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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 Masters’ 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)