Co-operatives Amendment Bills: public hearings Day 2

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Trade and Industry

24 July 2012
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The Committee heard submissions on the Co-operatives Amendment Bills from Mr Paul Browning of Transforum and the SA Institute of Professional Accountants. The City of Johannesburg, which was scheduled to have made a submission, said that its position was the same as that of the SA Local Government Association and would therefore not make a presentation.

Mr Paul Browning, Transport Analyst at Transforum,
gave a background history on taxi co-operatives since the establishment of the SA Black Taxi Association (SABTA) in the 1970s. He believed the co-operative format was the correct middle way to take to implement the 2007 Department of Transport’s (DoT) Public Transport Strategy Plan. He felt the DoT was not aware of the Department’s co-operatives strategy. The DoT was unwilling to enter into contracts with co-operatives and wanted it to form a company instead.
 
Members said the submission did not speak to the Bill. Members asked if the Bill precluded the establishment of taxi co-operatives and if the Bill was a stumbling block to taxi co-operatives or taxi bulk buying co-operatives. Members said the Bill offered an opportunity for the re-organisation of the taxi industry and asked what kind of government contracts the presenter had in mind. Members asked if the taxi industry had discussed and understood the Bill.

The SA Institute of Professional Accountants (SAIPA) welcomed the relaxation of the onerous financial reporting of co-operatives. SAIPA was concerned about a number of definitions in the Bill. The definition of an Annual Accounting Report needed clarity as a definition of auditing already existed and was clearly defined in the Audit Professionals Act and that it should be left as such. There were no auditing standards or frameworks for a social report or management decision report. The definition of a Management Decision Report needed clarity. SAIPA recommended that the Annual Accounting Report be referred to as an Annual Report which would contain the financial statements, the social report and the management report. The regulations should distinguish between an audit, an independent review and non-audited financial statements and the Bill should use the word audit more carefully. The Bill should include the definition of an independent accounting officer and it recommended the use of the Companies Act regulations to define who an accounting professional was. The wording in the Act and the Bill still referred to the Registrar but did not stipulate whether this was the Companies and Intellectual Properties registrar or a Co-operatives Registrar. It commended the Bill for removing the 5% Reserve Fund requirement so co-operatives could determine the percentage to be put into reserves as well as the removal of the restriction of one vote per member.

Members asked whether if “auditing” and “accounting” reviewer could be clarified. Members said that the category thresholds were difficult and were not set taking into account small rural co-operatives.

T
he City of Johannesburg did not make an oral submission as the city’s position was the same as that of the SA Local Government Association (SALGA) which had already presented a submission.

T
he Department noted that it was compiling and summarising the submissions received on the Palestine issue and had received requests to allow submissions after the closing date. The Department would communicate with the Committee in due course.

Meeting report

 

Transforum (Mr Paul Browning) submission
Mr Paul Browning, Transport Analyst of Transforum, gave a background history on taxi co-operatives since the establishment of the SA Black Taxi Association (SABTA) in the 1970’s. He believed the co-operative format was the correct middle way to take to implement the 2007 Department of Transport’s (DoT) Public Transport Strategy Plan. He felt the DoT was not aware of the Department’s co-operatives strategy. He was concerned whether the legislation was strong enough to implement within other departments’ own functional areas. He gave the example of the Nelson Mandela Bay municipality where five taxi co-operatives had formed a secondary co-operative but the DoT were unwilling to enter into contracts with co-operatives and wanted it to form a company instead. 

Discussion
Ms S van Der Merwe (ANC) asked if the Bill precluded the establishment of taxi co-operatives.

Mr G Mackintosh (COPE) asked whether the Bill was a stumbling block to taxi co-operatives or taxi bulk buying co-operatives.

Mr Browning replied that it was not preventing it, but that the institutional arrangements were not likely to give power to the dti over other departments of state, that is, the bill gave rights in principle but not in practice and therefore had no real influence.

He said PUTCO was big enough to do bulk buying and that taxi co-operatives should be moving to establish operating co-operatives, perhaps with the help of a guaranteed government contract.

Mr X Mabasa (ANC) asked if the taxi industry had discussed and understood the Bill.

Mr N Gcwabaza (ANC) said the Bill offered an opportunity for the re-organisation of the taxi industry. What kind of government contracts did he have in mind?

Mr G Selau (ANC) said the submission did not speak to the Bill.

Mr Browning said nothing in the Bill prevented the formation of co-operatives. He said it was a high profile government wish that the taxi industry join with bus companies into a joint company and the co-operative was the appropriate format to use. The Nelson Mandela Bay municipality contracts were worth R100m. When the taxi co-operative in Nelson Mandela Bay were formed, the contract had been resisted by the DoT which favoured the company format. He said he was not speaking on behalf of the SA National Taxi Council; he was a transport analyst working in Nelson Mandela Bay.

SA Institute of Professional Accountants (SAIPA)
submission
Ms Faith Ngwenya, the Technical and Standards Executive of the SAIPA, said the relaxation of the onerous financial reporting of co-operatives was welcomed. The definition of an Annual Accounting Report needed clarity as a definition of auditing already existed and was clearly defined in the Audit Professionals Act and that it should be left as such. There were no auditing standards or frameworks for a social report or for a management decision report. The definition of a Management Decision Report needed clarity. Regarding an Independent Reviewer, a reviewer could review but could not express an opinion. She recommended that the Annual Accounting Report be referred to as an Annual Report which would contain the financial statements, the social report and the management report. The regulations should distinguish between an audit, an independent review and non-audited financial statements and the Bills should use the word audit more carefully.

The definition of the Auditor’s Annual Accounting Report was confusing. It should be the audited financial statements or the audited report. The definition of independent review should use the same terminology of the International Standards on Review Engagements (ISRE).

She said an independent reviewer needed to be registered with an accredited body. SAIPA recommended using the Companies’ Act which allowed for a registered auditor, or an accounting officer as required in the Close Corporation Act or a professional body.

The Bill should include the definition of an independent accounting officer and recommended the use of regulations of the Companies Act to define who an accounting professional was. SAIPA commended the Bill for removing the 5% Reserve Fund requirement so co-operatives could determine the percentage to be put into reserves as well as the removal of the restriction of one vote per member.

She asked whether the regulations would define the categories of co-operatives.

The wording in the Act and the Bill still referred to the Registrar but did not stipulate whether this was the Companies and Intellectual Properties registrar or a Co-operatives Registrar

Discussion
Ms Van Der Merwe asked if “auditing” and “accounting” reviewer could be clarified.

Mr Mackintosh said the category thresholds were difficult and were not set taking into account small rural co-operatives.

Ms Ngwenya said that financial statements were prepared which then needed an audit, where an opinion was expressed or where limited assurance could be given through an independent reviewer

She said that as far as category of co-operatives was concerned, it was not possible to see who could prepare a basic accounting report. The middle level category B co-operatives had no need for an audit but required limited assurance from an independent reviewer, however if the reviewer was put within the Audit Act, it was limited to auditors only who could serve this function.

Mr Jeffrey Ndumo, Chief Director of Co-operatives in the dti, said that the three categories proposed in the Bill would be served by managers for Category A, independent reviewers who were not auditors for Category B and auditors for Category C. The Bill encouraged the agency to assist with the Independent Reviewer function through subsidies. On the issue of linking it to the Companies Act, he said that the Companies Act did not talk to management and social reports. The Department had engaged with SAIPA, the SA Institute of Chartered Accountants and with the Independent Regulatory Board for Auditors on the above issues. It had engaged with the National Union of Metalworkers of SA on bogus co-operatives and had steered away from the Companies’ Act which did not address social reports and management reports. 

Mr Brian Masango, Head of the Department of Economic Development for the City of Johannesburg, confirmed that the City would not be giving a presentation as the city’s position was that of SALGA which had already presented.

Other
Ms Zodwa Ntuli, Deputy Director General in the Department, said that the Department was compiling and summarising the submissions received on the Palestine issue and had received requests to allow submissions after the closing date. The Department would communicate with the Committee in due course.

The meeting was adjourned.


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