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Recommendations to the Minister October 2017 Recommendation 8

Recommendations to the Minister by the National Forum

RECOMMENDATION 8
Section 98(3): The National Forum must, taking into account the provisions of this Act, conduct a cost analysis of the operation of the Council and Provincial Councils and make recommendations to the Minister for consideration by Parliament as contemplated in subsection (4), on the funding thereof, with a view to the effective and efficient implementation of the Act.

8.1.    RECOMMENDATION:
It is recommended that the Income and Funding Model of the Legal Practice Council and Provincial Councils as set out in Appendix “H” attached hereto be approved.

8.2.    MOTIVATION:
8.2.1.    The Income and Funding Model was developed following a comprehensive investigation into the existing governing structures in the legal profession as well as the infrastructural and staffing requirements of the mew Council and its substructures, by organisational design experts LTS Consulting in consultation with the National Forum, the existing Law Societies and the Attorneys Development Fund (“AFF”).  The experts also made use of various source documents provided by the NF, including the Act, the organogram of the new structures and the functions to be performed at the different levels thereof.
8.2.2.    The report of the organisational design experts contained various recommendations, including the proposed infrastructure and staffing requirements of the different levels of the new governing structures as well as the costing thereof. The report was workshopped with the National Forum, the AFF and with negotiating teams of the existing Law Societies which were formed to negotiate the transfer of assets, rights, liabilities, obligations and staff from the Law Societies to the new Council and Provincial Councils in terms of s97(2) of the Act. Representatives of the Law Society of South Africa participated in some of the discussions and the Advocates organisations represented in the National Forum were also approached for input.
8.2.3.    A Funding Task Team of the National Forum and the AFF developed the Income and Funding Model in Appendix “H”, taking into account the sources of funding of the existing governing structures of the profession, the assets of the profession, the funding requirements of the new Council and Provincial Councils, the purpose of the Act and the objects of the Council, including the need to promote access to the legal profession, in pursuit of a legal profession that broadly reflects the demographics of the Republic.
8.2.4.    The Income and Funding Model was adjusted following discussions by the National Forum with the Law Societies about the staffing requirements of the new structures and the transfer of staff and assets from the Law Societies. From these discussions, the Staffing Structure of the Council and Provincial Councils in Appendix “I” was developed. This Staffing Structure also formed the basis of negotiations with the Law Societies, of transfer agreements in terms of s97(2).
8.2.5.    In the Income and Funding Model, Appendix “H”, the following needs to be clarified:
•    The income from levies on Legal Practitioners and administrative charges in the first year of operation is expected to amount to R130 100 000.  The National Forum, mindful of the impact of high levies on Legal Practitioners and especially new entrants to the profession, recommends that the annual levy payable in the first year of operation should be R3 500 plus VAT for practising Legal Practitioners and R800 for non-practising ones.
•    The National Forum accepted a recommendation from the AFF, based on past experience, to provide for a 5% default rate in the projected income.
•    The expected income from the Legal Practitioners’ Fidelity Fund (“LPFF”) in the first year of operation is R90 000 000, of which R75 000 000 can be made available as an appropriation after approval of the annual budget of the Council in terms of s22(1)(b) of the Act. The remaining R15 000 000 will not be part of the annual appropriation, but can be refunded by the LPFF to the Council upon the rendering of invoices by the Council after completion of the work and incurring costs relating to inspections, curator services, striking and suspension of transgressing Legal Practitioners.
•    The expected income dealt with in the previous paragraphs will be sufficient to cover the expected expenditure of the Council and a surplus of R5 657 269 is expected.

8.3.    IMPLEMENTATION:
If the recommendation is accepted, it is proposed that the Minister should table the Funding Model in Parliament for consideration as contemplated in s98(3) and (4).

If the recommendation regarding the sources of funding is not accepted, the National Forum is available to enter into discussions to address the issue.

It is important that certainty about funding should be reached as soon as possible, to enable the Council to be established and to commence operations when Chapter 2 comes into operation in terms of s120(3) of the Act.

8.4.    ORGANISATIONAL AND PERSONNEL IMPLICATIONS
The proposed organisational structuring and personnel requirements of the Council and Provincial Councils as a whole are dealt with in Appendix “I”.

8.5.     FINANCIAL IMPLICATIONS
The proposed funding requirements of the Council and Provincial Councils as a whole are dealt with in Appendix “H”.