South African Reserve Bank Amendment Bill [B10-2010]: Adoption

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Finance Standing Committee

19 July 2010
Chairperson: Mr T Mufamadi (ANC)
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Meeting Summary

The Chairperson welcomed Members back after a lengthy constituency period. He commended the spirit of the World Cup and the uniformity that it had brought about to all South Africans, as well as the financial boost to the leisure institutions. He hoped this spirit of cooperation could continue to inspire future work, including the work in Parliament and the Committee.

The Chairperson summarised the procedure followed to date with the consideration of the South African Reserve Bank Amendment Bill (the Bill). Members discussed some concerns with the vetting processes for directors but eventually agreed that there was sufficient reason not to insist that directors appointed by shareholders and those appointed by government should be vetted by the same panel. Concerns were raised with regards to corporate governance and the vetting process of directors appointed by the President. Members also discussed whether it was necessary to define “fit and proper” in the Bill but agreed that this was adequately covered by case law.

The Committee proceeded to a clause by clause deliberation on the Bill. They agreed that the words “and monitoring” should be added to Clause 4A(f) and that the word 'monitoring' should also be added to Clause 4A(c)(ii). Apart from these additions, the Committee approved the Bill. The DA indicated that although it was not opposing the Bill, it would still need to be formally approved by the DA caucus. 

Meeting report

Chairperson’s opening remarks
The Chairperson welcomed Members back after their long constituency period. He commended the spirit of the World Cup and the uniformity that it had brought about to all South Africans, as well as the financial boost to the leisure industry. He hoped that the spirit that had galvanised the World Cup would continue to inspire all to work together and that this spirit of uniformity should guide Parliament and the Committee, as leaders of society.

Committee composition
Dr D Rabie (DA) tendered apologies for his colleagues Dr D George and Mr M Swart, and indicated that he would be standing in as the Democratic Alliance representative for this meeting.

South African Reserve Bank Amendment Bill [B10-2010]: Consideration
The Chairperson recapped the previous meetings’ discussions of the South African Reserve Bank Amendment Bill  (the Bill). He noted that presentations had been made by the South African Reserve Bank (SARB) and recapped the discussions on the Bill, as well as making reference to submission made during the public hearings as well as the responses by the SARB. He reminded Members that the Minister of Finance, Hon Pravin Ghordin, had stated that the amendments were a stop-gap measure in the intervention of the management of the affairs of the SARB. Broader discussions were still to take place at Committee level.

The Chairperson asked Committee members to reflect on the submissions and the presentations that had been submitted by the National Treasury (NT)  and the SARB and advise the Committee if there were any additional changes that should be made. Before the committee considered the Bill clause by clause, he felt that the Committee should hold a general discussion on the impact of the Bill.

Mr S Swart (ACDP) also commended the success of the World Cup for South Africa and added that the British tabloids should definitely apologise for their remarks.

Mr Swart wanted to focus on the issue of corporate governance. Although he was in general agreement with the broad tenor of the bill, he felt that the clause relating to the appointment of directors needed greater clarification and an explanation. He did not think that this issue had been adequately dealt with during the responses submitted to the Committee. He requested that the Committee should again study the submission by the Institute for Democracy in South Africa (IDASA) and noted that greater clarification was necessary as to why there should be additional directors appointed by the President. This, in his view, would bring a new dimension, since those directors would not be vetted by the panel. This would distinguish them from the directors that would be elected by the shareholders.

Mr Swart reminded the Committee that the SARB board of directors comprised 14 directors, seven of whom were appointed by government, and the other seven by private shareholders. The intention behind the amendment was to increase government control by adding one more director appointed by government, thus having the President appoint eight directors.

He noted that in the past, there had been a problem in relation to corporate governance in that virtually anybody could be appointed as an SARB director by private shareholders. This, however, had not been the case with the government-appointed directors, as government had always adhered to corporate governance requirements.

Mr Swart said the amendments would be a way to introduce a mechanism whereby the same requirements would apply to directors appointed to private shareholders. The panel mentioned in the amendment would be a way of ensuring this.

Other Members of the Committee agreed that the panel would vet directors appointed by private shareholders.

Mr Swart then said that he understood the role of the SARB was to retain independence. He referred to the Chapter 9 Constitutional institutions and said that the appointment of the SARB directors to some extent resembled appointments to the Chapter 9 institutions. He noted that the Chapter 9 appointments always included a vetting process, and for this reason asked again why the panel should not vet all director appointments made by the President. The drafters appeared to have assumed that the directors appointed by Government would be vetted by the President, the Board and the Minister of Finance, as all those parties needed to be consulted.  However, he said that there could be unintended consequences. He also questioned whether it was proper to have a panel also vetting the head of State's choice when appointing directors to the Board.

Ms Z Dlamini-Dubazana (ANC) referred to page 4 of the Bill, where the term “fit and proper” appeared. She wanted to know what skills and experiences would be regarded as making a person “fit and proper” and what the vetting would take into account.

Ms Dlamini-Dubazana also referred to Clause 4A(c)(iv) of the Bill, on page 6, relating to the functions and powers of the Board and the general remuneration policy of the SARB. She said that there needed to be an indication that the general remuneration policy of the bank should be reviewed by the Board, in consultation with all the relevant stakeholders.

Ms Dlamini-Dubazana also said, in regard to Clause 4A(f), that there needed to be a monitoring tool.

Ms Dlamini-Dubazana thought that Clause 7 was still not clear as to when the shareholders acquired their shares, and whether this had taken place before the coming into operation of the principal Act. She felt that this disclosure was vital.

The Chairperson said that it was important to preserve the independence of the SARB, and that Parliament held this responsibility. The Chairperson felt that the consultation process should not result in undermining the independence of the SARB.

Ms Dlamini-Dubazana said that the President’s prerogative to appoint directors should not be questioned by anyone, including the Committee.

Ms N Sibhidla (ANC) said that anybody who had been appointed by government as a director would already have been vetted. She added that it would seem unnecessary to go through the same system twice.

Mr Swart questioned whether the nominees should not all appear before the panel before being vetted at a later stage by the President.

The Chairperson then called for Members to consider the Bill, clause by clause.

Clauses 1 to 3
Members agreed with all clauses contained in pages 1 to 3 and page 5 of the Bill.

Ms Dlamini-Dubazana requested whether it would not be necessary to include a definition as to what was regarded as “fit and proper” with regard to skills and experience.

However, other Committee members agreed that this was not necessary, saying that this had already been extensively defined by case law.

Clause 4
The Committee discussed the wording of Clause 4.

Ms Dlamini-Dubazana requested that that the wording 'and monitoring' be added to Clause 4A(f), on page 6 of the Bill.

Mr D Van Rooyen (ANC) added that the term 'monitoring' also needed to added to Clause 4A(c)(ii). He noted that this was vital for the linking of the Board's performance to the Committee's oversight role.

The Committee agreed to both additions.  

Remainder of Bill
The Committee agreed with the wording of all remaining clauses set out on pages 7 to 10 of the Bill.

Mr Rabie said that the DA needed to pass the legislation in its caucus first, but that the DA was definitely not opposing the Bill.

Ms Dlamini-Dubazana noted that the DA would, as a matter of practice, agree to legislation through its caucus first.

The Chairperson noted that the Committee had adopted the Bill, subject to the additions just proposed.

The meeting was adjourned.


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