Industrial Development Amendment Bill: final mandates; Gas Bill: finalisation

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The aim of this report is to summarise the main events at the meeting and identify the key role players. This report is not a verbatim transcript of proceedings.

economic and foreign affairs select Committee
31 October 2001
CONSIDERATION OF FINAL MANDATES ON THE INDUSTRIAL DEVELOPMENT AMENDMENT BILL AND CONSIDERATION AND FINALISATION OF THE GAS BILL

Chairperson:
Mr V. Moosa

Documents handed out:
Industrial Development Act No. 22 of 1940
Industrial Development Amendment Bill [B32B 2001]
Select Committee Amendments to: Industrial Development Amendment Bill [B32B 2001]
The Gas Bill [B18 2001]

SUMMARY
The Committee heard the content of the Gas Bill from Mr Surridge, Director of Coal and Gas for the Department of Minerals and Energy and Mr Dykes, departmental consultant. The Committee deliberated and decided to adopt the Bill with one minor amendment. The Committee next agreed to its amendments to the Industrial Development Amendment Bill and voted to adopt.

MINUTES
The Chairperson welcomed Committee Members and said that there were two items on the agenda: the Gas Bill and the IDC Bill. He said that the intention was to pass both bills at the meeting. He then went through a roll call of the provinces. Seven were present, including KwaZulu-Natal, Eastern Cape, the Free State, North West Province, Northern Province, Mpumalanga, and Gauteng. The Chairperson introduced Mr Surridge, Director of Coal and Gas from the Department of Minerals and Energy.

The Gas Bill
Mr Surridge proceeded to review the Bill clause by clause. He stated that Chapter 1 provided definitions and the objectives. Chapter 2, Section 3, established, and Section 4, defined the National Gas Regulator. Section 5 described the Constitution of the Gas Regulator, and Section 6 provided the disqualifications and requirements regarding Gas Regulator appointment. Section 7 provided for vacation of office or termination of appointment, Section 8 gave criteria for meetings of the Regulator, Section 9 defined duties, and Section 10 dealt with decisions made by the Gas Regulator. Section 11 provided criteria for personnel appointed and hired by the Regulator, and Mr Surridge called specific attention to 11.5, which was a clause that enabled the Minister to exercise jurisdiction over the Regulator. Sections 12 and 13 related to Regulator funds and accounting, and Section 13 discussed its financial reporting procedure.

Mr Surridge continued to Chapter 3, dealing with licensing and registration. He reviewed that Section 15 delineated those activities requiring license, and Section 16 laid out the steps of the license application process. Section 17 related to advertising of that process, Section 18 identified exactly what information was required of the applicant, and Section 19 went through application finalisation. Ultimately, Mr Surridge explained, going on to Sections 20 and 21, that the licensing process was controlled by the State. Section 21 provided lengthy conditions of license.

The Chairperson asked Mr Surridge to remind the Committee what activities required licensing.

Mr Surridge responded that licensing was required for gas transmission, distribution, storage, liquification, and regasification.

The Chairperson asked why all of these were not dealt with in this clause.

Mr Surridge answered that they were covered in other sections of the Bill.

Mr Surridge stated that Section 22 prohibited discrimination, Section 23 provided the term of license to be 25 years, Section 24 provided the Regulator with the authority to vary, suspend, or remove licenses from licensees, and Section 25 gave additional guidelines for the revocation of a license or application. Section 26 addressed license contravention, Section 27 provided for license revocation by the court, and Section 28 defined the terms of registration with the Gas Regulator.

Chapter 4, General Provisions, began with Section 29's stipulations for the processes for entry, inspection, and information gathering by the Gas Regulator. Section 30 provided for voluntary dispute resolution, Section 31 identified the role of the Regulator in investigations, and Section 32 dealt with the repatriation of land by the Regulator for the purpose of laying pipeline. Section 35 addressed land privacy, and Sections 34, 35, and 36 all dealt specifically with the Mozambique Pipeline Agreement. Section 37 concluded the Bill. It stated: "This Act is called the Gas Act, 2001, and comes into operation on a date to be determined by the President by proclamation in the Gazette."

Questions and Discussion on the Gas Bill
The Chairperson asked Mr Surridge to explain again, as he had done at the briefing meeting a week earlier, what the logic was for locking South African gas prices into the Euro and the US dollar. He stated that it was important to discuss this until everyone understood.

Mr Dykes, departmental consultant, responded that the Mozambique Agreement was in dollars. He stated that most pricing was determined in dollars and, secondly, that the price capping mechanism was market reliant, so it was not "locked."

The Chairperson asked the gentlemen to clarify whether prices would be affected "upstream" or only "downstream."

Mr Surridge said that this was correct, that the conditions of the Bill would only affect prices downstream. The Minerals and Petroleum Bill governed upstream prices.

The Chairperson asked if there were additional questions. He then stated that he wished to give his view on the Bill. The problem with the amendments that had been made were that Section 21(m) contained redundant language because Section 23 made nearly the same provision. He read the two parts out loud. He said that there was no conflict, per se, between the clauses, but he could imagine that there could be problematic legal interpretation of the language. He stated that Section 23 could be deleted entirely. He asked Mr Surridge whether he knew what Dr Crompton had to say on the matter.

Mr Surridge stated that Dr Crompton agreed with the Chairperson's suggestion.

The Chairperson then asked the Committee if they would vote to remove Section 23.

Mr D Devilliers of Sasol stated that the reason Section 23 had been inserted into the Bill was because of the word "exclusive."

The Chairperson suggested that they review it again slowly.

Mr M Koapeng of Sasol stated that the insertion had been made with the objective of having exclusivity of license available for 25 years. That would mean that, in practice, in one geographic area there would be one supplier for a 25-year period. The same rule did not apply to distributors in the same area.

The Chairperson turned his attention to the Department.

Mr Surridge said that, if they were to look at the number of licenses granted for the three main activities, including transmission, distribution, and storage, distribution was the area where they did not want a monopoly.

Mr Dykes concurred that distribution was the area that needed to be stimulated by competition, a diverse customer base, and good investment. He stated that investment would develop in time as the industry developed. If licensing were exclusive in this area for 25 years, then that would have a negative impact on the industry.

Mr Dykes said that there was some rationale in having both Sections 21(m) and 23 in the Bill.

The Chairperson asked whether they could defer the discussion on the Gas Bill in order to turn attention to the IDC for twenty minutes. He welcomed Mr J. Strydom, legal advisor to the Department of Trade and Industry and asked him to review the amendments to the Industrial Development Amendment Bill so that the representatives could hear them before voting.

The Industrial Development Amendment Bill
Mr Strydom reminded the Committee that his reference document was the same one he had promised to draft at the end of the last meeting, on Wednesday, 24 October 2001. He read the amendments that the Committee had agreed to on the 24th. The Committee decided to substitute Section 17 of Act 22 of 1940 for a new clause that replaced the words "books of account" and "accounts" with the words "financial statements." Mr Strydom said that the Committee's second amendment had been the deletion of Clause 11 from the Act and the substitution of a new clause that also replaced the words "balance sheet and accounts" and "a balance sheet and profit and loss account" with the words "financial statements." The numbers "three" and "seventeen" became "3" and "17," and "chairman" was changed to "chairperson." Similar grammatical corrections were made for consistency in part (2).

The Chairperson asked the provinces for their final vote on the IDC Bill with these minor amendments.

Mr B Dlulane (ANC) voted in favor on behalf of the Eastern Cape.

Mr T. Setona (ANC) voted in favor on behalf of the Free State.

The Chairperson voted in favor on behalf of Gauteng.

The Chairperson read a document of support issued by the Northern Cape.

Both representatives from KwaZulu-Natal were present, Mr M. Bhengu (IFP) and Ms N. Raja (DP), and they voted in favor.

Ms Z. Kolweni (ANC) voted in favor on behalf of the Northwest Province.

The Western Cape was not present.

Mr S. Fenyane (ANC) voted in favor on behalf of the Northern Province.

Ms P. Themba (ANC) voted in favor on behalf of Mpumalanga.

The Chairperson read the Motion of Desirability, the Free State representative moved, and the Eastern Cape representative seconded. The Chairperson read a second motion, KwaZulu-Natal moved, Northwest Province seconded, and the Bill was approved. The Chairperson thanked the delegation from IDC and the Department for their patience and said that they had had a lesson on how Section 76 legislation was passed in Parliament.

The Chairperson returned the Committee to the deliberations on the Gas Bill.

Questions and Discussion on the Gas Bill
Mr Dykes stated that, according to Section 21D, third parties had access to transmission pipelines, and there was no corresponding access granted to anyone to distribute.

The Chairperson said that it would then be an option to delete the last clause from 21(m).

The representatives from Sasol did not agree.

Mr Fenyane re-read the clauses aloud to make sure he understood what the suggestion was.

Mr Kaopeng stated that the clauses should be left as they were, without amendment.

The Chairperson said that his primary concern was that the courts could misinterpret the clauses.

Mr Surridge voiced that the Department was not "married" to its original suggestion, but it did make sense.

The Chairperson stated that he wanted the Committee to adopt the Bill with the amendment to delete the last words of Section 21(m). He read the Motion of Desirability, Northwest moved, Mpumalanga seconded, and he read the second portion of the Motion. The representative from the Northwest Province moved, and the Eastern Cape representative seconded. The Bill was adopted with minor amendment to Section 21(m). The meeting was adjourned.



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