TIM HUGHES: Rule by regulation is a danger to democracy

Too often we as citizens adopt an approach to public policy failures of “it’s not my issue” .

This is a dangerous dereliction of our civic duty, particularly as SA is an increasingly regulated state. While the often-stated rationale for the gazetting of regulations is that of addressing the country’s deep pathologies, this mantra has also paved the way for the abuse of power. Increasingly, our lives are governed by regulation, rather than legislation. It is time to take stock of this dangerous trend corroding our democracy and to assert and insert principles of consultation, transparency and accountability into regulation making.

Regulation is essentially policy and legislative rule-setting. It is the executive branch’s interpretation of, and expansion on, principal legislation that dictates the terms and conditions of its implementation. Yet far too little attention is paid to scrutinising the detail contained in regulation. This in part is a consequence of regulation not being subject to parliamentary debate, deliberation or drafting.

Regulation remains the purview of technocrats and legal drafters in departments and is often lost in the small print of the Government Gazette. The timing of the publication of regulation is entirely at the behest of the relevant minister or regulator and can be inserted deliberately to avoid public attention.

Due in part to this governance disconnect between executive regulation and accountability, frameworks and guidelines of good regulation have been adopted internationally by bodies such as the Organisation for Economic Co-operation & Development, of which SA is a partner. In this regard, the recently published regulations governing the Compensation for Occupational Injury & Diseases Act constitute a signal case of the opposite of good regulation. While the act may be regarded as a “not my problem” sort of issue, it is every citizen’s issue as it affects taxpayers, employers, workers and medical service providers. In essence, the regulations prevent medical service providers who treat injured workers from utilising the factoring and cash-flow services used by millions across the globe.  

So, how do the regulations contained in the law measure against global best practice? The first and most obvious requirement of good regulation is to meet a public need. The new regulations fail this cardinal test in that there is no public interest in preventing medical service providers from easing their administrative and cash-flow burdens in dealing with a dysfunctional Compensation Fund (CF) that leaves them unpaid for up to two years. Rather, there is a public interest in ensuring medical service providers are paid timeously for treating injured workers so that they continue to do so.

The second related requirement is that the regulations should serve a clear policy goal and be effective in its achievement. Again, neither the minister of employment & labour nor the commissioner of the Compensation Fund have provided cogent policy reasons for the publication of the regulations, or how they will advance any policy goal. 

Next, good regulations should have a sound legal and empirical basis. There is no identifiable empirical basis for denying medical-service providers the freedom to contract with administrators and prefunders to ensure their financial survival. The legality of the regulations as a restrictive trade practice will be tested in the courts, but is also likely to fail muster on constitutional grounds. 

Fourth, regulations should produce benefits that justify their costs. No benefits to medical service providers, workers, employers or taxpayers are to be found in the published regulations. The only discernible beneficiary of the regulations is the Compensation Fund itself in that the regulations will have the effect of stopping it being sued for payment by individual medical service providers. Good regulations should minimise costs and market distortions. Medical service providers’ use of prefunding administrators results in no cost to the fund, workers or employers. 

On the contrary, prefunding administrators systematically clean and validate medical service provider claims against the Compensation Fund, thereby reducing fraud and saving taxpayers’ money. Medical service providers freely contracting with prefunding administrators do not create a market distortion, rather they respond to one created by the inefficiencies of the fund. If implemented the Compensation for Occupational Injury & Diseases Act regulations will deepen, not remove, a market distortion. Good regulations promote innovation.

If passed in their current form the regulations threaten to destroy a highly innovative and service-orientated sector that has eased the burden of doing business with the Compensation Fund for thousands of stakeholders over decades. Regulations should be clear, simple and practical. By contrast, the pre-emptory publication of regulations even before the Compensation for Occupational Injury & Diseases Act has passed through both houses of parliament has wreaked havoc on unsuspecting stakeholders, not least Compensation Fund employees themselves around the country. This may explain why the fund’s systems were completely offline recently.

Finally, three overarching principles should apply to all government regulations, namely consultation, transparency and accountability. In this regard the regulations are a trinity of failure. Not a single medical service provider, worker, employer or key stakeholder was consulted in their drafting. Far from acting transparently, the fund’s commissioner first published the regulations the day after parliament rose in September, shortly after it had rejected and excised similar provisions from the Compensation for Occupational Injury & Diseases Act.

The regulations were withdrawn under legal challenge, and with all the transparency of a bureaucratic poker player the fund republished them on October 19. In terms of accountability, parliament was sidestepped. Though the regulations allow for public submissions within 60-days from their date of publication all evidence suggests the fund will simply ignore submissions it does not like.

Like many other government bodies, arrogance, incompetence and malevolence characterise policymaking and regulation by the Compensation Fund. Yet the social challenges hobbling SA are too severe for an engaged citizenry to allow this. SA deserves better.

• Hughes is spokesperson for the Injured Workers Action Group.