South African Postbank Bill [B14-2009]: amendments in response to submissions and its potential delay

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Communications

19 April 2010
Chairperson: Mr I Vadi (ANC)
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Meeting Summary

The Committee considered National Treasury’s most recent submission on the Post Office Bill and Postbank Bill. Their comments introduced fresh issues substantially different to the submission made by National Treasury at the public hearings. It raised the possibility of a conflict of laws arising with other banking laws. It might necessitate delaying the Postbank Bill until the conclusion of key legislation on dedicated banks. The Committee would need to engage further with National Treasury.

Prior to that, the Portfolio Committee received proposed amendments from the Department’s legal team in response to the public submissions. There were amendments to the Objects of the Act in Clause 2 to address the concerns of COSATU and the Eastern Cape Youth Development Board. There were also three proposed options to deal with the non-applicability of certain provisions of the Companies Act, 1973.

The legal team was asked about amending the Companies Act using the Postbank Bill rather than simply amending the Companies Act directly. This question prompted debate on the process of establishing the Postbank, particularly the requirement for corporatisation as a precondition for registration as a bank.

Looking at the powers and duties of the Postbank, a Member asked the extent to which the Postbank would differ from any other state-owned enterprise. The debate on corporatisation continued in clauses 9, 10 and 11 with respect to the extent of the Minister’s involvement in governance and operational matters of the Postbank. There was particular concern about clause 9(1)(f) allowing the Postbank to conclude joint ventures with third parties, as well as how this related to the Minister’s role.

There were questions about at which point the Minister became a shareholder and when the Minister became involved with operational matters to determine the length and breadth of executive authority in the powers and duties of the Postbank. The Committee discussed the scope of Postbank’s powers and duties in terms of the Public Finance Management Act.

A Member asked for a distinction to be drawn between government drafting policy and government running the show in the provisions on the powers and duties of the Postbank. Another Member felt that government had been excluded from laying policy despite the risk that would be borne by the taxpayer if there was a financial crisis of the kind that had recently been experienced globally. The Member cautioned against drafting laws in such a way that the effect of those laws would be that government would have no role to formulate policy.

Meeting report

Proposed Amendments to South African Postbank Bill
Mr Willie Vukela, Director: Legal, and Mr Alf Wiltz, Director of Legal Affairs: Department of Communications (DOC) took the Committee through the Department’s proposed amendments to the Objects of the Act and those dealing with the application of the provisions of the Companies Act of 1973. Mr Vukela explained that additional sections had been added to the objects of the Act to respond to the concerns of COSATU and the Eastern Cape Youth Development Board.

Mr Wiltz spoke about the submission on the correctness of referring to the Companies Act of 1973. They had consulted the State Law Adviser who had advised that referring to the Act of 1973 was consistent with what was stated in the Interpretation Act. There would be no problems when the new Companies Act came into effect. The Interpretation Act made it clear that a reference to a section of the Companies Act of 1973 would be taken to be the same as a reference to a similar provision in the Companies Act of 2008 when it came into effect.

Mr Wiltz said that the Department proposed in Option 1 to use the current wording in clauses 26 and 27 since it was best practice and he referred to examples of other legislation where that had been done such as the Nuclear Energy Act.  Option 2 would be to delete clause 27 and reword clause 26 using the approach followed in the Public Investment Corporation Act of 2004. Option 3 would be to delete clause 27 and reword clause 26 as shown in the document, provided that the South African Post Office (SAPO) could motivate which sections of the Companies Act of 1973 would not be applicable to the Postbank.

Discussion
The Chairperson asked for clarity on the proposed amendments about the applicability of the Companies Act of 1973 to the Postbank Bill. What necessitated these amendments?

Ms Mandisa Mbekeni, Group Executive: Legal Services, DOC, responded that section 66 of the Companies Act was the problem and a few other provisions such as requiring public companies to have a minimum of five members. In the Postbank instance there would only be one member. There were also restrictions on the Registrar of Companies when it came to registering the Postbank. The specific provisions could be submitted in writing to the Committee.

Ms Ntombebandla Mnyikiso, Senior State Law Advisor, highlighted those sections that by their nature were not applicable to the Postbank. These included section 32 of the Companies Act of 1973 which required seven members and could thus not apply to the Postbank which was a State Owned Enterprise (SOE) and thus had only one member. Section 44 of the 1973 Act providing for a name change by special resolution was another such provision. This could not happen because the Postbank was established in terms of legislation and its name could not be changed by special resolution. Other examples were similarly sections 66, 63 and 190.

The Chairperson was satisfied that these were changes were a procedural nature and they did not deal with substantive powers. The anxiety that had been expressed in the Committee’s previous discussions had been about the extent of ministerial powers. The Chairperson suggested that perhaps it was not good practice to list all inapplicable provisions as they could use a broad omnibus clause that encapsulated everything.

Ms P De Lille (ID) commented with respect to Option 3 that the level of banking had to be created within the ambit of the Companies Act. It seemed as if the Department wanted to go and change the Companies Act using the Postbank Bill instead of simply amending the Companies Act.

The Chairperson pointed out that corporatisation was a pre-condition for registration by the Registrar of Banks. The Companies Act required a company to be established before the Registrar of Banks could set out the criteria for the establishment of the Postbank.

Mr Gift Buthelezi, Acting Deputy Director General: ICT Policy Development, DOC, responded that it was important for them to speed up the legislative process of setting up the Postbank as this had been going on for a period of eight years. If they were to amend the Companies Act it would result in further delays as this would require lengthy legislative procedures.

Ms de Lille commented that the proposed legislative framework created a Postbank that was no different from a commercial bank as opposed to a people-centred banking institution.

Mr S Kholwane (ANC) commented that any legislation was subject to review and the Committee had the power to amend legislation and policy. His main concern was dedicated banks and whether the clause as it stood talked to the issue of dedicated banks.

Mr Vukela replied that National Treasury had given their input great detail on the subject of dedicated bank when they had made their submission at the public hearings.

Deliberations on Chapter 3: Powers and Duties of the Company
Ms de Lille asked in what way the powers and duties of the Postbank differed from those of any other SOE.

Ms Mbekeni replied that to the extent that the SOE was a creature of statute, its powers and duties would be limited to what was set out in that particular statute. If the SOE was not a creature of statute then its powers and duties would be limited to what was set out in the Companies Act and its articles and memorandum of association. In terms of the Postbank, its powers would be what would appear in the banking licence.

The Chairperson sought clarity on the import of section 9 (2)(a) requiring concurrence between the Minister and the Minister of Finance to conclude an agreement which governed cooperation between the Postbank and the Post Office. Which Minister would conclude an agreement governing cooperation? It was not clear if this was the Minister of Finance or Communications.

Mr Wiltz replied that the only thing that this section said was that an agreement had to be entered into by the Postbank and the Post Office. That agreement was also subject to approval by the Ministers of Communications and Finance. So none of them could conclude it on their own and the agreement was still subject to the concurrence of both ministers.

The Chairperson responded that he understood the first part but confusion arose with the next part because the Minister of Communications was a shareholder in both companies and this could mean that he could enter into an agreement with himself.

Mr Wilz responded that this was an operational matter that was far removed from shareholding. It was merely an issue of a shareholder approving the agreement and not being a party to it.

Mr Kholwane asked at what point the Minister was regarded as a shareholder and when would the Minister be involved in operational matters of the Postbank. 

Mr Buthelezi replied that this was a difficult question to answer but a similar thing had occurred with the South African Broadcasting Corporation (SABC) where the Minister was a shareholder as well as the policy-maker. It would be difficult in the Bill to clarify where such a power began and where it ended in terms of the concurrence. Checks and balances had been instituted so that there was no monopoly by one minister and Treasury would mostly be involved over money issues of the Postbank.

Ms de Lille asked for clarity on clause 9(1)(a) to (g). She referred to clause 9(1)(d) in particular which gave the Postbank the power to raise funds. From where would such funds be raised? She urged the Committee not to gloss over the powers and duties of the Postbank where it was allowed to conclude joint ventures and other commercial agreements.

Ms Motshoanetsi Lefoka, Chief Executive Officer: SAPO, assured the Committee that the powers and duties in clause 9 were subject to the Public Finance Management Act (PFMA) and could not be exercised in any way that breached the provisions of the PFMA.

Ms J Kilian (COPE) warned that there was a potential risk of people who had the full backing of taxpayers’ money not being as circumspect with the funds as they should be. There had to be management of risk in investment decisions. She asked if it would not be wiser if these powers were subject to checks and balances to avoid conferring too much power in a single provision.

Mr Kholwane responded that they had to move away from the mentality that people in the public service did not possess the ability to do what was done by the private sector. It was also important to appreciate the inherent bureaucracy in SOEs that impeded efficiency and slowed down decision-making such as the need for concurrence between Ministers and so forth.

Deliberations on Chapter 4:
Control and Management of Company
Ms Kilian asked whether the Board was the accounting authority.

The Parliamentary Legal Advisor responded that clause 11(b) was consistent with section 49 of the PFMA. However the King III report had expressed reservations about whether a big board was accountable. It was therefore something for the Committee to consider whether they also subscribed to this idea of size of the Board versus accountability.

Ms L Mazibuko (DA) commented that there was a redundancy in clause 9 of the Bill as it was repeated in clause 10. She asked why this provision envisaged that the Minister had to be so intimately involved. She wanted to know why the Bill sought to corporatise the Postbank if the department was going to run it.

Mr Wiltz replied that reference to any Executive role did not mean that this was a threatening role but it was one that buttressed governance of the Postbank.

Mr Vukela responded that for the bank to be established it was necessary to corporatise the Postbank and there was no way to avoid that in terms of process.

Mr J de Lange (ANC) commented that it had become a trend over the last 15 years in the Portfolio on Communications that no clear distinction had been made between government’s functions in setting policy and in implementing what was set by the communications industry. In most instances, policies were not set by government. He wanted an explanation why government was excluded from laying down policies.

Ms Mazibuko asked for clarity on the difference between government drafting policy and government running the show.

The Chairperson asked the drafters to think about a single clause to encapsulate the policy framework-creation role of the Minister in order to clarify this for the Committee and they would engage with it at a subsequent meeting.

Ms Lefoka responded that the Chapter 4 issue of control and management of the Postbank was also covered by the Banks Act which set out the manner in which boards were put together and how they were to be managed.

Ms Mbekeni also emphasised that there was a stringent governance framework in place given the financial crisis that the banking sector had contributed to globally and this was impacting on legislation.

Mr de Lange commented that the financial crisis had made it imperative to consider how policies and legislation were crafted. The Committee had to be careful in the drafting the law so that in effect government had no role to formulate policy. Government had to be able to set policies that would not allow the sort of things that had happened during the global financial crisis to recur.

National Treasury Comments on South African Post Office Bill & South African Postbank Bill
Ms de Lille noted that National Treasury said that there was an overlap with banking provisions and this necessitated the need for a conflict of laws provision to be inserted in the Bill. The Committee was therefore taking the risk of creating a conflict with many other banking laws. Her suggestion was that they wait until National Treasury had concluded the legislation on dedicated banks before proceeding with the Bill.

Ms Kilian agreed that it was unwise to proceed with the Bill.

Mr de Lange commented that the comments from National Treasury were at odds with the Bill’s approach which envisaged a full bank. The Bill took an expansive view while Treasury had a limited view. It was important therefore for National Treasury to interact with Postbank and Post Office officials so that they could come up with a common position.

Mr Kholwane expressed disappointment that National Treasury had not made this submission earlier during the public hearings on 23 March 2010. They had therefore misled the Committee by initially presenting submissions that differed substantially to the comments that were now before the Committee. This was an indication that they did not take the Committee seriously.

Mr Buthelezi responded to the Committee by pointing out that the Bill had been a product of a lengthy legislative process spanning a period of eight years and the Department had been trying to propel it through Parliament in a period of 12 months. It would take much longer if the Bill had to be reconciled with other banking legislation and this would effectively delay the establishment of the Postbank by a long period.

The Chairperson concluded that the key issue they would have to resolve was that of the powers and functions of the bank. However it was also important to have an indication of the direction in which dedicated banks legislation was going. This was important for the decisions that the Committee needed to make on the Bill. This could therefore require them to set aside their deliberations until after the conclusion of the legislation on dedicated banks.

Meeting adjourned.

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