Co-operatives Amendment Bill Working Draft: deliberations; Trade and Industry Budgetary Review and Recommendations Report 2012

Meeting report

Deliberations on the Co-operatives Amendment Bill
The Chairperson said that the Chair of Chairs had indicated that there would be no opportunity to extend the deadline of 01 November 2012 for the Co-operations Amendment Bill.

Adv Charmaine van der Merwe, Parliamentary Legal Advisor, said that the Committee would be using the Consolidated Co-operatives Amendment Bill Working Draft F3 [B17-2012]. She said she would only raise substantive matters marked in red. The first of which was the insertion, after the definition of “Minister”,  of the definition of a national apex co-operative being that contemplated in Section 6(1)(d).

The word ‘operational’ had been removed from the definition of a tertiary co-operative.

Adv Kathy Idensohn, University of Cape Town (UCT) law faculty, proposed, in Clause 3, that the additional subsection (8) under Section 3 be retained but that subsection (9), which derived from company law, be deleted and that its provisions be narrowed down to apply only when there was an infringement of the legal rights of members with respect to the co-operatives constitution or the provisions of the Act. An average member would not be able to go to court because of the large fees payable; therefore, this was a significant improvement in that a matter could be taken to the Tribunal instead of to court. The subsection could be placed under the functions of the Tribunal in Chapter 12B, Section 91N(a).

Mr X Mabasa (ANC) said that, unless it was critically important, the legislation should not move outside of international practices. A minority clause would divide instead of unite.

Ms S van der Merwe (ANC) said the matter was important as the reason for the failure of co-operatives had been because of the conflict within co-operatives, and co-operatives needed a mechanism to deal with conflict.

Mr G Selau (ANC) noted that at issue were not minority rights but member’s rights. He asked if the Department was comfortable that the rights of members were covered.

Mr Jeffrey Ndumo, dti Chief Director: Co-operatives, said that as long as the proposal did not elevate the rights as being minority rights and that the collective nature of co-operatives was emphasized.

In Clause 66, a revised 91N(a) would read “adjudicate in relation to any application made by any member or director of a co-operative whose rights in terms of the constitution of the co-operative or this Act have been infringed and make such orders as it considers fit.”

Adv Van der Merwe said, with reference to Clause 6, that Section 6(1)(d) dealt with the minimum requirements for a national apex co-operative to be constituted. There were two new provisions inserted, (1A) which dealt with the meaning of “operational” co-operatives and (1B) which indicated when a secondary co-operative could join the national apex co-operative.

In Clause 8, Section 9(4) saw a new subsection (8) being  added which indicated that if written notice was given of the existence of a pre-incorporation contract and if the contract was not expressly accepted or rejected within three months of the date of receipt of the notification, then the co-operative would be deemed to have ratified the contract.

In Clause 9, Section 10 saw the addition of subsection (8) which allowed only the national apex co-operative to use the word ‘apex’ as part of its name. Existing co-operatives which had ‘apex’ as part of their name would have the word automatically substituted with the word “tertiary” at the commencement of the Co-operatives Amendment Act 2012. Section 10(9)(b) stipulated that each affected co-operative be notified within 60 days of the commencement of the Co-operatives Amendment Act 2012.

In Clause 29, the substitution of Sections 38(1) and 38(2) dealt with the acceptance of commission, remuneration or reward. There was an outright ban on any form of reward for transactions and in all other instances there had to be disclosure to the co-operative and acceptance by the co-operative. In addition, Section 38(3) indicated that anyone guilty of contravening these subsections were guilty of an offence which was covered by Section 92 which dealt with offences.

In Clause 66, the amendments to Section 91M(1)(a) indicated that the chairperson could be appointed for a second consecutive term of office. Section 91M(7) indicated that the term of office of the members and the chairperson of the Tribunal be no more than five years and that the Minister had to ensure that the Department provide for succession. Section 91M had a subsection outstanding which would deal with the limit  members or chairpersons could serve.

Mr B Radebe (ANC) proposed that the period be capped at ten years.

Deputy Minister of Trade and Industry the Hon. Elizabeth Thabethe said that the wording of the subsection should be revised to allow for appointments to be made from outside of the Tribunal as for example in an instance when the whole board of the Tribunal needed to be replaced.

The Committee then went through the document clause by clause.

Mr Ndumo said that mention should be made in the Preamble that the seven co-operative principles were to be found in the Bill itself.

Adv A Alberts (FF+) asked if the definition in Clause 1(i) was exclusive in that it referred only to the historically disadvantaged.

Mr Ndumo replied that co-operatives were there to combat poverty and so were inclusive of all.

Mr Ndumo said that equal voting rights for primary co-operatives in Clause 1(i), substituted definition b(iii),  should include the phrase ‘category A and B’ primary co-operatives and that  substituted definition b(iv) should include the phrase ‘primary, secondary, tertiary and national apex co-operative’ in place of ‘secondary co-operatives and co-operative apex organizations’.

Mr Mabasa said that he thought that the housing co-operative definition had been removed.

Mr Ndumo said that the Department of Human Settlements had wanted some qualifications removed in the main body of the Act but the definition of housing co-operative remained.

Mr Ndumo said, with reference to Clause 3, that the amendment in Section 3(3) should include reference to  ‘principles of good governance’.

Adv Alberts said that the King Code of Governance Principles was not enforceable.

Adv Idensohn said that there would be a separate special regulation for good governance relating to co-operatives which would be published by the Minister.

Mr G Hill-Lewis (DA), with reference to Clause 6, queried the absence of the word ‘or’ in Section 6(1)(a).

Mr Adam Small, State Law Advisor, said that its absence was as per convention and it was also how the Principal Act was worded, but he would refer the matter to his office.

Mr Hill-Lewis said, with reference to Clause 6, the word ‘primary’ in section 6(1)(a)(iii) needed to be deleted.

Mr Ndumo said that it needed to be indicated that ‘annual returns’ in section 6(1A) referred to the financial statements, social report and management decision report.
 
Adv Idensohn said annual returns could be listed in the definitions.

Adv Van der Merwe said that apart from what Adv Idensohn had said, the term annual report could be replaced by “the financial statements, social report and management decision report”.

Budgetary Review and Recommendation Report (BRRR)
The Chairperson said that the BRRR looked into assurance targets and allocations and whether they had been met and whether the targets had been realistic. The report dealt with measurable objectives and key interventions.

Mr G Mackintosh (COPE) was concerned that government was considering reducing or removing investor indemnity.

Adv Alberts said that clarity was needed from government on when and how to apply labelling laws.

The Chairperson replied that a principled approach had been adopted.

The report noted concern over good governance at the National Regulator for Compulsory Specifications (NRCS), with both the CFO and CEO having been removed and the chairperson of the Board suspended over compromised tenders. It also noted concern at the work of the NRCS. Stability had been restored at the National Credit Regulator (NCR) where a Commissioner had been appointed. The Commissioner had pointed out the challenges the call centre was facing.

Mr Radebe was concerned at the weaknesses of Information Technology (IT) controls and that a permanent IT officer be appointed at the Companies and Intellectual Property Commission (CIPC).

Recommendation 12(d) had been moved to become Conclusion 10.8

The Committee recommended that the Department address weaknesses identified by the Auditor-General report on the dti and its entities, especially the IT problems of the CIPC; and that the national Consumer Protection Act (No. 68 of 2008) be reviewed to ensure compliance and protect vulnerable customers from unscrupulous lenders; the Committee regretted that it was unable to provide effective oversight on all the entities of the Department and thus the Committee should be classified as a group C committee and accorded priority status.

The report was adopted.

The meeting was adjourned.