Industrial Development Corporation Act: Presentation by Parliament's Legal Advice Centre

Economic Development

21 May 2012
Chairperson: Ms E Coleman (ANC)
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Meeting Summary

The Committee was given a presentation by Parliament’s Legal Advice Centre on the Industrial Development Corporation (IDC) Act, to provide the Committee with a greater understanding of the IDC’s role and operations. The presentation broadly outlined the aims, functions and objectives of the entity.
The broad powers of the IDC were highlighted, and it was noted that economic development and empowerment were stressed in these powers.  The general lines along which the IDC’s powers should be exercised,  were outlined, and the uniqueness of a section of the Act was pointed out, as every proposal made to the IDC had to be considered on its economic merit.
It was suggested that an amendment to the Act should be considered, as the Act stated the IDC fell under the Minister for the Department of Trade and Industry (DTI) whereas it now fell under the Ministry of Economic Development. 

The Committee raised a few matters which needed clarification and these were largely answered by the presenter.

With the correction of minor grammatical errors, the Committee adopted the minutes on the agenda, with the exception of those for the meeting of 8 February 2012.

Meeting report

The Chairperson welcomed everyone and opened the meeting. She said Parliament’s legal service was in attendance to give an overview of the Industrial Development Corporation (IDC) Act to aid the Committee in its understanding of the Corporation and to check that the Corporation’s mandate was being achieved.

She reminded the Committee that Africa Week and being African was being celebrated, with Friday 26 May 2012 being the official day marked for celebration. She challenged the Committee to learn at least one African language a year, as she was doing.

The Committee secretary presented apologies for Mr K Mubu (DA) who was at the doctor and so would be late, Mr N Singh (IFP) who had prior commitments, Mr S Ngonyama (COPE) and another Member who was on leave.

The Chairperson accepted the apologies and called for the presentation to proceed.

The presenter, Advocate Charmaine Van der Merwe, a legal advisor for Parliament’s Legal Advice Centre, said the Act was quite old and had been amended a few times.  However, it had not been reviewed in the past ten years and suggested the Committee could perhaps look into that. She noted that the presentation was not an analysis of the IDC Act but simply a look at important sections of the Act in terms of giving power to the IDC and what the Corporation may and may not do.

She described the objects of the Act and suggested that an amendment should be considered, as the Act stated the IDC fell under the Minister for the Department of Trade and Industry (DTI) whereas it now fell under the Ministry of Economic Development. 

Ms Van der Merwe outlined who the IDC were, their aims and objectives in terms of legislation provided by the Act. The broad powers of the IDC were highlighted, and it was noted that economic development and empowerment were stressed in these powers.  She outlined the general lines along which the IDC’s powers should be exercised and pointed out the uniqueness of this section of the Act, as every proposal made to the IDC had to be considered on its economic merit. She emphasised the importance of this.

The Chairperson interjected to ask Ms Van der Merwe to elaborate on the IDC’s “economic merit.”  

Ms Van der Merwe then read the entire subsection, section five, paragraph eight, from the Act itself to respond to this point. She found this sub-section was understandable when considering the broad economic powers the IDC was empowered with, and the caution about funding.

She went on to look at the role of the Minister in the IDC and elaborated on the board of directors in terms of its members, appointment of chairperson and deputy, issues of tenure, number of members, appointment of members, conditions of remuneration and employment, and managing and alternate directors. She commented that she found the section quite ordinary.

Looking at the finances of the IDC, Ms Van der Merwe, described it as quite commercial in nature and not out of the ordinary. She touched on issues related to share capital, expenditure, dividends, auditing and financial statements.

When looking at the regulations, it was quite interesting and different that shareholders could make regulations by resolution. Given that the shareholders were Government, she found it more understandable but felt an eye needed to be kept on this if the private sector became involved in compiling regulations.
Ms Van der Merwe listed these regulations, and remarked that section 19 of the Act was the most applicable to the Committee, as it dealt with what had to be provided to Parliament. She felt, however, that when the Act mentioned this, it should be made clear which House of Parliament was referred to, or whether it referred to both.  The section also looked at what information the Minister needed to be provided with, and what the Minister in turn needed to provide to Parliament. 

Looking briefly at general sections of the Act, she remarked that the Companies Act was not applicable to the IDC, but the Public Finance Management Act (PFMA) was. This was because of the duplication of responsibilities in both Acts.

In summary, she outlined how the Act had set up the IDC, how the Corporation functioned and its powers. 

Discussion
The Chairperson thanked the presenter and opened the floor to Members for questions.

Ms D Tsotetsi (ANC) requested clarity as to who exactly reports were submitted to.

Mr H Hoosen (ID) raised the issue of accountability and the disclosure of interests of board members who also had interests in companies the IDC funded. He wanted the presenter’s own view on this point.

Ms S Van der Merwe (ANC) noted numbering errors in the presentation. She questioned whether the IDC should fall under the PFMA, given that there was a new Companies Act. She felt the outlining of the Minister of the DTI in the Act was incorrect and should be looked at.  

Mr X Mabasa (ANC) wanted clarity around the meaning of leveraging of foreign direct investment (FDI) under the objectives of the IDC. He also questioned the application of the Act to all three spheres of government.

The Chairperson agreed with the Members that their issues needed greater clarification. She questioned disclosures and regulations and who drew these regulations up. She felt that disclosure and accountability was an important issue especially when looking at where money was accounted for. She asked if the accountability lay with the Minister of Trade and Industry or Economic Development. In terms of reports and meetings, the Chairperson asked for examples of records of decisions taken without any meetings, and for an answer as to how the Committee should treat the IDC going forward.

Committee Member Ms Van der Merwe remarked that each board member had a different term and so the board operated in a staggered manner.  The use of an annual report and address to the shareholders could also be used by the IDC as a report to the Minister. However, if a report was not provided to the shareholders, the IDC was still required to produce a report of its operations to the Minister.  More accountability was needed when looking at the interests of the board members. She said the PFMA would be applicable here, rather than the Act itself and felt that the applicability of the Companies Act to the IDC needed to be reviewed.

Answering the question of shareholding, Ms Van der Merwe felt the IDC could be asked who owed the B Shares.

She said the Act would read better if it said the Minister for the relevant portfolio, instead of singling out the Minister for DTI.

She said that leveraging of FDI could be interpreted widely and narrowly. The questions could be answered when taking into account policies and reports and the like. Broader leverage generally meant broader accountability and accompanied complications and different systems.

Although the Act did not specifically speak to the spheres of government, the mention of National Council of Province members and municipal council members alluded to the fact that it covered all three spheres.

Ms Van der Merwe said the PFMA provided for issues around disclosure which should be reflected in financial reports. She said such a report should come to Parliament and the Committee for oversight purposes.

In terms of shareholders doing drafting of regulations, she remarked that she found it strange and was unsure as to where these regulations would be published, apart from being a part of minutes of meetings.

Ms Van der Merwe was not certain how often shareholder meetings were held, but said it was usually once a year if they were not specially called for.

The Chairperson interjected and asked under which schedule of the PFMA the IDC fell under.

Ms Van der Merwe said she spoke under correction, but suggested it fell under schedule four which dealt with national public entities.  She would get back to the Committee to confirm this.

The Chairperson said knowing under which schedule the IDC fell would make it easier to understand its reporting responsibilities.

Ms Van der Merwe responded to a question as to which decisions were taken without holding a meeting, and said it was quite wide, as any decision could be taken.  She said usually a round-robin method was used to reach a quorum for decisions when a meeting could not take place. She felt the IDC could respond to the question at the Committee’s request, as it fell within its oversight mandate.  Furthermore, on the issue of the Committee’s oversight mandate, she said the Committee could request the IDC to present their interpretation of the IDC Act and their challenges and concerns related to the Act.  She added the Committee was allowed to request a Bill be introduced.  

The Chairperson thanked Ms Van der Merwe for the presentation and for answering the questions.

Adoption of Minutes
Committee Minutes dated 8 November 2011
The Chairperson went through the minutes page by page and invited comments from the Members.
Apart from sentences being omitted, Mr Mabasa moved for the adoption of these minutes. The 8 November 2011 minutes were adopted with minor amendments.

Committee Minutes dated 15 November 2011
Mr K Mubu (DA) noted some grammatical corrections.
Mr Mabasa noted a bullet point needed to be rephrased.
Mr Mabasa moved and Mr N Gcwabaza (ANC) seconded the adoption of the minutes. The 15 November 2011 minutes were adopted with minimal changes.

Committee Minutes dated 1 February 2012
Mr Mubu said he did not get notice of the meeting and therefore his apology was not received.
The Chairperson noted Mr Mubu was not a member then but Mr Marais (DA) was.
The Chairperson said the Committee Secretary needed to get the attendance register to sort out the problem.
Members noted grammatical corrections that needed to be made.
Ms Tsotetsi moved and Mr Mabasa seconded for the adoption of the minutes. The 1 February 2012 minutes were adopted with minimal amendments.

Committee Minutes dated 8 February 2012
 Mr Gcwabaza raised a question around the acting Chairperson.  
Ms Van der Merwe clarified that if the Chairperson was on leave, the election of the Acting Chairperson was only needed once but if the Chairperson was not on leave, the election of an Acting Chairperson needed to happen at each meeting.
Mr Mubu asked for consistency in the minutes describing Committee Members as “Honourable Members” and others saying “Mr” or “Ms”. The Chairperson asked which title Members preferred. The Committee settled on the title “Honourable Members.”
Mr Mubu raised a grammatical concern.
Mr Mabasa noted a number of grammatical corrections were needed
Mr Mubu suggested the minutes be sent back to the drafter for clarity.
Ms Tsotetsi said this would make things worse and felt the Committee should sort it out amongst themselves.
The Chairperson disagreed and felt the minutes should be sent back for better quality minutes to be adopted. The 8 February 2012 minutes were not adopted.

Committee Minutes dated 17 April 2012
Grammatical errors were raised by Members.
Mr Mubu moved and seconded by Ms Tsotetsi for the adoption of the Minutes. The 17 April 2012 minutes were adopted with minor changes.

Committee Minutes dated 18 April 2012
Adoption of the minutes moved for by Ms Mubu and seconded by Mr Gcwabaza. The 18 April 2012 minutes were adopted without changes.

Committee Minutes dated 8 May 2012
Adoption of the minutes moved by Mr Gcwabaza and seconded by another member. The 8 May 2012 minutes were adopted without changes.

The Chairperson thanked everyone and applauded them for the adoption of the minutes and their attendance.

The Chairperson announced that she might be going to Rwanda as part of a delegation for an assignment given by the Speaker.

The meeting was adjourned.

Present

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