South African Post Office Bill [B2 - 2010] Deliberations, Independent Communications Authority Council Report Adoption; Adoption of Second Term Committee Programme 2011 and Adoption of ICASA Council Report

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Communications

11 April 2011
Chairperson: Mr S Kholwane (ANC)
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Meeting Summary

The Department of Communications (DoC) briefed the Committee on the effects of the new Companies Act of 2008 on the South African Post Office (SAPO) Bill. The Companies Act would come into operation on 1 May 2011. Essentially, the effects were largely technical, since the name of the Bill, and references to SAPO, including the definitions clause, had to be amended to reflect the new listing of State Owned Enterprises, to “South African Post Office (SOC Ltd)” in accordance with section 11(3)(c)(iv) of the Companies Act. Other clauses affected by the new Companies Act included clauses 2, 3, 27, 28, and 32, as well as Schedule 2 of the Bill and the Memorandum of Objectives.

The Committee noted its concerns that the Committee was falling behind schedule on working with the Bill, as it would need to consider these latest amendments, and a COPE Member expressed concerns about clauses 27 and 28 of the SAPO Bill, pointing out that the new Companies Act contained clear directives for what was expected of State Owned Enterprises, but these clauses would allow certain provisions of the Companies Act to be declared inapplicable. The Department of Communications legal advisors responded that the new Companies Act in essence was not changing the position that had been discussed before, and the Department had wanted to ensure that if there were to be any conflict, there would be a clear procedure for resolving such conflicts, and that the new Bill’s provisions should prevail. The Chairperson suggested that the Committee should in the meantime proceed with finalising the Bill and wait to see how the SAPO Bill would finally be affected.

The Department of Communications gave a brief presentation on the amendments proposed to the SAPO Bill by the ANC. The ANC proposed that the concurrence of the Minister of Finance should be removed from clauses 3, 8, 18, 22 and 23. The DA was concerned about this proposal, pointing out that hard lessons had been learned in the past about the danger when the Minister of Finance did not have input into the financial operations of State Owned Entities, particularly in relation to borrowing. COPE was also concerned with most of the proposed amendments, although it did concede that it would be acceptable to differentiate between operational matters, and prescribe those matters where the Minister of Communications could bear sole responsibility for decision making, provided that the Minister of Finance was able to intervene should there be a crisis. COPE pointed out that over the past five years some State entities had moved from being well-managed companies to being companies in financial distress. The IFP stated that the National Treasury (NT), via the Minister of Finance, had to be involved where the matters would affect the national fiscus, but did not see this as undermining the authority of individual ministers. The ANC explained that the Minister of Finance formed part of the Cabinet, that major issues would be tabled in the Cabinet meetings, and that this Minister would therefore be informed of SAPO’s activities. The Department of Communications agreed that there would be no harm in removing the references to the concurrence of the Minister of Finance, and even intimated that this could improve the Bill. There would not be conflict between the SAPO Bill and the Public Finance Management Act (PFMA), and a number of instances were cited where the requirements of the PFMA had already been incorporated into the Bill. The COPE Member questioned why the Department had not dealt with these issues earlier, and was now conceding that the ANC’s proposals were preferable to the existing wording. The ANC also proposed an amendment to clause 12 of the Bill, relating to the appointment of non-executive members to the SAPO Board by the Minister, suggesting that the Minister should have an option whether to appoint a nomination committee to deal with appointment of board members. COPE had suggested that the Minister should give explanations if a committee was not considered necessary, but the DA maintained that a nomination committee was absolutely required. The Committee resolved that Members would consider the amendments and return to vote on the adoption of the Bill after 24 May.

The Committee adopted its second-term committee programme and the report on appointment of Dr Marcia Socikwa, by the Minister, to serve on the Independent Communications Authority of South Africa (ICASA) Council for a second term. COPE expressed that although it had hoped for a completely new appointee, it accepted the Minister’s choice, but wished to ensure that performance agreements were signed by the councillors.

Meeting report

Second Term Committee Programme Adoption
The Chairperson asked if Members had any concerns about the Programme or if they wanted to propose any amendments to it.

Ms J Killian (COPE) asked for, and received clarity that the budget vote of the Department of Communication (DoC) would be taking place on 31 May 2011 and that of Government Communications and Information Systems (GCIS) on 1 June 2011.

The Members adopted the Programme.

Independent Communications Authority of South Africa (ICASA) Council Report: Adoption
The Chairperson informed Members that the Minister had deliberated on the two candidates nominated by the Committee to fill the vacant Councillor’s position on the Independent Communications Authority of South Africa (ICASA). Dr Marcia Socikwa and Ms Nomonde Pearl Gongxeka were nominated, and the Minister had appointed Dr Marcia Socikwa, the current serving councillor, for a second term.

Rev K Zondi (IFP) said that the IFP endorsed the Minister’s choice.

Ms Killian stated that the choice was supported.

Ms N Magazi (ANC) said that the ANC supported the appointment.

The Chairperson read out the report of the Portfolio Committee on Communications on the appointment of Dr Marcia Socikwa to serve on the ICASA Council, as required by the rules of Parliament. This report stated that the Committee agreed to the appointment.

Ms Killian stated that whilst COPE accepted the Minister’s choice, and noted some improvements in ICASA, there was a definite need to strengthen the performance of ICASA as a body. It was for this reason that COPE had wanted to bring in new appointees to the Council, which had not happened. However, she felt that additional pressure should be placed on the DoC to make sure that performance agreements were signed by the councillors and that ICASA would be able to live up to the Committee’s expectations.

Rev Zondi replied that the IFP took COPE’s concerns on board. However, since the IFP felt that continuity of the current ICASA Council was critical at this time, it had supported the appointment of Dr Marcia Socikwa.

Ms Magazi concurred with the sentiments expressed by Rev Zondi. The ANC also thought that continuity was critical at this point in time.

The Chairperson assured Ms Killian and COPE that there were three councillors whose terms were coming to an end in June 2012. There was still an opportunity to introduce new councillors into the Council. The Committee had to continue being vigilant in ensuring the ICASA continued its regulatory work. There were broader issues, such as how the Committee would shape ICASA in the future.


South African Post Office Bill (the Bill): Effect of the new Companies Act
Mr Alf Wiltz, Director: Legal Services, Department of Communications, informed Members that his presentation would focus on the amendments proposed by the Committee, as well as areas of the South African Post Office (SAPO) Bill that were going to be affected by the new Companies Act of 2008, which had already been assented to and was due to come fully into operation on 1 May 2011.

Cover Page
The Cover Page was amended to reflect the new name of the Post Office in accordance with section 11(3)(c)(iv) of the Companies Act, 2008. This section required that the name of a State owned company must end with the expression “SOC Ltd”. The Bill was therefore renamed the “South African Post Office (SOC Ltd) Bill”.

Clause 1: Definitions
The definition of Companies Act was amended to refer to the new Companies Act of 2008. The definition of Post Office was amended in accordance with the naming convention prescribed by the new Companies Act.

Clause 2: Objects of the Act
The Clause was amended to omit “Limited” and to substitute “SOC Ltd” in the full name of the South African Post Office (SAPO).

Clause 3: Continued Existence of Post Office
The same name change was done also in clause 3.  It was further amended to replace references to “articles of association” with references to “memorandum of incorporation”.

Clause 27: Application of Companies Act to Post Office
Clause 27(2) was amended by omitting the words “A provision” and substituting the words “Notwithstanding sections 5(4) and 9 of the Companies Act, a provision”
. This amendment was necessary to clarify that the SAPO (SOC Ltd) Act would prevail in case of conflict between the Companies Act and the SAPO (SOC Ltd) Act.

Clause 28: Certain Provisions of Companies Act may be declared inapplicable to Post Office

Clause 28(1)(a) was amended by omitting the word “The” and substituting it with the words “Notwithstanding section 9 of the Companies Act, the”. This amendment was necessary since a different exemption procedure was provided for in the Companies Act. The application of section 9 of the Companies Act had to be excluded, to ensure that the procedure in clause 28 of the Bill could be followed to declare certain provisions of the Companies Act inapplicable to the Post Office. The references in clause 28 to “Registrar of Companies” have been replaced with references to “Companies and Intellectual Property Commission”, in line with the new Companies Act.

Clause 32: Short Title and Commencement
The short title of the Bill was amended in clause 32, in accordance with the naming convention prescribed by the new Companies Act.

Schedule 2: Short Title and Commencement
The definition of ‘postal company’ was substituted with the following definition in the Schedule, for purposes of amending both the Post Office Act, 1958 and the Postal Services Act, 1998
, to read  ‘‘ ‘postal company’ means the South African Post Office SOC Ltd, referred to in section 3(1) of the South African Post Office (SOC Ltd) Act, 2011;’’.

Mr Wiltz then explained that the words ‘memorandum of association’ were replaced with ‘memorandum of incorporation’ in the amendment of section 3(4) of the Post Office Act, 1958 in the Schedule.

Section 3(5) of the Post Office Act, 1958 had now been deleted from the Schedule. This provision had originally stated that notwithstanding the provisions of the (former) Companies Act, the postal company and the telecommunications company may have fewer than seven members. He explained that the previous Companies Act of 1973 had required a public company to have at least seven members. However, this had fallen away in the Companies Act of 2008.

Memorandum of Objects
The heading of the Memorandum was amended to refer to the new name of the Bill.

Paragraph 4.31 of the Memorandum was amended to clarify that the name of the Bill has changed since its introduction.


Discussion
The Chairperson thanked the DoC for informing the Committee about the impact of the new Companies Act on the SAPO Bill. He was not sure when the SAPO Bill was going to be finalised. The Committee now had to the impacts of the Companies Act on the Bill, but he reminded Members that they must also finalise previous issues raised by the Committee on the Bill.

Rev Zondi thanked the DoC for being proactive and taking the new Companies Act into consideration. He questioned if matters raised around clause 22(2)(a), as raised by SAPO, had been resolved. This clause focused on the staff of the Post Office and employees appointed by the Chief Executive Officer, subject to terms and conditions and within financial limits determined by a human resources policy that had to be approved by the Minister, after consultation with the Minister of Finance and the Minister of Public Administration.

The Chairperson asked the DoC to address this question once the presenters had dealt with the other aspects focussing on issues and amendments proposed by the ANC.

Ms Magazi asked if the Committee should continue with resolving other matters that had been raised by the Committee. She felt that the Committee was running behind schedule.

Ms Killian stated that her concern related to clauses 27 and 28 of the SAPO Bill. The new Companies Act had a clear focus on what was expected of State Owned Enterprises (SOEs). However, these clauses effectively were saying that, notwithstanding the Companies Act, the Post Office was a special type of SOE that deserved special provisions. The Committee needed to have clarity on the ability to declare certain sections of the Companies Act inapplicable and inappropriate to this Bill.

The Chairperson wondered if the Committee should wait for the new Companies Act to come into effect, so it could see how the SAPO Bill was going to change. In the meantime, the Committee had to continue finalising the Bill and resolving the issues they had raised at previous meetings.

Mr Wiltz replied that the coming into operation of the new Companies Act did not in fact make a substantial difference to the SAPO Bill. The issues contained in clause 27 and 28 had already been discussed by the Committee. The references to the new Companies Act would replace those of the former Companies Act. If there was a conflict between the SAPO Bill and the Companies Act, the SAPO Bill would prevail. The matter had been debated at length. The DoC tried to create a clause to prescribe which statute would hold greater weight if there was ever a conflict, and it made little difference in practice which Companies Act was named, as it was the procedure that was important. The Committee had discussed this matter and had opted for a blanket approach, to create a procedure or mechanism that was open and transparent, by which certain provisions could be excluded from applying to SAPO. The Committee had to keep in mind that the Companies Act was written for thousands of companies and hundreds of SOEs. It was a generic piece of legislation that tried to create one-size fits all dispensation. The legislator should have the discretion to create something specifically applicable to SAPO, which it was doing by the SAPO Bill. It was acceptable, provided that an open and transparent process was followed, that exemptions be created. He believed that the SAPO Bill’s exemption clause 28 was better than the Companies Act’s section 9, dealing with exemptions. He pointed out that clause 28 of the SAPO Bill provided for public consultations, whereas section 9 of the new Companies Act did not, and that clause 28 also allowed SAPO to motivate why it required specific exemptions from the application of a specific provision in the new Companies Act.

The Chairperson noted Members’ appreciation for the work done by the DoC.

Amendments Proposed by the ANC to the SAPO Bill: Department of Communication presentation
Mr Willie Vukela, Acting Chief Director: Information and Communication Technology (ICT) Policy Branch, Department of Communications, read out the amendments proposed by the ANC at a previous meeting.

Clause 3: Continued Existence of Post Office
The need for concurrence of the Minister of Finance was removed from clauses 3(5)(b) and (c).

Clause 8: Government Support to Post Office and Loans by Post Office and Subsidiaries
The need for concurrence of the Minister of Finance was removed from clauses 8(3), and 8(4)(a).

Clause 12: Appointment of Non-Executive Members of Board
The ANC had proposed an amendment that would
give the Minister discretion to appoint the nomination committee. The proposed ANC amendments further reintroduced the role of trade unions in the nomination of non-executive members of the Board. The amendments further ensured that the number of nominations should be at least one and half times the number of board member vacancies.

Clause 18: Conditions of Appointment of CEO, CFO and COO
The need for concurrence of the Minister of Finance was removed from clause 18(5).

Clause 22: Personnel of the Post Office
The wording “and the Minister of Finance” was removed from the end of sub-clause 22(1)(a).

Clause 23: Subsidiaries and Accountability

The wording “and the Minister of Finance” was removed in both paragraphs (a) and (b) of clause 23(3).

Deliberations
Ms N Michael (DA) said that she was very concerned about the need for concurrence of the Minister of Finance being removed from all the clauses in the Bill. The Committee had bitter lessons as to what could happen to entities when the Minister of Finance did not have some kind of input into their financial operations. SAPO was an SOE, and she was sure that members of the Executive would be happy to help out one another to ensure the best use of State resources. There should be discussion between the two ministers, and concurrence by the Minister of Finance, who would adopt the broader view when it came to funding. It was “ludicrous” to think that the Minister of Finance should not have a say, and she urged that it was essential for the Minister of Finance to indeed give input into all matters of SOEs and their subsidiaries borrowing money. She reiterated that she saw the exclusion as problematic. Given the communication sector’s history of financial disasters, the Committee would be treading on dangerous territory if it were to take away the concurrence of the Minister of Finance.

Ms Killian believed that most of the proposals to remove the concurrence of the Minister of Finance were unacceptable. COPE completely disagreed with these amendments. There were a few SOEs that had, over the past five years, moved from being well-managed companies to being companies in financial distress. Some even had to be referred for oversight to the Minister of Finance. However, she conceded that perhaps the Bill could differentiate between operational matters and matters where the Minister of Communications could in practice allow SAPO, for instance, to enter into loan agreements or issue shares, provided that overall the Minister of Finance retained the ability to intervene in a case of financial crisis.  For example, she thought it would be acceptable to leave out the reference to the Minister of Finance in clause 8(3), but the oversight role and concurrence of the Minister of Finance should be included in clause 8(4), and she stressed that it would be reckless to remove it from this clause.

Ms Magazi stated that she stood by the ANC’s proposal to remove the necessity for concurrence of the Minister of Finance from the Bill. She said that it was not necessary to bring the Minister of Finance into certain matters, pointing out that the Executive would be involved, since major issues would be tabled at Cabinet, and since the Minister of Finance formed part of the Cabinet, he would be informed of SAPO’s activities. The concurrence of the Minister of Finance was not needed when the Minister of Communications decided on employees' remuneration. The Minister of Communications would consult the Minister of Finance about this matter anyway, so it did not have to be legislated. The Board of SAPO had the responsibility to run and to make these decisions for SAPO as well.

Mr Wiltz added that the DoC had checked to ensure that the new proposals were not in conflict with the Public Finance Management Act (PFMA.

Rev Zondi interrupted him, saying that the Committee should strive for flexibility. Government departments should not work in silos. The National Treasury (NT), via the Minister of Finance, had to be involved in cases where there were implications to the national fiscus. He did not think that this would undermine the authority of individual ministers. The issue of flexibility would operate insofar as clause 22(2)(a) was concerned. The Committee thought that the Minister of Communications should not be hindered by having to confer with the Minister of Finance on operational matters. NT would be consulted on certain matters, even though the necessity for concurrence of the Minister of Finance would be removed from the Bill.

Mr Wiltz reiterated that the DoC wanted to ensure that there were no conflict between the new proposals and the PFMA. For example, section 54(2) of the PFMA dealt with a number of issues that were relevant to the SAPO Bill, and noted that before a public entity concluded certain transactions, the accounting authority for the entity had to inform the relevant treasury of the transaction, promptly and in writing. The accounting authority also had to submit relevant particulars of the transaction to the executive authority for approval of the transaction. Therefore, SAPO would have to involve Treasury and get approval from the Minister of Communications for certain transactions. He summarised that these transactions included the establishment or participation in the establishment of a company, and this was dealt with in clause 23 of the SAPO Bill. Furthermore, approval was needed for participation in a significant partnership, trust, unincorporated joint venture or similar arrangement, and this was dealt with in clause 3(5)(b)(iv) of the SAPO Bill. Approval was also needed for the acquisition or disposal of a significant shareholding in a company, dealt with in clause 3(5)(b)(iii) of the SAPO Bill, or for the acquisition or disposal of a significant asset, dealt with in clause 3(5)(b)(1) of the SAPO Bill, or the commencement or cessation of a significant business activity, as outlined in clause 3(5)(b)(ii) of the SAPO Bill, and further for a significant change in the nature or extent of its interest in a significant partnership, trust, unincorporated joint venture or similar arrangement, which was dealt with in  clause 3(5)(b)(iv) of the SAPO Bill.

Mr Wiltz agreed that the reference to the concurrence of the Minister of Finance could be omitted from the SAPO Bill. In fact, such omission would ensure that there would not be conflict between the Bill and the PFMA. Even the PFMA said that the SAPO should inform the Treasury of its transactions and get approval from the Minister of Finance. In his view, it would actually improve the Bill if the concurrence issue were removed. The DoC was comfortable with the amendments proposed by the ANC, as they were not in conflict with the PFMA. Safeguards already existed under the PFMA, which would protect the State's finances.

Mr Vukela addressed Rev Zondi's question directly. He said that he did not think the DoC had the competency to engage with NT on the matter. This was a Committee Bill, and the DoC’s engagement only happened in the initial stages. The DoC could only engage with the NT regarding the removal of the concurrence of the Minister of Finance, if mandated by the Committee to do so. 

Ms Killian noted that the Committee had engaged with the DoC, from the beginning, to check that there was no conflict between the SAPO Bill and the PFMA. It was disconcerting, therefore, that the DoC should, at this late stage, approve of the amendments now proposed by the ANC, and she thought the DoC owed the Committee an explanation as to why it had initially proposed certain wording in the Bill that was apparently now seen as conflicting with the PFMA. The PFMA had been in existence for over ten years, and she questioned why so many SOEs had gone into financial distress and disarray, if the PFMA was being implemented correctly. It was for this reason that Parliament should be allowed to introduce further provisions to strengthen National Treasury’s position and ensure that it was not burdened with additional, unexpected expenditure when institutions were “corporatised”. COPE did not agree that it would be wise to remove the requirement for concurrence of the Minister of Finance, and wanted to see extra protection in place, to ensure that public entities operated within their means, and avoid money being spent to bail out the institutions instead of assisting the poor.

Mr Vukela explained that the DoC never really supported the view that the concurrence of the Minister of Finance was needed. When the matter was raised initially, the DoC had expressed its concerns, but had assumed that, if necessary, other legislation could be amended after this Bill was passed.

Mr Wiltz added that duplications in the PFMA and the SAPO Bill had the potential to cause conflicts, due to legal technicalities, and the DoC had been present at earlier meetings to ensure the integrity of the Bill, although some of the matters were outside its direct scope of their expertise.

Rev Zondi asked for an explanation of the difference between “with the concurrence of” and “in consultation with”. He wanted to know how other SOE legislation was worded.

Mr Wiltz answered that “in consultation with” and “with the concurrence of” meant the same thing. Approval was required in both cases. He added that there were different Acts for dedicated SOEs. He did not have the information to hand, and thus was unable to answer the question immediately.

The Chairperson asked the DoC or SAPO to explain to the Committee what the practical consequences would be if the words referring to the concurrence of the Minister of Finance were removed.

Ms Vuyokazi Mahlati, Chairperson, SAPO Board, replied that the PFMA made the SAPO Board an accounting authority, and it tried to comply with PFMA. The SAPO Board, in line with its mandatory responsibilities, tabled a report on SAPO's budget, the borrowing plans and capital expenditure to the Minister of Communications every year. These reports were also sent to the Minister of Finance and the NT. SAPO thought that PFMA was sufficiently clear in dealing with current issues. SAPO’s only concern was that it would be problematic to complicate matters that were already made clear in other legislation.

Ms Motshoanetsi Lefoka, Chief Executive Officer, SAPO, referred to clause 8(3), which looked at the payment of financial support. This information would be included in SAPO's budget. The information was checked by the NT and updated by SAPO on a regular basis. SAPO had to state whether any borrowing was planned by SAPO over the Medium Term Expenditure Framework (MTEF) period. This information also had to be submitted to the NT, as well as the Minister of Communications, for approval. Clause 8(4) contained similar provisions. The SAPO Board, as the accounting authority, had a limit as to what it could consider and approve and anything above that limit would be sent to the Minister of Communications for consideration.

Ms Mahlati added that all the information had to be submitted to Cabinet finally. The Minister of Finance participated in the decision-making as part of the Cabinet.

Ms Killian stated that COPE was prepared to compromise on some of the issues around concurrence, but was reluctant to move on clauses 3 and 5. She suggested that the DoC should meet with the NT and the Minister of Finance to check whether the latter two agreed to the removal of the concurrence of the Minister of Finance from the Bill. The government did not want to have another SOE in trouble in the future.

Ms Killian made a further point that the Minister of Communications had to appoint a nomination committee for the urgent appointment of board members. This promoted transparency and accountability. The Committee had a responsibility to ensure that the SAPO Board was fully representative.

The Chairperson noted that the Committee had been dealing with these issues for some time. In relation to whether the Minister of Communications should appoint a nomination committee for the appointment of board members, COPE had also suggested that if the Minister chose not to appoint one of the nominees, an explanation for this must be given.

Ms Michael said that the DA thought the appointment of a nomination committee was a necessity, not an option, and would not be happy were there to be no committee. She suggested that this Committee would be failing in its duty to the people if it allowed this proposal to go through unchallenged, as it went directly to transparency and accountability. The Minister of Communications should not be able to hold this kind of power and the nomination committee must be in place.

The Chairperson clarified that the ANC had proposed that the Minister should have a choice whether to appoint a nomination committee to appoint board members, based on the urgency of the situation. The DA felt that such a committee had to be appointed to deal with every appointment. COPE had said that the Minister would have to give an explanation of a decision not to appoint the committee. It would be fair for the ANC to consider the other parties’ suggestions. He suggested that this matter should be further discussed on Friday 15 April 2011.

Ms Michael pointed out that Members had understood that this Bill would be finalised in this meeting, as many would not be able to attend Friday's meeting in light of other party commitments.  She therefore recommended that Members should be given more time to discuss the matters with their respective parties and return in May 2011 to finalise the Bill.

Ms Magazi concurred with Ms Michael's proposal.

The Chairperson noted that the Committee would return after the elections in May to finalise the Bill. When they returned, members would not have further debates on the Bill, they would just be voting on it.

The meeting was adjourned.




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