Keep South Africa’s e-commerce simple, effective, and lightly regulated

There is nothing new, in law, about e-commerce. The legal concepts of offer, acceptance, and contract are all very clearly defined and cover all types of communication media, including telephone, fax, phone, paper-based and oral agreements. Why then do we require special laws for electronic transacting? Is the bill really necessary that is currently being debated in Parliament? There is no doubt that electronic evidence can be submitted to the courts as was done in the Microsoft anti-trust case. But most governments worldwide have come to the conclusion that e-commerce is somehow different and that some legal terms relating to electronic transactions need special clarification. Statutory law is expected to guide the courts in matters for which there are tried and trusted legal precedents and the result may well be to create confusion where currently there is none.

However, the Electronic Communications and Transactions Bill from the Department of Communications goes too far. Where other countries, such as Australia, New Zealand and Canada, have implemented minimal legislation that grants legal equivalence to electronic forms of signature, sent/received concepts, and terms such as “in writing”, South Africa has set about creating a legal monster. Going far beyond the measures required to ‘foster e-commerce’, the Department of Communications appears to have taken a chapter from every piece of e-commerce legislation in the world.

The Free Market Foundation has, in its submission on the bill, offered a word of warning on two counts. Firstly, South Africa should take care not to over-legislate in our developing market, and secondly, the Department should avoid legislating in areas that are not within its field of expertise. The proposed legislation on cyber-crime and the possible appointment of cyber-inspectors, for example, should be the responsibility of the Department of Safety and Security whilst laws on consumer protection should be dealt with by the Department of Trade & Industry, not the department that looks after our telephones.

The goals of the bill, and of a general e-commerce strategy, should embody the “light touch” regulation that has been adopted by most of South Africa’s trading partners. There is no need to enact sweeping codification of common law rules just because people are using new technology for everyday purposes. There is always the risk that judges may interpret the fact that special legislation has been adopted, to mean that contracts concluded over the Internet have to be treated differently to contracts concluded by some other means. This could have unintended negative consequences.

Creating more legislation may do more harm than good and policymakers should rather consider removing regulatory barriers and restrictive government policies in order to foster e-commerce. Government should think about adopting a holistic view that takes into account all aspects of public policy. For example, the government could look more closely at the liberalisation of telecommunications, including the removal of licenses and regulatory restrictions, so as to bring about completely open trade. Privatising the radio spectrum, by establishing private property rights in it, would lead to much greater efficiency in the use of this scarce resource. And immigration policies could be changed so as to allow unrestricted importation of information technology skills into South Africa. Such an approach would have positive consequences for e-commerce whereas proposals such as the notion to compel all encryption producers to register with the Department of Communications would tend to drive away both skills and technology.

South Africa’s regulators do not appear to give adequate attention to the probable impact of their regulatory proposals on specific industries and the economy in general. In many other countries Regulatory Impact Assessments (RIA’s), including cost/benefit analyses and studies on the funding of implementation, are being carried out on all proposed new laws and regulations. If the costs outweigh the benefits the proposed law or regulation is scrapped. The Department of Communications has not carried out a RIA on its proposed legislation even though bad provisions could cause untold economic harm. A small-scale example is the increased costs of regulation and administration that would be incurred if the proposed nationalisation of the .ZA domain registration is carried through at an estimated cost of R24 million per annum. This cost is simply not justifiable when compared to the almost zero cost of having the job done privately by one individual maintaining the register on his PC.

“Fast-tracking” the Electronic Communications and Transactions Bill has resulted in a hurried and potentially harmful document. Subjecting it to an RIA would be a good way of ensuring that it will not be detrimental or costly to businesses in South Africa and consequently harmful to the economy.

The amount of legislation and regulation contained in this bill needs to be minimised. The greater part of the proposed legislation should be abandoned or re-drafted by the correct departments, and all they need do is amend existing legislation. Technology development and trade can then proceed unhindered, following trends discovered in the larger overseas markets. Intrusive legislation is not necessary, as no problems have manifested themselves. The government should keep the bare bones of the Bill and focus on the clauses that grant electronic transactions legal equivalence with other methods of concluding agreements. Our developing economy cannot afford to have electronic communications smothered in yet another unwieldy bureaucracy.

Finally, one has to question the motivation behind certain sections of the bill. Chapter 9 looks particularly insidious as it grants the Minister the power to declare a private sector database “critical to the national interest”. It further grants government officials wide powers to take control of the information held within such a database. It is questionable whether this particular chapter will withstand constitutional scrutiny, but unless it is removed prior to promulgation, corporate South Africa will be vulnerable and should be very aware of its implications. For example, should the government decide that the prospecting and research databases of mining houses are “critical to the national interest” the proposed legislation would allow the government to take control of them. As “the national interest” is not objectively defined, government would in fact have the power to take over any database it chooses. Such far-reaching and excessive government powers are inconsistent with the spirit of the constitution and the fundamental tenets of the rule of law. They have no place in the statutes of a modern and open democracy.

Author: Neil Emerick is an independent IT consultant, freelance researcher and writer. This article may be republished without prior consent but with acknowledgement. The patrons, council and members of the Free Market Foundation do not necessarily agree with the views expressed in the article.

FMF Article of the Week\4 June 2002 - Policy Bulletin / 01 December 2009