South African Post Office Bill [B2-2010]: deliberations

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Communications

13 September 2010
Chairperson: Mr I Vadi (ANC)
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Meeting Summary

The Committee discussed whether the Bill should be renamed the South African Post Office Limited Bill since SAPO was a company. Members were told that according to the current Companies Act, SAPO was classified as a public company. However, according to the new Companies Act, which was enacted but not yet in operation, it would be classified as a State-Owned Enterprise (SOE). The Department suggested that transitional arrangements be put in place for when the new Companies Act came into operation.

The Committee amended the definition for “family member” and the SAPO proposed the inclusion of “universal services” in the definitions clause. They noted that clause 2(c), which spoke of the separation of accounts of the Post Office between reserved and unreserved postal services, was a duplication of clause 4. There was also a question whether this clause should be included in the Postal Services Act rather than the SAPO Bill. The Clause 2 title was amended from “Purposes of the Act” to “Objects of the Act”.

Clause 5(g) spoke about ensuring the needs of disabled persons were taken into account in the provision of postal services. Members said the clause was too broad and the clause should be reformulated. Members questioned the need for sub-clause 6(2)(b). The Committee could not think of any subsidiary the clause would apply to. There was a concern about clause 8(1) which stated, “The Minister may with the concurrence of the Minister of Finance, out of money appropriated by Parliament for the purpose, annually grant financial support to the Post Office in respect of normal expenditure”. Why would the Minister, with the concurrence of the Minister of Finance grant support from money that was appropriated by Parliament to SAPO? If the money was approved by Parliament, then it was granted already. The Committee questioned whether there was a need for 16 SAPO board members or if this number should be reduced.


The Committee discussed clause 11 which looked at persons disqualified from membership of the Board. The same principles were discussed in the Postbank Bill. The Committee agreed that these principles would be carried over to this clause. Further, the law had to be clear that they could not have any interest in the sector. During deliberations on clause 12, it was decided that one of the requirements for membership to the Board was that members had to have certain expertise in banking. Members told the DoC to model clauses 1 to 14 along the lines of what had been done for the Postbank Bill.


Meeting report

South African Post Office Bill [B2-2010]: informal deliberations

Title
The Chairperson noted that the title of the Bill might have to be changed to the South African Post Office Limited Bill. He asked if SAPO and the Department of Communications (DoC) wanted to change the name of the Bill to the South African Post Office Limited Bill. What were the legal implications?

Ms Mandiza Mbekeni, Legal Executive: SAPO, explained that the according to the current Companies Act, SAPO was classified as a public company. This was why the company was seen as “Ltd”. However, according to the new Companies Act, which was enacted but not yet in operation, it was going to be classified as a State-Owned Enterprise (SOE). She was not sure if SAPO would keep the “Ltd” title under the new Act.

Ms J Killian (COPE) wondered how the Committee would resolve this issue. Members had to scrutinise this matter very closely. If one looked at the Definitions in the Bill, it referred to the Companies Act of 1973. The new Act had been passed but was not promulgated yet. What impact would the new Companies Act have on the Bill?

Mr Alf Wiltz, Director: Legal Services (DoC), answered that the DoC had discussed this with the Committee many times during deliberations on the South African Postbank Bill, that the Bill should not refer to the new Companies Act yet. They had to stick with the current Companies Act for the time being. He did not think it was necessary to take the matter further, as it was the position that was already adopted by the Committee during previous discussion on the South African Postbank Bill. Therefore, it was unnecessary to anticipate what the future relationships would look like as long as the Bill worked under the current Companies Act. In time, the DoC would come back to the Committee with one omnibus law to ensure that all the legislation was aligned with the new Companies Act. The law catered for transitional arrangements.

Ms Killian said that she was more comfortable having transitional arrangements in place. The Committee was in a difficult position as they could not legislate for the future. The Companies Act had already been passed; it only had to be promulgated.

Mr N van den Berg (DA) asked if SAPO could explain where the relationship between SAPO and the South African Postbank would be stipulated in SAPO Bill.

Ms Motshoanetsi Lefoka, Chief Executive Officer: SAPO, replied that SAPO was made up of subsidiaries. The Postbank was going to be one of the subsidiary companies of SAPO. SAPO was looking at formulating a logistics arm for the financial services bank that was just set up in the Postbank Bill. SAPO would provide the Postbank with infrastructure for the bank to be able to function. This would be governed by a Service Level Agreement (SLA). SAPO was going to be, on behalf of the government as the shareholder, the sole member of the Postbank. SAPO would ask for the Postbank to be exempted from being regulated under the Banks Act.

Clause 1 Definitions
Ms Killian noted that changes had been made to the definition of “family member” in the Postbank Bill. She thought the same changes should be made to the definition in SAPO Bill.

The Chairperson noted that the definition would be amended to mimic the one in the Postbank Bill.

Mr S Kholwane (ANC) asked why the term “Director-General” was defined in the clause if the term was not used in the Bill.

The Chairperson wondered if it was necessary to define the term in the Bill.

Mr Herman Smuts, Principal State Law Adviser: Office of the Chief State Law Adviser, replied that a definition was usually included in the Bill to clarify the way it was used in the context of the Bill. He would look into the matter and clarify if there was a need for the definition.

Mr van den Berg asked if all the discussions on definitions in the Postbank Bill would be carried through to the SAPO Bill. 

Mr Wiltz answered that this was a good question to ask. The SAPO Bill contained governance provisions that were similar to the ones included in the Postbank Bill. It begged the question whether the Committee wanted to revisit every definition and discuss them at length or, if the Committee would accept that many of the same issues had already been discussed. This was a decision only the Committee could make. If the Committee agreed that many of the issues had already been discussed, the DoC could be mandated to align the SAPO Bill with the amendments made to the South African Postbank Bill. 

Ms R Morutoa (ANC) said she did not feel comfortable with the way the Committee wanted to define “family member”, especially the inclusion of “a person living with that person as if they were married to each other”.

Mr Willie Vukela, Director: Legal Services (DoC), told Members that definitions in bills were usually standard. In the Postbank Bill deliberations, the definition for “family member” was amended. The DoC needed guidance on what they had to do. The definition could be amended or revised to be in line with what Members wanted.

Ms Morutoa remembered that this definition had been highlighted by Adv J De Lange (ANC). She knew it was a standard definition, but she wanted someone to explain what the legal implications were of the definition.

Mr Smuts answered that the Committee had to look at the definition in the context of the Bill. For example, the term “family member” was used in the clause dealing with fiduciary duties. In this clause certain acts were prohibited, which included acts by family members. Therefore, it made sense to expand the definition of family member to include persons that were living with each other as if they were married.

Ms Morutoa said that she was still bothered by the term “as if they were married”.

Mr Vukela replied that there was information that could be accessed because the proximity of two people living with one another. In trying to protect the interest of the company, the definition should be included.

The Chairperson said the Committee had to decide if they wanted to include the definition of “family member” in the Postbank Bill in the SAPO Bill. He thought the definition in the Postbank Bill was much clearer.

The Committee agreed that the definition would be migrated from the Postbank Bill to the SAPO Bill.

Ms Lefoka requested that the definition of “universal service” be included in the clause. The definition would be used as per the Green Paper on Postal Policy. It defined the obligations SAPO had regarding postal services. The definition would state that, “The obligatory provision of postal services throughout the territory to which the obligation applies”. This implied accessibility to collection by which mail being sent could be put into the mail network as well as delivered to every address in the territory. It also implied affordable prices and good quality of services.

The Chairperson said the Committee would consider the proposal. He asked the DoC and SAPO to formulate a definition that would be considered by the Committee the next time they met.

Mr Vukela replied that the formulation was contained in the Green Paper policy. The DoC would modernise it and come back to the Committee.

Clause 2 Purpose of Act
Mr Kholwane wondered if clause 2(c) really defined the purpose of the Bill.

Mr Vukela replied that clause 2(c) defined one of the functions of the Bill. SAPO was a monopoly player and the government had to subsidise its losses. Cognisant of competition legislation, SAPO operated in a space that was highly contested. It was also a company with a number of subsidiaries. It was important for the government to ensure that its interests were protected. This was why it wanted to see two separate accounting models for SAPO. It was uncompetitive and illegal to cross-subsidise from the public coffers to the competition environment. One could only subsidise from a competition space to a public space, which was seen as a reserved market. Even the regulator, ICASA, made submissions on this saying they wanted to see two accounting models. SAPO had to account for what the government gave it as well as what it received from its competitive environment.

Mr Kholwane said that he understood what the clause meant, but it seemed it was being repeated in clause 4. He also raised the issue because he thought ICASA was regulating these matters. The question was whether the Committee should include it under “Purpose of the Act” if it was ICASA’s responsibility.

Ms Lefoka replied that the issue of separation of accounts also stemmed from the Postal Services Act. SAPO was in full support of the clause. However, draft regulations from ICASA on the separation of accounts were currently being drawn up. The intention was to implement them in the near future. ICASA and SAPO had worked on the “Regulated Financial Statements”, which spoke to how SAPO should be accounting to ICASA. She was concerned that ICASA was not at the meeting, but as far as SAPO was concerned, the matter had already been taken care of and would become redundant in the Bill.

Mr Wiltz, DoC, clarified that clause 2(c) indicated what the Bill was about, but the obligation was contained in clause 4. Therefore, clause 4 was necessary.

Ms Lefoka, SAPO, added that clause 4 should have been sitting in the Postal Services Act because this was where ICASA drew its mandate and the technicalities of how it instituted the separation of accounts. SAPO was not questioning whether the clause was required; they just thought it was sitting in the wrong place. It was supposed to be included in the Postal Services Act.

Mr Wiltz noted that SAPO conceded that there was a need for clause 4, even if it was in a different Act. This clause was proposed by ICASA. The DoC would rethink the position of the clause depending on what ICASA wanted. If ICASA said the clause was necessary, the DoC would support them. The clause was regulatory in nature, but it seemed to be more of an accounting problem, which was a corporate issue. The DoC thought the clause could belong in the SAPO Bill as well.

The Chairperson instructed DoC and SAPO to discuss the matter and bring the finalised version to the Committee. He also asked if the title of the clause could be changed from “Purpose of the Act” to “Objects of the Act”.

Clause 3 Continued existence of Post Office
The Chairperson noted that no changes or concerns were raised.

Clause 4 Separation of accounts
The Chairperson noted that the clause had already been discussed.

Clause 5 Duties of Post Office
Mr van den Berg said that he understood what clause 5(g) meant but there were a wide range of people that were disabled. It was wonderful that SAPO wanted to take care of people but how would this sub-clause be implemented on the ground? The clause was too broad: “ensure that the needs of disabled persons are taken into account in the provision of postal services”.

Mr Vukela, DoC, commended SAPO for wanting to include this provision in the clause. Every individual had to be able to access post offices. This provision ensured this would happen. SAPO had to ensure that post boxes were accessible to everyone. This was the key to universal postal service.

Ms Killian added that if the clause said “must”, it meant that the DoC would have to provide SAPO with the budget needed for the function. She was aware that the DoC had budgetary constraints. SAPO had to focus on providing universal postal service. The idea would have been wonderful if South Africa was a rich country. If the clause said “must”, it had to be within reasonable means.

Mr Vukela asked the Committee what type of post office they wanted to have in a country that was still developing? He wondered if the Committee wanted to discriminate against persons with disabilities.

The Chairperson noted that SAPO had a legal obligation to provide accessible post offices and boxes to the public. He asked if civil action could be taken against SAPO if these needs were not met.

Ms Lefoka answered in the affirmative.

Mr Vukela added that the postal service was a basic right. The government had to protect this right for fundamental reasons. If the Committee removed this basic right, there would be challenges. It was a question of access.

Ms Morutoa was concerned about the similarity of sub-clauses 5(e) and 5(f).

Mr Kholwane added that some of the sub-clauses had to be reworked as they covered the same issues. Some clauses seemed to overlap. 

The Chairperson asked the DoC to look at these and return with a reformulated version for approval.

Clause 6 Powers of Post Office
The Chairperson asked what sub-clause 6(2)(b) meant.

Mr Smuts answered that it meant that the Bill would also apply to subsidiaries of SAPO, while SAPO was the sole member and shareholder of those subsidiaries.

Adv J De Lange (ANC) noted that the sub-clause meant that any changes made to the SAPO Bill would apply to the Postbank. He did not see the logic in this clause. He could not think of a single reason why the Bill had to apply to the Postbank.

Ms Lefoka replied that SAPO had other subsidiary companies, but she did not see how Bill would impact on the Postbank.

Mr Wiltz answered that Adv de Lange raised a valid point. The sub-clause 6(2)(b) had to include a provision similar to sub-clause 6(2)(a) which would say something like “apart from the South African Postbank, this Act applies”.

Adv De Lange said that the DoC and SAPO still had to tell the Committee which subsidiary they wanted the clause to apply to. The Committee could not think of any subsidiary the clause would apply to. If the DoC and SAPO had a subsidiary in mind they had to tell the Committee so members could evaluate the proposal. If the sub-clause did not apply to any subsidiary, it should not be included. He did not think that sub-clause 6(2)(a) had to be included in the clause. He had never seen such a clause.

Mr Wiltz answered that there were two other subsidiaries that the sub-clause could apply to. The question was whether the Committee wanted to create similar governance laws for each of these subsidiaries. He thought the Committee would want to have similar governance principles that could apply to the subsidiaries.

Mr Kholwane said that if the DoC and SAPO wanted to include the subsidiaries in the sub-clause, they had to be more specific about which subsidiaries they wanted to include.

The Chairperson stated that this clause would be flagged. The DoC and SAPO had to look at the clause again. He asked them to be more specific about to which subsidiaries the sub-clause would apply.

Clause 7 Performance agreement of Post Office
The Chairperson noted that no changes or concerns were raised.

Clause 8 Government support to Post Office and loans by Post Office
Ms Killian said she was concerned about clause 8(1) which stated, “The Minister may with the concurrence of the Minister of Finance, out of money appropriated by Parliament for the purpose, annually grant financial support to the Post Office in respect of normal expenditure”. She understood that this was a sort of general wording that was being used, but she felt more comfortable with, “The Minister must with the concurrence of the Minister of Finance…”. She thought the Committee was creating a vehicle that it did not want to “feed”. The government wanted SAPO to do so many things, yet the clause said that the Minister may appropriate money to SAPO. She was very concerned about the wording of the clause.

Adv De Lange added that he had never seen a clause structured this way. The government had never said that the Minister had to hand over money that Parliament appropriated to that entity. Why would they say this now? Once the money was appropriated, it had to go to the Post Office. Why would the Minister, with the concurrence of the Minister of Finance grant support from money that was appropriated by Parliament to SAPO? If the money was approved by Parliament, then it was granted already. He did not understand this clause.

Mr Smuts explained that the use of “may” meant that the clause was an enabling clause that authorised the Minister to take a certain action. If the Committee wanted to make it an obligation, “may” could be amended to “must”. He suggested that the DoC and himself would come up with something more precise.

Mr Wiltz added that the clause was taken from clause 29 of the Postal Services Act of 1979. The clause enabled the Minister to ensure that SAPO received the money granted by Parliament. The DoC could revisit this clause and come back to the Committee.

Adv De Lange warned the Committee that they had to be careful of Apartheid legislation. Apartheid legislation worked from a different legal premise, where Parliament was sovereign and the Ministers were seen as guards. Presently, there was a rule of law based system. The clause created discretion for the Minister to override the appropriation from Parliament. He did not see why this clause was needed. The “usual” clause was needed instead, which said that the money appropriated by Parliament for that institution went to that institution. Once the Committee started saying that the Minister “may” grant financial support, it created a buffer between the entity and Parliament. This clause was just inappropriate. Under Apartheid rule, the Minister would have played this role.

The Chairperson asked the DoC and Mr Smuts to clean up this clause.

Clause 9 Board of Post Office
The Chairperson noted that having 16 members on SAPO Board was too much. He wondered if a Board this large was needed.

Ms Lefoka answered that the only limitation if the Board was reduced was that it would hinder the number of committees and some of the independence that was required for some of the committees within the Board. SAPO requested that the number of Board members not be reduced.

Adv De Lange found Ms Lefoka’s argument weak. The number of Board members could not be based on the number of committees needed within the Board. He wondered how much the Board members were paid.

Mr Kholwane added that the Committee needed to look at the performance of the Board to see if there was value for money. SAPO and the DoC had to come back to the Committee with recommendations for the Board.

Adv De Lange was concerned that the Bill did not say anything about the accountability of the two members of SAPO Board that would sit on the Postbank Board as well. He suggested that a provision for this be included in the SAPO Bill. He wanted to flag this as an issue that needed to be discussed urgently.

The Chairperson asked SAPO to provide the Committee with the information about SAPO Board members, the performance of the Board and how much remuneration they received. The Committee needed a full picture of the costs the Board was incurring.

Clause 10 Functions of Board
Adv De Lange stated that the Committee might have to look at the functions of the Board to see if the current model they were using was the correct model. He thought that the Committee had to look at the Board in a very different way because it was operating more and more through other entities. He was worried that a lot of the thinking by the Committee and the DoC was about SAPO under Apartheid. Some of the things could be good, but some of them were bad. Until the Committee looked at the subsidiaries and how they had to be accountable to the Board, not indirectly but in law, then only could they address the functions of the Board. He wanted to flag this issue.

The Chairperson noted that the clause was flagged.

Clause 11 Persons disqualified from membership of Board
The Chairperson noted that the Committee and the DoC had had good discussions about persons disqualified from membership of the Board when they deliberated on the Postbank Bill. He asked if the Committee was comfortable with those principles in the Postbank Bill being migrated to the SAPO Bill.

The Committee agreed. He asked the DoC to come back to the Committee with a proposal.

Mr Wiltz said the DoC needed the Committee’s guidance on the conflict of interest principle as it should apply to SAPO. There was a ‘no interest’ principle in the Postbank Bill but there could be members on the SAPO Board that had vested rights under the Memorandum and Articles of Association. He did know for certain if there were members on the SAPO Board that had interests in the sector but the current Articles said that members could have up to 10% interest in another postal company. The DoC needed to know how to deal with this issue. Clause 11(g) tried to cater for vested rights and said the rights issue could be determined in the Articles. He did not think this was what the Committee wanted. He wondered if the vested rights issue would require a transitional provision that said by the time the new Board came in, they were not allowed to have any interests in the sector at all. Did the Committee require that current members had to divest themselves of all their interests within six months of the Act being enacted? He wanted to know how the DoC had to approach the matter practically.

Adv De Lange replied that the Committee needed to look at the matter carefully. The answer was in transitional arrangements. The Committee had to make a distinction between someone joining the Board that had interests and someone already on the Board. There had to be two different scenarios. The one scenario is where Members were already on the Board. The other scenario was for new Members coming into the Board. The law had to be clear that they could not have any interest in the sector. Even if the present Articles allowed for this, it had to be stopped. He understood that members could not divest themselves of their interests immediately, there still had to be a transitional arrangement. However, the Committee had to be clear that members could not have any interest in SAPO at all. This also had to be applied to tenders.

The Chairperson told the DoC to provide the Committee with the necessary information so the Committee could decide what to do.

Clause 12 Appointment of non-executive members of Board
The Chairperson addressed sub-clause 12(4). He asked if expertise in banking should also be a consideration for appointment to the Board.

Mr Wiltz answered that the DoC had to take
cognisance of the whole “fit and proper” issue. He wondered to what extent all Board members should be fit and proper as contemplated in the Banks Act. This was a challenge that had to be looked at.

Adv De Lange said the clause also had to be amended to cater for subsidiaries.

The Chairperson asked if it was a requirement for members of the Board to be a South African Citizen.

Ms Lefoka said it was not.

The Chairperson noted that this could be included in the clause.

Mr Kholwane requested that the Chairperson adjourn the meeting because Members needed to be in the House for a plenary session at 2pm.

Adv De Lange said that the Committee needed to discuss clause 12(7) further. The Committee had to be convinced that it was good governance for trade unions to be on the Board. He asked if any other country did this. It seemed to be a huge conflict of interest. Trade unions had to be entitled to information so they could make decisions but they did not necessarily have to be on the Board. Rationally, he did not understand why trade unions would want to be on the Board anyway. The Committee needed more information on this.

Clause 13 Resignation, removal from office & vacancies; Clause 14 Fiduciary duties & disclosure
The Chairperson told the DoC to model clauses 1-14 along the lines of what was done for the Postbank Bill. He asked if he could say, provisionally, that the Committee had worked up until Clause 14.

The Committee replied in the affirmative.

The meeting was adjourned.

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