concerned mean that a province should be allowed to continue applying the existing Act or common law, until it wants to legislate for its own reasons and needs?
16.3 Section 25 deals with micro-manufacturers. This is not legal. In terms of the decision in Ex parte President of the RSA: Constitutionality of the Liquor Bill 2000 (1) SA 732 (CC) at paragraphs  and , Cameron AJ stated in a unanimous judgement that "the national government has accordingly not shown that the retail structures sought to be erected by the Bill are reasonably necessary for or incidental to the national system created for producers (manufacturers) and distributors.  The same considerations seem to me to apply to the Bill’s provisions regarding micro-manufacturers . . . ".
17. Section 56, the "default provincial legislation" clause, is problematic. The considerations mentioned in paragraph 15.2 above apply again here. Section 56 appears to be subterfuge to escape the decision of the Constitutional Court in the former Liquor Bill case referred to in paragraph 15.3 above? There no new grounds for departing from that judgement.
The question of the repeal of Liquor Act 27 of 1989
18. Section 57 contemplates the repeal of the whole of Liquor Act 27 of 1989. If the hesitation which we express about the application of section 44(2) of the Constitution gains some hearing amongst the law-makers, perhaps a better option is to allow the provinces to repeal Act 27 of 1989 in their sphere of competence. The repeal of Act 27 of 1989 should be only to the extent that it is incompatible with the Bill where the Bill relates to National competence. This approach would require a repeal of Act 27 of 1989 by each province before that Act becomes inoperative in South Africa.
Practicality and desirability of certain sections in the Bill
The soundness of some definitions and related issues
19. The definition of "premises" in the Bill is confusing. The definition of "registered premises" is to be preferred. The reason is that "premises" is too widely defined. Ideally it should be related to the area of operation of a registered person and no further. The present wording could mean that the entire "premises" (building or property) within which liquor is traded in a small part, whereas provisions concerning premises are presumably intended to relate only to the part of the premises to which the licenced business is confined. Most liquor outlets in South Africa are in private homes or family businesses attached to homes. Does this section prohibit licensing under such conditions if, for instance, there are children in the home?
20. Section 10(2)(b) is couched to widely. It disallows a person who is drunk to use public transport. So how do intoxicated people get home after their revelry? Must they use their own transport? Surely not. This provision will promote drunk driving if intoxicated people are forced off public transport, which, instead, they should be encouraged to use. It is sufficient to prohibit being drunk and disorderly in public. Being drunk per se is not and should not be an offence.
21. Section 17 is also cast too widely. It requires the Minister to vet structural alterations to registered premises. But what of minor structural changes? Perhaps the term structural alterations needs to be defined to avoid unnecessary registrations of minor changes to registered premises.
Section 23 which allows reviews to the High Court of the Minister’s decisions should be made compatible with section 40(4) which allows an appeal by way of a complete rehearing of the matter. Thus section 23 should cater for a review of procedure and an appeal on the merits.
23. Another facet of inadequate definitions can be seen in section 10. Section 10(1) prohibits the consumption of liquor on, inter alia, a street. How does that affect sidewalk cafés and restaurants which splay out onto the pavement? How does one interpret the prohibition relating to "any vacant land in an urban area"? Does this prevent a wedding, fete or other function in a temporary structure from getting a temporary liquor license? The lack of clear definition presents diverse problems. Section 10(3) prohibits possession or consumption "in a sports ground". Is this sound? Consider private suites in large stadia, or commonplace functions for which sports grounds are used? In this regard section 11(c) is not an answer. The sub-section "permits" provinces to issue licences. But provinces have that competence in terms of Schedule 5 and section 104 of the Constitution in any event. This Bill is posited as the default legislation for all provinces. This is another example of where the legislature may be exceeding the bounds of its competence, and doing so in ways that create legal confusion, anomalies and unintended consequences.
24. Section 12 deals with qualifications to be registered as a manufacturer. Taken literally section 12(1)(d) may serve to disqualify the biggest manufacturers in the country. Consider the possibility of a single shareholder of a large company who has a previous conviction involving dishonesty. Surely this section needs to be revisited? In any event, why does a previous offence involving dishonesty feature in the Bill? This is not just a question of its rational criterion, but also a question of human rights. If a person has served a sentence, and thus "paid the debt to society", why continue to punish such person? Does that not undermine our criminal justice system cynically? Criminals should be encouraged to rehabilitate by inter alia entering into legitimate business activities.
Is the desire to facilitate entry into the liquor trade achieved by the Bill?
If one considers the lack of criteria inherent in sections 13 and 14 concerning applications for registration, this Bill will not achieve the principle of easy entry into the industry except for those persons with substantial resources. However, if the criteria are clearly set out in the Bill, and they are not as onerous as in, say, the Gauteng Liquor Bill 2002, published in Gauteng Provincial Gazette No 354 of 17 October 2002, then progress may be made. The fact that it is impossible to tell from the Bill how onerous entry will be – that the criteria for entry are left to executive decree, perhaps in arbitrary and discriminatory ways – reflects the extent to which the Bill is too vague. The legislature must decide what it wants and legislate. It may not delegate this responsibility to the executive.
On a practical issue of ease of entry, why does section 26(1) prohibit a distributor from exporting? Ease of entry also requires some level of legal stability and certainty to remain in business. All the inspection provisions require a "reasonable" belief of some wrongdoing before an investigation is launched; all except section 38(1). This is surely an oversight. Al forced searches and seizures should, according to the rule of law and due process, be conducted only on the authority of the courts, unless the delay in getting authority would defeat the object thereof.
The confusion in the Bill about importers
27. In terms of section 4(2) people who import liquor may sell that liquor if they are registered persons. Thus a manufacturer who is duly registered may sell the liquor which it imports. However the stated purpose of the Bill is to have a three tier industry: section 2(1)(b). How is the right to sell compatible with section 12(2) which prohibits manufacturers from selling? In any event, why are importers not defined and subject to the same laws as other registered persons? They appear to be a separate category without being provided for.
The age restriction of 16 years on employment
28. Section 8 prohibits a person under 16 years of age working in premises where liquor is sold unless undergoing training in terms of Act 97 of 1998. What is to be done about family businesses where liquor is sold where children are naturally present and may assist parents or family although not undergoing formal training and never intending to pursue such work as a career? Most liquor outlets in South Africa are in private homes and small family businesses linked directly to homes. What about children whose parents are disabled or dead? Why do people under Act 97 of 1998 get this exemption?
Regulatory impact assessment of the Bill
29. There is a need for a regulatory impact assessment before the Bill is passed into law. This would encompass a cost benefit analysis: that is at least a comparison between the current Act 27 of 1989 and the cost of the new law to the administration.
30. The compliance costs associated with implementation of the Bill should also be assessed. Is this Bill actually cheaper for people in the industry than the existing law? Is it going to be easier to get into the industry under the new law than under the 1989 law? It is estimated that 80% of the industry, especially at retail and micro-manufacturing levels, is not registered. Will this Bill be an easier route to register, at least in the areas of national competence? To test the efficacy of the Bill, criteria on how to assess its efficacy should ideally be drawn up now. This is a monitoring function.
31. If the criteria and guidelines suggested above are incorporated into the Bill, and if it is revised generally in accordance with the above principles, this legislation could work well. The technical drafting of this Bill is excellent and its drafters will have no difficulty in redrafting it so as to comply with the constitutional requirements mentioned in this Submission.
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23 April 2003