Independent System Market Operator Bill [B9-2012]: deliberations on proposed amendments

Meeting report

Chairperson’s opening remarks
The Chairperson stated that on Friday 8 March 2013, the Department of Energy (DoE) was allowed by the Committee to respond to the inputs of submission that came about through the public hearings. The Department, together with the Committee went through the entire ISMO Bill and amendments to it were proposed. These amendments to the Bill were compiled into a four-page document which DoE was to present to the Committee clause by clause at today’s meeting.

Mr K Moloto (ANC) proposed that Members focus on Fridays’ proposals, and if Members have any other issues to flag they should do so. Since the amendment document was structured clause by clause, the structure of the discussion should therefore be the same.

The Chairperson agreed that DoE should take the Members through the A-Bill document clause by clause.

Department of Energy (DoE): proposed amendments to ISMO Bill
Clause 1: Definitions
Mr Maduna Ngobeni, DoE Deputy Director: Energy Regulation, indicated that there were still a few minor amendments that DoE still wanted to do, however the key definitions would be discussed.  He suggested that the A-Bill document be read together with the ISMO Bill for a greater understanding of the content.

The term ‘expansion plan’ had been inserted as a definition into the Bill, and the proposed definition was that it was a plan for development of the transmission network.

Mr S Mayathula (ANC) interrupted and asked what the term ‘black start capabilities’ meant.

Mr Ngobeni responded that DoE would get back to defining the term ‘black start capabilities’, however ‘black start capabilities’ was a technical term used which dealt with starting up generators which were no longer functional. DoE would add the full definition in the revised version of the Bill.

Mr J Smalle (DA) asked for a point of clarity about the adjustments in the definitions that DoE was still busy with. He suggested that DoE indicate which definitions DoE was still busy with so that the Members did not keep raising issues which DoE would not be able to answer at this stage.

The Chairperson agreed with Mr Smalle and added that the suggestion would be useful because DoE would also avoid having to repeat itself.

Mr Ngobeni responded that one of the definitions that DoE was still busy with was that of ‘auxiliary services’ and DoE also wanted to align ‘system operator’ and ‘market operator’ and put them under one umbrella. These terms spoke to the same functions of ISMO, so they should not be defined separately.

Mr J Selau (ANC) asked what DoE meant by the terms ‘system operator’, ‘market operator’ and ‘dispatch’ and whether DoE was referring to sales.

The Chairperson responded that DoE was still to get back to the Committee with clear definitions of these terms, as there was still no clear definition and this created a fragmented understanding.

Mr Selau responded that the issue which needed clarity was the distinction between ‘dispatch’ and ‘sales’ as the understanding was that ISMO would be selling and not dispatching.

The Chairperson stated that DoE should note the concern raised and should get back to the Committee with a clear definition and distinction between these terms.

Mr Ngobeni responded that DoE would get back to the Committee on this. Going back to the A-Bill, the definition of ‘integrated power system’ would be reworked to accommodate the comments that were raised during the public hearings.

Mr Mayathula drew attention to the fact that the term ‘integrated power system’ was referred to as ‘integrated powers system’ on the A-Bill and wanted to know if the difference in the spelling was of significance.

The Chairperson added that in the Bill there was reference to ‘an integrated power system’ whereas in the A-Bill it was drafted as ‘a integrated power system’ and wanted to know why the wording was different

Mr Ngobeni responded that the main difference was that DoE did not want to seem as though it was referring to a specific power system when it used the word ‘an’ in the Bill which was why the wording was changed to a ‘an’ in the A-Bill.

Mr Ngobeni said a new definition of ‘transmitter’ was added to the A-Bill, the reason being that the transmitter was not a function of ISMO and should therefore be defined outside of ISMO.  Even though Eskom currently owns transmission, it should be noted that there were some municipalities which owned transmission such as Ethekwini municipality, which means that these municipalities were also referred to as ‘transmitters’.

Clause 2: Objects of Act
▪ Mr Ngobeni stated that after “responsible for” the words “maintenance and” were omitted from the Bill. On page 5, line 14 the words “manages electricity dispatch” were omitted as well.

The Chairperson asked where ‘maintenance’ was accommodated for in the Bill.

Mr Ngobeni responded that ‘maintenance’ of ISMO was accommodated in the previous sections of the Bill.
The Chairperson stated that when DoE omitted something it would be helpful if it was indicated where the duplication was catered for.

Mr Ngobeni replied that in the process of tariff aggregation, dispatch was catered for.

Mr L Greyling (ID) stated that aggregation and dispatch should be separate functions and should not be lumped together in one paragraph.

Mr Ngobeni stated that no changes were made to Clause 3.

Mr Mayathula suggested that the term “SOC” on page 5, line 20 should have been defined fully before the abbreviations were used on their own, unless the term was a standard term widely understood.

Ms Ntombi Mayekiso, State Law Advisor, replied that the term “SOC” was a standard term used in the Companies Act and was widely understood as standing for State Owned Companies.

Clause 4: Functions of ISMO
▪ Mr Ngobeni stated that on page 5, line 44 after “integrated resource plan” the phrase “whose inputs must be dully considered by the transmitter”. When the first draft was put together, ‘system operation’ and ‘expansion’ were put together; however, the term ‘expansion’ on page 5, line 45 should be omitted from the Bill because ‘planning’ and ‘expansion’ refer to the same process. On page 6, line 36 a new clause was included because the system operator should be in a position to interrupt power supply in times of shortages in a way that would not disturbing the functioning of the economy.

Mr Selua asked if intervention by the system operator would only intervene during shortages and not in other instances such as maintenance or some other reasons for ISMO to interrupt.

Mr J Smalle (DA) stated that in cases where the transmission or generators needed to be safeguarded, these situations also needed to be catered for. He asked if these incidents would also be catered for by the system operator.

Mr Moloto asked what the purpose was of repeating the same issue under both the Objects and Functions of the Act.

Adv Ntuthuzelo Vanara, Parliamentary Senior Legal Advisor, responded that the Objects indicated what the Bill sought to address and it was by no means empowering ISMO to perform certain functions.

Mr Moloto agreed with Adv Vanara. He added: Why not give ISMO the functions and repeat the preservation of the integrity of the system as it is?

Mr Ngobeni noted the concern and stated that DoE would repeat it.

The Chairperson reminded Mr Ngobeni that Members wanted to know how ISMO would deal with issues such as maintenance during the interruption of power supply.

Mr Ngobeni replied that ISMO functions were limited in the Bill because they were covered in the Electricity Regulation Act (ERA) and Grid Code; therefore mostly new issues were covered in the proposed ISMO Bill.

Mr Mthokozisi Mpofu, DoE Deputy Director General: Electricity, responded to the questions on maintenance and stated that if the system was in trouble, ISMO would not dispatch the system. ISMO had been given the mandate of dispatch and would take into account the system itself and other incidental matters that arise.

Mr Smalle argued that the Minister must make provisions for regulations to draw from for dispatch in the Act.

Mr Ngobeni stated that the ERA allows the regulator to make rules about how dispatch should be conducted in the sector. Dispatch rules therefore cover all issues pertaining to dispatch.

Mr Selau said that it was dangerous for the ISMO Bill not to make provisions for dispatch and maintenance but to look for the ERA for guidance.

Mr Ngobeni agreed that some matters in ERA should be repeated in the ISMO Bill. However he warned that ISMO should not be given too much power. New issues should not be introduced in an “empowerment” Bill, as issues such as dispatch needed to be done by the National Energy Regulator of South Africa (NERSA). ISMO could not have too much power, as the regulator had the final say in matters of regulations and dispatch.

Mr Smalle suggested that ISMO should make reference to NERSA.

Ms Mayekiso stated that issues such as power shortages should be handed over to the regulator for review. DoE should get back to the Committee with more concrete responses.

Adv Vanara stated that ‘dispatch’ was appropriately defined in ERA and the concerns around the meaning of dispatch should not be a concern, rather the appropriate definition for ‘dispatch’ should be the one in ERA.

The Chairperson agreed that the definition of ‘dispatch’ would be the one outlined in the ERA.

▪ Mr Ngobeni stated that on page 6, line 46 the current Clause 4(3)(d) was substituted with “procure electricity on such terms and conditions as may be agreed upon by parties”. A point was also raised that since not all generators were located in of South Africa, there could be generators located outside the country and so the clause needs to be kept broad. On page 7, after line 24 of the Bill a new clause was inserted which read “ISMO may, with the concurrence of the Minister, perform such other functions as may be necessary to give effect to or were ancillary to its functions as set out in subsections (1) to (3).”

The Chairperson asked if the numbering would change.

Mr Ngobeni replied that the numbering would not change since it was a subsection.

Mr Smalle asked if the new clause was not covered before.

Mr Ngobeni replied there was a need for a broad clause which covered all factors.

Mr Greyling asked which comment the new clause was relating to and if it was a specific input made during the public hearings.

Mr Ngobeni replied that it was a comment made by NERSA during the public hearings.

Mr Mayathula suggested that DoE define ‘MW’ on page 7, line 2 in the Bill.

Adv Vanara explained that what was intended in the new subsection was to acknowledge that the specified functions might have other auxiliary functions which needed to be performed. It was an acknowledgment from the legislature that not all functions could be covered separately. Oversight by the Minister was also needed so that people did not simply add their own functions.

The Chairperson added that the newly added subsection was a general ‘catch all’ provision in order not to limit ISMO functions.

Mr Greyling warned against a situation where the Minister decided to give ISMO too many unnecessary functions.

The Chairperson stated that ISMO would not pick up any other functions outside the outlined parameters.

Clause 6:  Subsidiaries and accountability
Mr Ngobeni said that the whole clause was deleted.

Clause 11: Application of Companies Act
Mr Ngobeni stated that the section was not yet finalised.

The Chairperson said that in the Summary of the Bill in the Memorandum On The Objects, provision was made for the deputy chairperson to chair the meeting in the absence of the chairperson. He wondered why the matter was in the summary of the Bill but not in the A-List.

Mr Ngobeni replied that the matter would be included in the Bill.

Mr Mayathula referred to Clause 8(2) page 8, line 6 and asked if the Companies and Intellectual Property Commission had the powers to publish particulars in the Gazette.

Mr Moloto asked who had powers to publish particulars in the Gazette.

Mr Ngobeni replied that in terms of the Companies Act, the Companies and Intellectual Property Commission had the responsibility to publish matters in the Gazette.

Clause 13: Appointment of non-executive Members of Board
On page 5, line 14 the words “manages electricity dispatch” were omitted as well.
Mr Ngobeni stated that page 9, line 22 the words “The Minister and” were omitted. On page 9, line 46 the Clause 13(8)(a) was substituted with “(8)(a) Any vacancy occurring in the Board in terms of Clause 14, must be filled in the manner provided for in section within six months of such vacancy occurring.”

Mr Mayathula asked whether a person who was interested in a position could apply for themselves or whether another person would have to submit that person’s name for recommendation

Mr Ngobeni replied that a person could submit their own application however the wording in the Bill was confusing.

Ms Vania Mahotas, DoE Executive Director, Electricity Regulation, replied that an invitation was sent out via the Gazette by the Minister. People would apply and the nominations committee would shortlist its recommendations and submit them to the Minister who would make the final decision.

Mr Mayathula said that the response from Ms Mahotas was not what was asked

Mr Moloto said that in the A-list document the wording suggested that an applicant must be nominated and could not submit his/her own application

Adv Vanara replied that a nomination process was advocated for in the A-list, reason being that board members needed to be representative of the communities at large. However a second provision was made for a nomination committee to make a policy decision about whether people could apply for themselves or open up a nomination process. Without a policy decision it would be difficult to move forward with a decision.

Mr Selau said that there was a need for board members who were in touch with their communities plus board members who were sufficiently qualified in terms of skills. Both processes therefore needed to be accommodated, as the final decisions would ultimately be made by the committee.

Mr Moloto said that the decision was not an easy one to make. The challenge in being nominated was that people begin to owe loyalty to the nominators, which introduced lobbying and coalition building. The appointment process by the Minister through the nomination process was therefore more favourable.

Mr Mayathula said that both the nomination process and direct applications should be opened up, with the nomination process being guided by the nomination committee, under the guidance of the Minster.

Ms N Mathibela (ANC) said that regardless of how people apply an applicant’s curriculum vitae should be the main indicator of whether they were suitable for the job.

Adv Vanara clarified that by ‘policy decision’, it did not mean that a document had to be drafted, but the nomination committee had a decision to make about how people should apply

Mr Moloto said that the best approach would be to marry the two options as long as the Minister had the final decision

Ms Mayekiso supported the suggestion.

The Chairperson agreed that a dual approach to applications would be applied and that the Minister would have the final say and would apply a set of criteria for the appointments.

Mr Mayathula asked about who would determine the size of the nomination committee.

Mr Ngobeni said that DoE thought it was better to leave it as flexible as possible, but if the Committee wanted to put down a number, one would have  to outline composition criteria.

Mr Moloto said that a distinction needed to be made between an advisory structure and a decision making structure. The advisory board was not a decision making body and did not have any powers in making the final decision; therefore the number of member s and the composition of the nominations committee should not be a concern.

The Chairperson asked if board members were suppose to be appointed in concurrence with Cabinet.

Mr Moloto replied that the Minister decided how to move forward and it would be safer to not include it in law but to leave it up to the internal processes of Cabinet. He then asked if the Minster was confined to consider applicants which came from the nominations committee or if the Minister could add his/her own nominations

Mr Ngobeni replied that the Minister was bound to select from what the nominations committee provided.

Clause 15:  Disqualification from Membership of Board and disclosure
Mr Mayathula asked why the ‘may’ in Clause 15(1) was not a ‘must’.

Ms Mayekiso replied that ‘may’ was used instead of ‘shall’ in the current legislation, as ‘shall’ was outdated.

Ms Mathibela said that the word should be a ‘must’ instead of a ‘may’.

Adv Vanara asked if DoE could afford to use discretionary words such as ‘may’ seeing that the obligations at hand were serious in nature. He suggested that the matters be obligatory in nature.

Mr Moloto agreed with the view of Adv Vanara.

The Chairperson ruled that the wording would move from ‘may’ to ‘must’.

Clause 20: Committees of the Board
The Chairperson said that during the last meeting an issue was raised about whether the board could appoint one or more board committees with the concurrence of the Minister and asked DoE to look into this.

Mr Ngobeni replied that people who were not part of the board could be brought in to participate on the board committees; therefore the section was not adjusted. If the committees included people from outside, the Minister would need to have concurrence.

Mr Moloto said that the board would need the concurrence of the Minister in establishing the board. It would be a different case if it included board committee members from the outside. A distinction therefore needed to be made between people from outside and functionaries of ISMO. Therefore outsiders could not participate in board committees, unless invited to advise on a matter.

Mr Smalle suggested that voting rights should be brought in when making reference to board members.

Mr Moloto said that there needs to be clear motivation why Clause 18(4) should be retained as the board could procure external assistance and experts temporarily when the need arose.

The Chairperson said that 18(4) was not generic.

Mr Selau said that the clause was not specific since it was not saying permanent or temporary, and whether outside board committee members could be retained for long or short periods.

Mr Moloto agreed with Mr Selau and said that the board was empowered to secure services of any person. However the concurrence of the Minister was confusing seeing that the board was entitled to reorganise its business to fulfil its mandate. Outside members could never be permanent members of a board.

Mr Greyling said that there was a problem with the word ‘appoint’ and suggested that wording should be rather about employing the services of consultants.

Adv Vanara said that it should be acknowledged that the clause created much uncertainty. But because ISMO was a company, Companies Act provisions needed to be upheld. The board had leeway in determining its own internal arrangements, so if the board wanted to have different sub committees it should freely do so. The board could source specialised services such as legal opinion from someone who would not be a permanent board member. However the Bill did not envisage how the outsourced services would be dealt with and this was a confusing matter.

Mr Moloto said that the Companies Act was explicit in stating that the company must establish its audit committee and in terms of a normal company, shareholders approve the appointment of the audit committee. Clause 18(4) was therefore not relevant, as the board was responsible for managing the affairs of ISMO.

Mr Selau proposed that Clause 4 be build into Clause 1. The purpose of an internal audit committee was to update the audit committee about their daily workings and provide direction where needed.

Mr Mayathula said that board committees were chaired by board members, so external and internal audit committees reported to the board members. Therefore there should not be conflict between an audit committee being part of a board committee.

Mr Moloto said that the issue was about concurrence of the Minister as an internal audit committee was there to be independent in their thinking and should be able to alert board members about any issues which arise. Motivation was therefore needed about the issue of needing the Minister’s concurrence and why it was important.

Mr Smalle suggested that Clause 18(4) be flagged and dealt with later, seeing that Members had varying views on the matter.

Ms Mayekiso suggested that concurrence of the Minister apply only to Clause 18(4), not to other committees.

Mr Moloto replied that Ms Mayekiso’s suggestion would apply serious problems and would not solve the problems.

Mr Mayathula said that the board could not appoint other permanent members, and would only make use of external services temporarily.

Mr Ngobeni said that if a person from outside was contracted to assist the board on a matter, then concurrence from the Minister was necessary, however if no external person was contracted, Clause 18(4) could be omitted. Consultants were needed by the board for their expertise, on a lower level, and approval by the Minister was not necessary.

The Chairperson asked Mr Smalle if he still stood by his proposal to flag the matter, seeing that DoE had given its input. Concurrence by the Minister was therefore removed and the board would be allowed to appoint advisors temporarily.

Mr Moloto reminded Members about the quorum matter raised during the last meeting and DoE had still to respond.

Ms Mayekiso said that the 75% quorum was agreed upon but DoE still needed to make the final decision.

The Chairperson asked if DoE had applied itself to the issue of the quorum.

Ms Mayekiso replied that the trend in Parliament insisted on increasing the percentage of the quorum when it comes to decision-making, although this raised some concern among board members. However, the circumstances surrounding the establishment of ISMO needed to be looked at, and the 75% quorum needed to be reviewed.

Mr Mayathula said if ISMO would have 9 board members, a 75% quorum would be 7 members. However even Parliament did not follow a 75% quorum. This level of quorum would be killing for the ISMO board as the quorum would never be met.

Mr Moloto said that the same point was raised in the last meeting; the problem was that board members would struggle to meet this. A proposal was made for a simple majority of 50% plus 1; the same practice that was applied to the private sector.

Mr Selau agreed with the adoption of the 50% plus 1 majority. However he raised a concern that members should not be able to make major decisions such as the adoption of a constitution for example. A two-thirds majority should be needed for major decisions.

Ms Mayekiso reminded the Committee that they were not bound by the current practice and should therefore make a decision that they would be comfortable with.

Mr Ngobeni said that currently DoE was following the 75% trend, but this was more for policy decisions.

The Chairperson asked for an explanation for the rationale behind Clause 19(1)(a)

Mr Smalle replied that the composition of the board was the 7 non-executive plus the 2 executive members. Therefore if the quorum was formed in the absence of the 2 executive members, then the organisation could be hampered in decision-making. Mr Smalle agreed with Mr Selau that the Bill needed to be revised to include a list of the major decisions which could not be taken in the absence of the fully-fledged executive board members. The Minister therefore needed to outline what decisions which the non-executive members could take in the absence of the executive members.

The Chairperson asked that DoE explain Clause 19(1)(a).

Mr Ngobeni replied that the section explained that the board could delegate certain functions to the board committees; however such a delegation must be passed by a 75% majority. Clause 4 then spelt out some of the decisions that the board could not delegate such as the appointment of the chief executive officer or the chief financial officer.

The Chairperson asked if the section was only for specific resolutions and not for all decisions taken by the board.

Mr Moloto suggested that the matter should be put aside while DoE consulted with National Treasury on the matter. There were certain decisions that State Owned Enterprises (SOEs) could not take without consulting with the relevant department.

Mr Ngobeni said that certain decisions were guided by the Public Finance Management Act (PFMA) and agreed with Mr Moloto’s proposal. There were certain decisions that the PFMA stipulated what a public entity could or could not do and it categorised the public entities. The different categories of entities had a particular meaning under the PFMA, one of them being that of ‘borrowing’. There were certain entities which could not borrow money, while other entities could borrow money only with the approval of National Treasury. Other entities could not enter into long-term agreements without the approval of National Treasury.  The ISMO Bill did not address these issues as they were addressed in the PFMA.

Mr Moloto said that the board could not make any major decisions without approval from the Minister, therefore the proposal to change the 75% quorum to a 50% plus 1 simple majority would not hamper the decision-making process of the board. He reiterated that the matter should be flagged and discussed at a later stage.

The Chairperson ruled that the matter of the quorum should be ‘parked’ until another time

Mr Ngobeni added that the entire Clause 19, which deals with delegation of functions by the board, should be reviewed.

The Chairperson said that DoE should come back with a refined decision on the matter.

Mr Ngobeni proposed that the quorum be reduced from 75% to a simple majority of 50% plus 1. Clause 19 should therefore be reviewed according to the newly proposed 50% plus 1 simple majority.

Mr Moloto said that the issue of delegation was a delicate one and that DoE should guide the discussion, especially when it came to financial matters concerning the board. Therefore the majority of 75% should still apply to major decisions concerning delegation. The only issue where the percentages mattered was that of the quorum.

Mr Selau said that more than 80% of the board were non-executive members, the 75% made it difficult for them to make decisions. A two-thirds majority (66.6%) therefore should be considered instead.

The Chairperson ruled that a two-thirds majority would be considered

Mr Ngobeni confirmed that the quorum would be reduced from 75% to a 50% plus 1 simple majority.  With regard to the delegation functions of the board, a 66.6% majority would apply before members made major decisions.

Mr Mpofu raised a concern that ISMO was unprecedented in the country and a 50% plus 1 majority quorum on decisions would strain DoE. A ratio such as this should only be considered when ISMO was a fully established entity. The proposed ratios should therefore be reconsidered.

Mr Smalle said that the Minister should give guidance through regulations for delegations. DoE should therefore not be worried about the implications of the two-thirds majority proposal. Regulations should guide decision-making.

Mr Moloto said that there were checks and balances that board members needed to adhere to before making any major decisions such as acquisitions and the appointments of the chief executive officer. A two-thirds majority would apply to delegations. The DoE should see if it gave enough power to the Minister to recall board members for non attendance of meetings

Mr Selau agreed with Mr Moloto that the issue of non attendance should be included in the regulations and strict elements of discipline should be outlined.

Mr Mayathula said that a simple majority was a 5 out of 9 attendance, whereas 6 out of 9 was a two-thirds majority, therefore the difference between the two was not too wide.

Mr Moloto reiterated that checks and balances were outlined in regulations. The ISMO board would be called to Parliament to account for their annual reports; therefore a 50% plus 1 majority should still be applied for attendance of meetings

The Chairperson ruled that the previous agreement of 50% plus 1 attendance and the 66.6% majority for delegation still stood.

Clause 21: Conditions of appointment of chief executive and chief financial officer
Mr Ngobeni reminded the Committee that in the previous meeting the issue was raised of whether concurrence by the Minister was needed for the appointment of the chief executive and chief financial officer. Another issue was around the terms of these officials. DoE was then given the task to assess the way forward. DoE concluded that the chief financial officer should be removed after eight years, while the chief executive officer was retained for that period.

Mr Moloto supported the proposal to remove the chief financial officer after eight years, but the chief executive officer drove the implementation of the board’s strategy.

Mr Ngobeni said that remuneration packages of these officials were determined by the Minister of Energy as well as the Minister of Finance. Based on the Eskom Convention Act, this issue was not mentioned. DoE therefore suggested that the entire clause should be reviewed by the remuneration committee.

Mr Moloto argued that there was no need to bring in the Minister of Finance to consult with the Minister of Energy on matters of remuneration.

The Chairperson ruled that Clause 21(6) be omitted from the Bill and that there was no need for the Minister of Energy to consult with the Minister of Finance

Mr Moloto drew attention to the fact that Clause 21(6) raised other points as well and that it could not be removed entirely. However, it was the board that had the final say on remuneration in concurrence with the Minister of Energy

Mr Greyling agreed with Mr Moloto and said that best and worst practice in public enterprises in issues pertaining to remuneration should be weighed and a solution should be proposed. He therefore proposed that the matter be ‘parked’ and discussed at a later stage

Mr Moloto agreed with Mr Greyling that the issue be flagged. However, the drafters should check King III which refers to the remuneration policy and the role of the Minister and make a decision based on that.

The Chairperson ruled that the matter would be flagged for a later stage.

Mr Mayathula said that Clause 23(1) said that “the board may appoint any senior employee of ISMO to act as chief executive officer or chief financial officer for a period not exceeding six months”. He raised a concern about what would happen in the event that the acting senior member could not be replaced after the period of six months.

The Chairperson reiterated and asked what would happen in the event that there was no permanent appointment in the set six-month period.

Mr Ngobeni said that DoE would look into the matter, and it would consider that a provision for extension be made or after the six-month period another senior member was appointed to act. Another point to be considered was whether the Minister would be involved in these appointment processes.

Mr Mayathula asked if the acting senior member would be permanently appointed after the six-month period.

Mr Ngobeni replied that other mechanisms needed to be considered, because the position had to be filled after the six-month period. An option could be that the Minister could extend the six-month period into a longer period so that there was enough provision made for the right person to be appointed permanently.

Mr Mayathula drew attention to Clause 31(3) which said “ISMO may not dispose of the majority of its assets or such part of its assets as would have a significant impact on the ability to perform its functions without the prior approval of the Minister of Finance.” He asked why the Minister of Energy was bypassed and ISMO needed to get approval from the Minister of Finance first. The Minister of Energy was supposed to be part of this process.

Mr Selau agreed that other ministers did not have to be consulted and that the Minister of Energy needed to have final authority as ISMO did not report to the Minister of Finance, but to the Minister of Energy.

The Chairperson said that the Minister of Finance would only be consulted by the Minister of Energy when matters of finance were the point of discussion. But direct references to the Minister of Finance, which bypassed the Minister of Energy, were an issue to be reconsidered.

Mr Moloto said that the PFMA outlined that ISMO could not dispose of assets without the approval of the Minister of Finance.

Mr Ngobeni said that the section was a repetition of the PFMA.

The Chairperson asked what was meant in Clause 31(a) which said that the funds and assets of ISMO consisted of “shareholder contributions”.

Mr Ngobeni replied that some individual shareholders contributed money and assets into ISMO.

The Chairperson asked if it would not be appropriate for the Bill to outline that funds and assets of ISMO could not be dispersed without the approval of the Minister of Energy in concurrence with the Minister of Finance. Shareholder contributions should therefore be considered initially by the Minister of Finance.

Mr Ngobeni replied that this was a drafting issue and would be looked into, but what DoE was running away from was to draft regulations which contradicted the PFMA. DoE had noted the changes and would produce a revised document.

Ms Mahotas asked if DoE should produce the revised document in the following meeting the next day.

The Chairperson replied that the meeting scheduled for the next day would be postponed to Friday 15 March, and the revised document should be produced in that meeting.

The meeting was adjourned.

Apologies: Ms B Tinto (ANC), Ms B Ferguson (COPE)