Quarterly Review 2010.06

Quarterly review

April – June 2010

IPR roundtable a resounding success

The Intellectual Property Rights Roundtable, held in Johannesburg on 29 April 2010,organised by the FMF, chaired by Microsoft Director of Law and Corporate affairs, Chose Choeu, and attended by 53 participants invited for their expertise and special interest in IPR, was a resounding success. Delegates included representatives from several major law firms, government departments and municipalities, universities and the Council for Scientific and Industrial Research (CSIR).

Temba Nolutshungu, FMF Director in charge of parliamentary liaison, explained the Foundation’s interest in property rights, which included intellectual property rights. South Africa’s ranking at 20th out of 125 countries on the International Property Rights Index was an important achievement as a strong correlation existed between IPR scores and economic growth. When welcoming the participants, he made special mention of Joan Fubbs, Chair of the Parliamentary Portfolio Committee of the Department of Trade & Industry (DTI).

Ms Fubbs told participants that although she had been concerned about attending the meeting since she would be chairing the upcoming Parliamentary Portfolio Committee hearings on the new IPR Bill, she had decided to come to hear a wider cross-section of views on this important legislation.

Traditional Knowledge Bill

The Intellectual Property Amendment Bill, generally known as the Traditional Knowledge Bill, introduced by MacDonald Netshitenze a Director in the Department of Trade & Industry (DTI), gave rise to lively discussion. Mr Netshitenze concentrated in his presentation on the increasing international support for the protection of traditional knowledge, acknowledged that he was aware that critics were of the view that such knowledge should not be accommodated within an IP regime, and stated that he disagreed with that view.

Some lively discussion ensued. Andre van der Merwe (DM Kisch) and Owen Dean (Spoor & Fisher), participants from major IP law firms, raised various concerns about the proposed legislation and made clear that they were in favour of protection for traditional knowledge, but suggested that it should be achieved by way of sui generis (special) legislation and not be inappropriately forced into IP legislation. Leon Louw (FMF), was concerned that a Regulatory Impact Assessment (RIA) of the bill, carried out by the DTI had not been made public as required by the constitution. Jeanette Lotter (Innovative Medicines SA), said that her organisation was not unhappy about the intent of the legislation but believed that there was a need to harmonise health and IP policy.

After hearing the strongly motivated views of the IP lawyers, Ms Fubbs closed the session by saying that clearly, some sections of the Bill required attention but she was not in a position to express an opinion on the sui generis issue. She said that she would welcome further debate, especially if the general public was involved.

Constitutionality of Software Procurement Policy

Professor Robert Vivian (University of the Witwatersrand) analysed government’s instruction to all sectors of government to give preference to open source in their software procurement. He said that the South African constitution supports both protection and the taking of property, which is anomalous. He concluded that, to act constitutionally, the government, as a consumer, should be neutral with regard to open source and proprietary software. When told that members of government had disagreed on the proposal to give preference to OSS but had been convinced by a legal opinion that it was a legitimate action, Professor Vivian responded by saying that the only way it could be made legitimate was by changing the constitution.

Publicly Financed Research

Dhesigen Naidoo (University of Pretoria) described the experience of universities since the adoption of the South African legislation on IP from publicly funded research, which is based on the US Bayh-Dole Act, listing the positives and negatives. A positive result was that publicly funded organisations and their researchers were more aware of the potential commercial value of their research. This would lead to greater IP development and protection. Some negatives were, policing and reporting, and the “walk in” rights of the state – the right, for instance, to take IP in the event of a health, security or emergency situation – which were causing anxiety in the university environment; and the legislation intervened in arrangements between publicly funded organisations and international partners, making them wary of investing and sharing knowledge with SA partners. One participant mentioned that forcing publicly funded institutions to file patents encouraged researchers to file useless ones, which closed off competing research in a particular area.

The Anti-Piracy White Paper

Charl Everton, Chairperson of the Business Software Alliance, talked about the importance of IT to the South African economy, saying that it represented 4.2 per cent of GDP and was expected to rise to 4.9 per cent by 2013. Software made up 14.7 per cent of the total IT market. Increasing piracy lead to economic losses, reduced tax revenues, and a loss of investment. A reduction in piracy would lead to the creation of many new jobs. Unauthorised use of software should be added to illegal copying and sale as a criminal offence.

Fake and sub-standard drugs

Jasson Urbach, Director of the Health Policy Unit, described the dangers posed to health by the sale of fake and sub-standard drugs. Fake drugs made up 10 per cent of the global market and at least 25 per cent of sales in developing countries. Sub-standard drugs could, in many cases, be more dangerous than fake drugs in that they increase the probable emergence of resistance to real drugs.

Subsequent to the roundtable

Following the Roundtable, the FMF made a submission to the DTI (see Submissions) and Owen Dean (Spoor & Fisher) at the suggestion of the FMF, drafted and submitted a sui generis bill as a workable alternative to the existing IPR bill.


The Foundation made two submissions during this quarter.

1. Parliamentary Portfolio Committee of the Department of Trade and Industry on the Intellectual Property Amendment Bill aka the Traditional Knowledge Bill (see IPR Roundtable) – see link.

The Foundation applauded the DTI’s desire to properly secure traditional rights as stated in the Policy Framework, but questioned the Bill’s ability to achieve this goal. The FMF’s concerns include: widespread condemnation by jurists of core aspects of the Bill; unintended effects, especially the effective nationalisation of traditional knowledge; superfluous and potentially costly provisions; and inconsistency with the constitution, other laws and international obligations.

2. Department of Energy on the Integrated Resource Plan 2010 – see link.

The FMF pointed out that South Africa’s energy (electricity) problem is not technical; it is not the lack of integrated resource planning, but the lack of a regulatory system that mobilises resources efficiently through competition. Most countries, and all integrated regions, have progressed to systems in which generation, transmission, distribution and energy trading have been separated. In virtually all cases there is a greater or lesser degree of competition.

Tax Freedom Day

This year, May 2 was Tax Freedom Day. The day on which average South African income-earners at last started working for themselves after spending almost one-third of the year (the 121 days from January 1 to May 1) working to pay their personal tax bill, in other words, to pay their share towards covering the costs of government.

The concept of Tax Freedom Day (TFD) was developed to measure the contribution that middle-income taxpayers have to make to cover the total costs of administering government. Tax takes a greater percentage of some people’s incomes and less of that of others, so TFD is merely a rough guide. The greatest value of the concept is that it gives us an indication as to whether government is taking more or less of our money each year, how much taxes increase or decrease, and how our taxes compare with those of other countries.

South Africa’s TFD has crept further and further into the year. The dates for the past nine years were 2001 / 20 April, 2002 / 22 April, 2003 / 22 April, 2004 / 26 April, 2005 / 1 May, 2006 / 5 May, 2007 / 10 May, 2008 / 12 May and 2009 / 10 May. Between 2001 and 2009, government appropriated 12 additional days from the working lives of the average person. In 2010, it gave back eight days, probably as a result of the credit crunch.

Garth Zietsman, the statistician responsible for calculating TFD, says that the global credit crunch resulted in lower profits and therefore the step back in TFD in 2010. He says that TFD “is calculated by dividing general government revenues by gross domestic product at market prices to establish what proportion of the year’s labour goes to paying for government. That proportion is converted into days of the year to arrive at TFD.”

Unsung hero

On Saturday, June 12, Rotary International recognised the lifelong work of Leon Louw, Executive Director of the Free Market Foundation.

Rotary International’s motto is “service above self”. Acknowledging the good done by Rotary across the globe since its inception in the US in 1905, the Rotary International Unsung Heroes Award is made in the name of its founder Paul Harris who died in 1947. It is awarded to deserving individuals for their selfless contributions to society.

The FMF’s Chairman, Dr Brian Benfield, in his citation, pointed out that Leon and the FMF are credited with over 200 pro-market reforms that today positively affect every South African. These range from increased shopping hours to abolition of agricultural boards to deregulated transport.

Leon trained initially as an attorney and, apart from possessing a profound grasp of South African jurisprudence, is an outstanding economist of international repute. A sought after speaker at universities, conferences and conventions across the globe, he has over the past 40 years spoken in some 30 countries on nine continents, on occasion sharing the platform with such great economic minds as Friedrich Hayek, Milton Friedman and Walter Williams.

Leon is also well known as co-author, with his wife Frances Kendall, of South Africa – The Solution and Let The People Govern. He has also authored a seminal study entitled Habits of Highly Effective Countries: Lessons for South Africa.

Dr Benfield said there can be little doubt that The Solution, and the speeches that Leon gave on the book’s main thrust of a peaceful transition to democracy under a constitution protecting the rights of all citizens, influenced the thinking of the participants in the negotiation process that ended apartheid. For their role in the transition to democracy, Leon and Frances were twice nominated for the Nobel Peace Prize.

Leon played a very significant role in ensuring that South Africa has a property rights clause included in its constitution, a vital element to ensuring a country’s freedom and prosperity. Moreover, he has ceaselessly worked to help thousands of black property owners around the country to have their land title upgraded by government from leasehold to freehold.

Dr Benfield said, “Leon Louw reminds us that the history of liberty is the history of limiting the power of kings, rulers and governments; it is not the history of increasing it. Indeed, our constitution, like most constitutions, is intended as the supreme law of the land to safeguard our freedoms by limiting government. The only system compatible with these basic rights is the free market economy.”

Temba times two

Cape Town Director, Temba Nolutshungu, in June, had two media coups with articles published in the Cape Times (June 21) and the Washington Times (June 23).

In his Cape Times article, Freedom is key to economic health, Temba wrote that economic well-being is a consequence of freedom and argued that job creation is not a role of the state. He said that government-generated jobs are created at taxpayers’ expense and that while the private sector creates wealth, the state sector consumes it. Temba concluded that: “The legislative and institutional framework within which economic activity takes place, and, in particular, the degree of regulation to which an economy is subjected, is a determinant of how wealthy a country and its inhabitants can be.” The article was “published as part of a National Dialogue initiative launched in March by the Ministry of Economic Development in association with the Cape Times and the SA New Economics Network”.

Temba’s Washington Times article, Fear as a bar to progress – DDT ban hurts the Third World poor, described how the implementation of the “precautionary principle”, in this case the ban on DDT, has led to loss of life in malaria-infested countries. Temba described how developing countries face the unenviable choice of ignoring the ban at the cost of losing their agricultural export markets to the EU and potentially the US. Temba’s article was published on the opinion page, Environmental / Humanity Protection, alongside an article by UN Secretary-General Ban-ki Moon and another in which eminent pharmacologists challenged the proposed ban on dioxin in the US.

Temba and the Polish scientists

In May, Temba Nolutshungu addressed a group of Polish and local scientists on biotechnology politics in South Africa in general and on the “precautionary principle” in particular. The precautionary principle, a political construct, in essence warns against risk-taking when the risk cannot be quantified or fully identified, or when the risk is not precise in detail. Temba pointed out that risk is an essential component of life, and particularly in the process of discovery and development. He said that if the precautionary principle had been applied when penicillin and various vaccines against diseases such as polio and smallpox were being developed, millions would undoubtedly have perished.

More words of wisdom …

Leon Louw addressed the following during this quarter:

April 10 and May 15, three separate Boehringer Ingelheim functions, on The impact of nationalisation on the healthcare industry.

April 23, the SA National Defence Force College, on The World economy and global market trends.

April 29, the FMF’s Intellectual Property Rights Roundtable, on A Regulatory Impact Assessment (RIA) for the Traditional Knowledge Bill.

April 29, the Gordon Institute of Business Science (GIBS), arguing against the debate proposition that Government is right to place state owned enterprises at the centre of economic growth.

April 30, the FMF’s youth lunch, on The global financial crisis.

May 20, the Nuclear Forum, on Investing in the Pebble Bed Modular Reactor (PBMR).

May 24, the Procurement, Asset and Financial Fraud African Summit 2010, on two topics: Fraud and corruption in government and Tax fraud and the economy.

May 26, the Fraud Conference (a second one in the same week!), on Mutual corruption in tenders.

Leader page articles

Three of Eustace Davie’s feature articles were republished on the leader page of The Star during this quarter:

Creating a gap for the jobless, April 5

Waving certificates, not placards, May 10

A weakened rand will bring only disaster, May 24

Upcoming dates

The FMF’s AGM will be held on August 4, followed by a presentation by Leon Louw. Formal notification to follow in due course.

The FMF will be celebrating its 35th anniversary on December 1. Please keep the evening free.

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