Meeting SummaryThe Committee resumed deliberations on the South African Post Office Bill [B2-2010]. The Director: Postal Policy, ICT Development of the Department of Communications presented the amendments made to the provisions of the Bill discussed during the deliberations held on 14 October 2010. The two remaining issues were the number of members of the Post Office board and the implications of the Bill for the subsidiary companies.
The Chief Executive Officer of the South African Post Office explained the composition of the SAPO board, the board committees, the Stamp Advisory Board and the boards of the courier and freight and document exchange subsidiary companies.
The Member from COPE was critical of large boards of directors. The purpose of the board was to provide strategic direction and act in an advisory capacity to management and should not be involved in operational matters. Members felt that it was difficult to decide on the optimum number of board members without a thorough understanding of the functions and responsibilities of the board. SAPO was requested to provide a document with details of the board members and who served on the various board committees by 22 October 2010.
The Committee discussed whether the Bill should include a general provision that made the legislation applicable to the subsidiaries of SAPO or specific references to the subsidiaries in the applicable clauses. The Committee had little understanding of the operations of the subsidiary companies and was unable to reach a decision. The Chief Executive Officer gave a general overview of the operation of the subsidiary companies. The Committee requested a document explaining the operation of the SAPO subsidiaries as well.
Briefing by the Department of Communications (DOC)
Mr Norman Munzhelele, Acting Deputy Director-General, DOC, introduced the delegates from the Department to the Committee. The Department had prepared a presentation document, which included the amendments to the Bill suggested by the Committee during the deliberations held on 14 October 2010.
Mr Willie Vukela, Director: Postal Policy, ICT Development, DOC, took the Committee through the amendments made to certain clauses in the Bill (see attached document).
Clause 2 (c) was deleted, in line with the deletion of Clause 4. Sub-clauses (e) and (f) of Clause 5 (1) were re-inserted into the Bill. The Committee had raised concerns that the provisions under Clause 9 (6) (a) would be too onerous. After considering the matter, the Department deleted Clause 9 (6) (a) and amended Clause 9 (6). Clauses 11 (3) (a) and (b) were amended and clauses (4) (a), (b) and (c) were inserted to correct the duplication of the provisions under Clause 14. Clause 13 (2) was amended to include the provisions contained in the earlier version of Clause 13 (2) (d). Clause 22 (2) was amended to provide for the concurrence of the SAPO board before staff was appointed by the Chief Executive Officer.
The Chairperson said that two issues remained to be resolved. The first issue was the number of members of the SAPO board specified in Clause 9 of the Bill. The Committee was not convinced of the need for 13 or more members of the board. The second matter was the extent by which the legislation would apply to the subsidiaries of the Post Office. The Committee had asked SAPO to explain the nature of the relationship between the various SAPO subsidiaries and their respective boards.
Ms Motshoanetsi Lefoka, Chief Executive Officer, SAPO explained that there was a main SAPO board as well as the boards of the courier and freight and document exchange (DOCEX) subsidiaries. The sub-committees of the SAPO board included the Audit Committee, the Risk Management Committee, the Human Relations and Transformation Committee and the Postbank Committee. The chairpersons of the committees sat on the Chairperson’s Committee. The chairpersons and members of the committees were executives and directors of SAPO. One member of the Postbank Committee was independent and was not a member of the SAPO board. The Stamp Advisory Committee advised the SAPO board on matters concerning philately and stamps. Members of the Stamp Advisory Committee were representatives of the Department of Public Service and Administration (DPSA), the DOC, the Department of Arts and Culture an the Philately Society of South Africa. The chairpersons of the courier and freight and DOCEX subsidiaries sat on the SAPO board. Executives and directors of SAPO were members of the subsidiary boards. All the boards had specific regulatory and compliance responsibilities. The boards of the subsidiary companies had audit and compliance sub-committees. The subsidiary companies were represented on the SAPO Risk Management Committee.
Ms J Killian (COPE) said that care had to be taken when an established entity was under consideration. The functions of the board were clear in the legislation. The board had to provide strategic direction and act in an advisory capacity. The board should not involve itself in operational matters. It was preferable to have fewer members of the board with the necessary skills and expertise and who were better paid. The Ministers of Communications and of Public Enterprises were currently reviewing the remuneration of board members. She was reluctant to support the concept of a large board. It was essential to identify the critical functions that had to be carried out by the board. Board members sitting on too many operational committees had to be avoided. In such cases, the members had to attend too many meetings, leaving little time to attend to the actual implementation of decisions. The focus should be on having a functional board. The entity should appointment persons with the necessary expertise to run operations.
Mr E Kholwane (ANC) said that it was difficult for the Committee to determine what the number of members of the board should be. He wondered what informed the size of the board. The Committee had to understand what work had to be done by the board to justify the number of members serving on it. He agreed that the purpose of the board was to provide strategic direction. The number of board members should not be determined by sentiment or a ‘thumb suck’. The Committee could consider the experience of other countries with a similar developmental agenda and any benchmarking exercise that had been done.
The Chairperson agreed with Mr Kholwane. The Committee had not requested a benchmarking exercise but was expecting a detailed breakdown of exactly who served on the various boards and sub-committees. The information would assist the Committee to understand the organisation of SAPO. The current Postbank Committee would soon be replaced by a Postbank board.
Ms Lefoka had misunderstood the nature of the information required by the Committee. She undertook to discuss the matter with the chairperson of the SAPO board and investigate the statutory requirements in terms of the King III corporate governance guidelines and the Companies Act. A written document could be forwarded to the Committee by Friday, 22 October 2010.
The Chairperson asked to what extent the Bill would apply to the SAPO subsidiaries if it became law and if the subsidiaries would be affected by the legislation.
Mr Alf Wiltz, Director: Legal Services, ICT Development, DOC advised that the relevant clause was Clause 6 (2). The clause made provision for the Act to apply to the subsidiary companies of SAPO as a whole. The Committee had questioned the clause and queried whether or not it would be better if specific provisions were included in the relevant clauses of the Bill. It was difficult to determine exactly which provisions should apply to the subsidiary companies. The Department decided that at least clauses 11 and 14, which dealt with conflicts of interest and the disclosure of interests of board members, should apply. Other clauses applicable to the subsidiaries were 23, 24, 25, 27, 28 and 30. The Department was not averse to including the original provision that made the entire Act applicable to the subsidiary companies.
The Chairperson understood that the option was either to include a general provision that the entire Act would apply to the subsidiaries or to include specific reference to the subsidiaries in certain clauses. He asked if the appointment of the boards of subsidiaries was guided by SAPO’s Articles of Association.
Ms Lefoka replied in the affirmative. The current legislation was applicable to the Articles of Association. The Articles of Association would have to be changed if the legislation was amended, to ensure that it was aligned to the new Act.
The Chairperson asked what the implications would be if the original provision was retained.
Mr Wiltz was of the opinion that the provisions concerning the appointment, resignation and removal of board members did not apply to the subsidiaries as these matters were specific to the relationship between the Minister and the SAPO board. The provisions should be included in the SAPO Articles of Association.
The Chairperson was still unclear on what the implications would be for the subsidiaries.
Mr Wiltz replied that the provisions would not apply to the subsidiary companies.
Mr Herman Smuts, Principal State Law Adviser, Office of the State Law Adviser said that it would be necessary to interpret which provisions would be applicable to the subsidiaries. It would be clearer if the applicable clauses were listed.
Mr Kholwane said that it was difficult for the Committee to determine how the subsidiaries would be affected because the Committee did not have a thorough understanding of how the subsidiaries operated. The Committee did not wish to pass legislation that would make it difficult for the subsidiaries to operate but was unable to determine how the companies concerned would be affected by the provisions of specific clauses.
The Chairperson said that the Committee only received one annual report and strategic plan from the Post Office and had little insight into the operation of the subsidiary companies. The Committee could not conduct any oversight over the subsidiaries and relied on SAPO, as the holding company, to exercise control. The Committee did not have sufficient information to carry out proper oversight and would be unaware if there were any serious problems in the subsidiary companies. He asked SAPO to provide more details of the operation of the subsidiary companies.
Ms Lefoka explained that the SAPO board was responsible for the appointment of members of the subsidiary boards, in consultation with the Minister. The subsidiary boards operated on the same principles as the SAPO board and were subject to the Public Finance Management Act (PFMA) and National Treasury Regulations. The subsidiary boards compiled individual strategic plans and budgets, for submission to the SAPO board. The approved plans and budgets were incorporated in the overall SAPO strategic plan and budget and presented to the Department and to the Committee. The subsidiary companies produced their own audited financial statements, which were incorporated with the SAPO statements and included in the SAPO annual report. The annual report included the financial statements of the subsidiaries as well as the combined group statements. Each subsidiary submitted its own quarterly performance reports to the SAPO board. Governance of the subsidiaries was in terms of the Articles of Association and the shareholder contract between SAPO and the subsidiary company. SAPO oversaw and monitored the performance of the subsidiary companies.
The Chairperson asked SAPO to submit a written document to the Committee, explaining the operation of the SAPO subsidiaries. The Committee had to decide if the Bill should contain a general reference to the subsidiaries or specific mention in the applicable clauses but would attempt to finalise the deliberations on the Bill during the following week.
The meeting was adjourned.
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