Davidson legislative proposal to regulate the business interests of State employees: briefing & Committee Report adoption on Lee legislative proposal to repeal the SA Boxing Act

Meeting report

Chairperson’s opening remarks
The Chairperson welcomed a new Member, Ms J Terblanche (DA), who would be replacing Ms Dreyer on the Committee.

He noted that the Minutes of 16 March had not yet been prepared for adoption.

Davidson Legislative proposal to regulate the business interests of State employees
Mr I Davidson presented his legislative proposal. The object of the proposal was to restrict the business interests of employees of the national, provincial and local spheres of government, including entities, as well as members of their controlling bodies, whenever such entities were conducting business with the State or public entities, and also to require such employees to disclose their interest.

He stressed that the proposal was put in concept only, and was not averse to making amendments to it, providing that it upheld the important principles. A recent report of the Public Service Commission (PSC) highlighted the fact that corruption was becoming endemic in the public service. The PSC’s 2010 Financial Report had found that 1 204 financial misconduct cases were reported as having been committed in departments during 2008/09, the highest number for seven years. In addition, 1 430 complaints of corruption were reported to the PSC’s national Anti-Corruption Hotline, and were referred back to departments for feedback. A further PSC report in December 2010, on the Financial Disclosure Framework for 2009/10, found that only 45% of senior managers in national and provincial departments had submitted their financial disclosure forms to the PSC by the required date of 31 May 2010.

Mr Davidson noted that the key driver of corruption was the lack of restrictions on State employees doing business with the State. State employees who had a financial interest in companies that tendered for goods and services had a clear conflict of interest, yet this had never been regulated. His legislative proposal sought to do so. He proposed that national, provincial and local government employees and their families could be prohibited from directly or indirectly holding more than 5% of shares, stock, membership, or other interest in an entity that did business with those governments, unless prior approval was given, in accordance with certain set criteria. He further proposed that before the government entered any contract with an entity for the supply of goods and services, the entity must provide affidavits disclosing whether it was owned or part owned by employees of that particular sphere of government. All government employees would be required to disclose their business interests at prescribed intervals.

For the purpose of the proposal, he noted that “business interests” could include either a right or entitlement to share in profits, revenue or assets of an entity, or a real or personal right in property, or a right to remuneration or any other private gain or benefit. This also included any interest or potential interest in rights, in the categories stated, that were acquired through an intermediary, and any potential interest.

Mr Davidson said that a core feature of his proposal was the disclosure of business interests of employees and family members of employees in entities conducting business with the State. There was dual responsibility. The entity itself would have to provide an affidavit, in a prescribed way, disclosing any business interest that an employee or a family member had. The employee would also have to disclose, in the prescribed manner, any business interest of the employee or family member in an entity conducting business with the State.

Mr Davidson further stressed that he had proposed that an employee would not be allowed to have a business interest, either personally or through family members or partners or business associates, if this would result in direct or indirect control of more than 5% of the shares, stock, membership or other interest of that entity. That would not apply to contracts that had already been concluded.

He noted that failure by an entity to disclose any interest of a State employee in that entity, provided that it was aware or should reasonably have been aware of the interest, would enable the State to cancel the contract and claim damages. If an employee failed to make the necessary disclosure, he or she could be exposed to disciplinary action.

Mr Davidson concluded that a similar bill was enacted in the Western Cape recently and was hailed by the media as a positive step forward in trying to contain employee corruption.

Discussion
Ms J Kilian (COPE) expressed support for the intention of the proposed legislation. She asked if Mr Davidson was contemplating a special unit, and, if so, where it would be placed.

Mr Davidson responded that it would not be necessary to create bureaucracy through a special unit. Responsibility was placed on both the entity and the individual to declare their interests. If a person failed to disclose, then there would be prescribed disciplinary procedures, as well as possibly damages resulting from cancellation of the contract. The legislation would be self-enforcing, so no bureaucracy was required.

Ms Kilian noted that it was one of the most serious derelictions of government that so far no substantive action had ever been taken for breaches by officials of the Public Finance Management Act (PFMA). The trend of the public service reports was very disconcerting. He asked if this legislation proposed to criminalise non-compliance, and whether those companies who failed to comply might be able to be black-listed or prevented from again conducting business with the State. If this proposal succeeded, it could stem the tide of corruption. She asked for clarity on how it would be operate in practice.

Mr Davidson replied that it might be possible to draw a list of people or business entities that contravened his proposed legislation, but it was really intended to be self-enforcing, by requiring use of affidavits and disclosure, and this should be sufficient.

Ms B Tinto (ANC) asked who would be regarded as “family” for the purposes of the State employees. 

Mr Davidson said there was a proposed definition for “family member”, but he stressed again that this was a concept document only, and he would not be averse to discussing changes.

The Chairperson clarified that Ms Tinto’s request referred to extended family.

Ms M Kubayi (ANC) asked Mr Davidson whether his proposals were not currently covered by any other legislation, and asked whether he was trying to close a gap, or to improve enforcement of any other measures.

Mr Davidson responded that there was no current legislation that was quite as specific. The Financial Disclosure Framework was a separate piece of legislation, and was merely used to illustrate how people could ignore legislation in place and try to avoid it in order to indulge in corrupt practices. The main point about his proposed legislation was that it was self enforcing, in the sense that if people did not make disclosure, and were then caught, this carried severe ramifications both for the individual and for the entity.

Ms Kubayi asked whether Mr Davidson had checked whether this would be constitutionally sound.

Mr Davidson reiterated that the Western Cape had already passed similar legislation. He was advised that an investigation into constitutionality done on this had shown no constitutional infractions, and there had been no challenges against it.

Ms A van Wyk (ANC) said that other legislation dealing with family members would normally limit this to mean immediate family, such as spouse and children, but did not extend to siblings, which his proposal had done. She asked why he had sought to extend this.

Mr Davidson said that this was done because it was very easy, for example, to put a business in a brother’s name, then pay over any financial gain. He had tried to prohibit this practice as far as possible, to make it more difficult also for family members who were employed in a business, or owned a part of it, to do business with the State where there was a conflict of interest.

Ms van Wyk asked for clarification as to whether the intention of his proposal was to restrict State officials with other business interests from doing business with the State entities, or to try to outlaw it completely.

Mr Davidson responded that he was trying to make it more difficult for them to do so. The State would, if it passed this legislation, be expressing a clear intention that public servants should not have a conflict of interest, and benefiting from State contracts, on top of their normal employment, was unacceptable. It would put in place a mechanism that could restrict this behaviour as far as possible.

Ms van Wyk asked how Mr Davidson had arrived at the figure of 5% of shares, pointing out that 5% of shares in one company might actually be worth far more than 50% in another.

Mr Davidson said that 5% was just an arbitrary figure, which could amount to a meaningful stream of income, but that the detail on this could be debated.

Draft Committee Report on Lee Legislative Proposal to repeal the South African Boxing Act No 11 of 2001
The draft Committee Recommendation Report was tabled. The Chairperson noted that this recorded that the Committee, having considered the legislative proposal and consulted with the Portfolio Committee on Sport and Recreation and the Department of Sport and Recreation, recommended that permission not be granted to the member to proceed with his proposed legislative proposal. The Committee made further observations in regard to this recommendation. Firstly, the proposal by Mr Lee pre-empted legislation that was soon to be introduced by the Department of Sport and Recreation. The Department of Sport and Recreation (SRSA) had told the Committee that it anticipated that the South African Boxing Act Repeal Bill would be submitted for consideration to Cabinet in July 2011, and to Parliament in October 2011. Because of this, the Committee was of the view that Mr Lee’s legislative proposal was not feasible and should not proceed.

The draft Report was adopted by the Committee, with no objections.

The Chairperson noted that the Report would be forwarded to the Office of the Speaker, to be placed on the ATC.

Draft Committee Report on Davidson legislative proposal to amend the Executive Members’ Ethics Act No 82 of 1998
The Chairperson tabled the Committee’s draft Recommendation Report.

This recoded that the Committee, having considered the legislative proposal and having consulted with the Presidency, the Department of Justice and Constitutional Development, the Portfolio Committee on Justice and Constitutional Development, and the Joint Committee on Ethics and Member’s Interests, recommended that permission not be granted to the member to proceed with his proposed legislation.

The Committee observed that this legislative proposal pre-empted legislation soon to be introduced by the Department of Justice and Constitutional Development, in the form of the Executive Members’ Ethics Amendment Bill. The Department of Justice and Constitutional Development had confirmed that Cabinet, in November 2010, had approved the principle underlying this Bill, and also confirmed that the Department’s Amendment Bill would probably be submitted to Cabinet for final approval in March 2011, once it had been published for public comment, and would be submitted to Parliament in April 2011.  For these reasons, the committee felt that the proposal by Mr Davidson should not proceed.

Discussion
Mr P Pretorius (DA) commented that under point 3 the Committee should stipulate the dates given by the Department, and should reserve the right to act if, after a month or two, nothing had been forthcoming from that Department.

The Chairperson responded that that became the responsibility of the Speaker, but did not relinquish the Committee of its own responsibility to check on the matter.

Ms van Wyk added that it also became the responsibility of the relevant portfolio committee, so this Committee could only make enquiries on progress.

Ms Kubayi agreed with Ms van Wyk, adding that once a report was published in the ATC, the House decision was binding, and the matter was no longer the direct responsibility of this Committee.

Ms J Terblanche (DA) thought that the Committee would still have the right to follow up on the matter. She pointed out that the Department had claimed that the legislation would be submitted to Cabinet probably in March 2011; it was now 23 March yet no report on this had appeared in the ATC. She questioned whether there was any point in putting a time frame on something, but ignoring it. She proposed that the Report could be adopted, but that the Committee should follow up on when the matter would be tabled.

The Chairperson agreed with Members, but added that the Committee could also bring to the attention of the Office of the Speaker anything that was not following procedures or promises.

Ms Kubayi felt that the wording in the draft Report had referred to final approval of Cabinet and Parliament, and thought that there was presently no cause for concern. The Committee would be able to track progress through the party Whips.

Mr Pretorius agreed, but had wished the Committee to bear in mind that it still had the right to ask questions.

The draft Report was adopted. 

Draft Committee Report on Greyling Proposal to regulate private funding of political parties
The Chairperson tabled the draft Recommendation Report on the Greyling proposal to regulate private funding of political parties.

He noted that there had been some public interest in the Committee’s decision to reject Hon Greyling’s proposal to regulate private funding of political parties. The Chairperson had received a letter from the Institute for Democracy in South Africa (IDASA), questioning the decision of the Committee, and a letter would be addressed to the Presiding Officer to notify him of the letter. It had also been copied to the Speaker. A Mail and Guardian article was published on 18 March 2011, entitled “Parly stymies funding openness bid”, but the details were not entirely accurate and a letter would be addressed to the newspaper.

Ms Kubayi appealed to the Chairperson to write to the Speaker about the conduct of Hon Greyling. He had walked out of the Committee meeting. If the Mail and Guardian report was a true reflection of what he had said, then he should be reprimanded because he had seemingly questioned the ability of the Committee, despite substantive evidence, and had brought the Committee into disrepute. He had given a false account of why he had left; he had attended in order to present his proposals, but when matters did not go his way, he had walked out. That could be tolerated, but the follow up article was uncalled for.

The Chairperson said that whilst Members might have regarded Mr Greyling’s walk-out as uncalled for, it was necessary to bear in mind that people could be controlled by their emotions. This Committee should be guided by the law and the Rules of Parliament.

Mr Pretorius suggested that it would make the resolution more clear if the wording was changed from  “‘The Committee wishes to make the following observations” to read “The Committee, having taken Parliamentary legal advice, also wishes to make the following observations”.

The Chairperson agreed, and said that this would be added into the report.

Mr Pretorius then also commented on Ms Kubayi’s remarks. He had not seen the newspaper report, but his understanding was that although Mr Greyling’s actions had perhaps caused some discomfort, and were maybe unnecessary, he did not think this justified a formal complaint.

Ms van Wyk said that the matter went further than the report in the Mail and Guardian. She noted that the letter from IDASA, written to the Chairperson, was also clearly based on Mr Greyling’s complaints. The report of the Committee was not based solely on Parliamentary legal advice, but other issues were also taken into consideration. She suggested that the Committee Secretary should distribute the newspaper article to those Members who had not seen it, and that Ms Kubayi’s proposal for disciplinary steps be deferred, since Ms Kubayi was referring more to the media report and the IDASA discussions.

It was agreed that the proposal of Ms Kubayi to refer the matter to the Speaker would be considered at the next meeting, after the additional information had been circulated.

Ms Kubayi then proposed the adoption of the Committee’s draft Report.

The Committee adopted the draft Report, as amended.

Adoption of minutes
The Minutes of the Committee meeting held on 9 March 2011 were adopted.

The meeting was adjourned.