Special Economic Zones Bill [B3-2013]: flagged clauses

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Trade and Industry

11 June 2013
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The parliamentary legal advisor led the Committee through all matters still of concern to the Committee in the SEZ Bill.

The definition of ‘person’ was deleted. The revised definition of ‘public entity’ was a matter of style and they would use that of the State Law Office. There were still two concerns about the establishment of the SEZ Advisory Board. In clause 7(7)(a) whether the Minister ‘may’ or ‘must’ appoint alternate members and the timeframe in which the appointments had to be done. The alternate members that the Minister appointed would be for state entities.

The Department had proposed that the members representing organised labour and civil society also have alternates. There was an outstanding issue on the dissolution of the Advisory Board: that the dissolution be on reasonable grounds and the question of what constituted reasonable grounds. In addition that there should be an interim Advisory Board established to do the functions of the Advisory Board. A third issue was whether the Advisory Board should be ‘reconstituted’ or ‘re-appointed’.

The Department questioned whether ‘due inquiry’ needed to be part of clause 19 and wanted the Committee to consider that the phrase ‘after consultation’ was sufficient. There had been the question of whether the designation of an SEZ was done ‘in consultation ‘ or ‘after consultation’ with the Minister of Finance. The parliamentary legal advisor questioned whether the implementation protocols were in alignment with the Inter-Governmental Relations Framework Act as the parties entering the protocols were the Ministers. At issue was whether the Minister’s annual report on the implementation protocols was tabled in the National Assembly or in the NCOP.

The legal advisor had proposed the insertion of a new clause on pre-incorporation contracts to allow business to make agreements which could be ratified later. This issue was flagged for further discussion. The advisor withdrew her proposal that the administrator have the power to terminate contracts. It was agreed that sub clauses be added indicating that the costs of the appointment of an administrator would be to the account of the entity and that the Minister, if satisfied that the entity was able to operate once again, could terminate the services of the administrator. The appointment of an administrator had to be reviewed after 90 days. The operator needed to show that it had access to sufficient financial resources. The question before the Committee about suspension or withdrawal of a permit was whether the SEZ Board should be consulted before or after a decision had been taken. The SEZ Board had to be involved in the transfer of an operator’s permit because an operator’s permit was linked to a particular zone. Clause 25(1) spoke about the licensee establishing an entity to manage the SEZ while the Public Services Administration had to be involved in the process to establish a government entity. This matter was flagged for further investigation.

The Chairperson said she hoped that by 14 June the Committee would be able to give the list of changes to integrate it into the Bill, following which parties could propose amendments to it. She was targeting adoption of the Bill by 21 June.

Meeting report

Deliberations
Adv Charmaine van der Merwe, the parliamentary legal advisor, said that she would go through all the matters that were still of concern to the Committee.

She said the definition of ‘person’ was deleted following criticism in the public hearings as a person included bodies that were not incorporated.

The revised definition of ‘public entity’ was a matter of style and they would use that of the State Law Office.

She said there were still two concerns around the establishment of the SEZ Advisory Board. In clause 7(7)(a) whether the Minister ‘may’ or ‘must’ appoint alternate members and the timeframe in which the appointments had to be done.

Alternates that the Minister appointed would be for government officials of state entities. The Department had proposed that the members representing organised labour and civil society also have alternates.

Regarding clause 19 on the dissolution of the Advisory Board, the outstanding issue was that the dissolution had to be on reasonable grounds and what constituted reasonable grounds. In addition that there should be an interim Advisory Board established to do the functions of the Advisory Board. A third issue was whether the Advisory Board should be ‘reconstituted’ or ‘re-appointed’.

Mr Kaya Ngqaka, Chief Director: Special Projects, said the Department’s concerns on clause 19(1) was with the phrase ‘due inquiry’. It questioned whether this was necessary and if this meant that a forensic investigation had to be done. It wanted the Committee to consider that the phrase ‘after consultation’ was sufficient.

Mr W James (DA) asked if there were guidelines or whether the Minister took legal advice.

Adv van der Merwe said there were no legal guidelines because the reasons for an inquiry were very broad.

Mr B Radebe (ANC) said inquiries were done on merit on a case by case basis.

Adv Monwabisi Nguqu, State Law Advisor, said that the term ‘due inquiry’ would require the Minister to convene a hearing. Inquiries could take time, as much as two years, which in the end would take away the minister’s discretion.

Mr Ngqaka said that ‘after consultation’ would be sufficient and the Minister would not be hamstrung.

Adv Nguqu said ‘after consultation’ would mean that the Minister heard the other side.

Adv van der Merwe said that the word ‘re-appoint’ the Board had been used to keep the clause in alignment with clause 7.

Adv Nguqu said that ‘re-appoint’ would mean bringing back the old Board

Mr James said that the word ‘re-constitute' be used because it was the appointment of a new Board which could have some members of the old Board. The Committee agreed on ‘re-constitute’.

Adv van der Merwe questioned whether the implementation protocols were in alignment with the Inter-Governmental Relations Framework Act as the parties entering the protocols were the Ministers. Consequently ‘SARS’, in clause 22(1)(d), would be changed to ‘the Minister of Finance’.

In clause 22(3) she said there had been the issue of whether the Minister’s annual report on the implementation protocols be tabled in the National Assembly and/or in the NCOP.

The Committee agreed to the wording that the report would be tabled "in Parliament".

In clause 24(4), Adv van der Merwe said there had been the question of whether the designation of an SEZ was done ‘in consultation ‘ or ‘after consultation’ with the Minister of Finance.

The Committee agreed that it read ‘after consultation’ with the Minister of Finance.

Adv van der Merwe said no further amendments were necessary to clause 25(1).

She proposed the insertion of a new clause on pre-incorporation contracts to allow business to make agreements which could be ratified later as the licensee could not enter into agreements except if it was allowed by legislation. Pre-incorporation contracts was a possible way to reduce the time taken for businesses to become operational. This issue was flagged for further discussion.

She said that in clause 28(1)(a) the word ‘it’ had been clarified to mean SEZ entity.

On clause 29(1) on the aspect of her proposal that the administrator have the power to terminate contracts, she said she was withdrawing that proposal. The administrator could refer such matters to court for a decision. The costs of the appointment of an administrator would be to the account of the entity. If the Minister was satisfied that the entity was able to operate once again, then the Minister could terminate the services of the administrator.

Clause 29(4) indicated that where the Minister acted in terms of clause 29(3) and appointed an administrator, he had to review the appointment after 90 days.

In clause 30(2) ‘make representations’ had been substituted with ‘submit written comments’.

In clause 30(3) ‘from customs controlled zones’ had been deleted because SEZs were custom controlled zones.

In clause 33(1)(c), the dti had said, on the question of whether the operator needed to have capital in the bank, that the operator had to show that it had access to sufficient financial resources.

There was a proposal to delete part of clause 36(1)(b) referring to the customs and excise rules and procedures and to the Commissioner of the South African Revenue Service as the first part of the clause dealt with contraventions of the laws of South Africa.

In clause 36(2) before suspending or withdrawing permit there were two recommendations. She had proposed there should be consultation with all affected parties namely the Entity, the SEZ board and the operator. The dti’s position was that the Board be notified that the permit had been withdrawn. She said the question was just whether it was after the fact or should consultation take place beforehand.

Mr Radebe asked who appointed the operator.

Adv van der Merwe said it was the SEZ Board that appoints the Board but had to apply for an operator permit.

Mr Radebe said the Minister must inform, not consult, the Board that the operator was no longer compliant with the conditions of the permit.

Mr James and Mr A Alberts (Freedom Front Plus) agreed with this.

Adv van der Merwe said that in clause 37, there had been concern that the SEZ Board be aware of the transfer of an operator’s permit because an operator’s permit was linked to a particular zone. Therefore when a permit was transferred, the Board had to be involved in that process.

She said clause 22(1) would be amended to read ‘..tabled in parliament’ and not ‘…tabled before Parliament’.

The Chairperson said the matter of pre-incorporation still needed discussion.

Adv van der Merwe said the problem arose when an operator was appointed because the SEZ Board appoints an operator and if a licensee entered into a contract it would not be valid because they were not mandated to do so.

Mr Alberts said pre-incorporation agreements for companies had undergone changes and in case law prescribed what the agreements should look like, that there should be guidelines.

The matter was flagged for the advocates and the Department to investigate further.

Adv Nguqu said that clause 25(1) spoke about the licensee establishing an entity to manage the SEZ. He said the Public Services Administration had to be involved in the process to establish a government entity. The matter was flagged.

Adv van der Merwe said that after discussions with the dti, the Department had amended clause 29(2) to include the term of appointment of the Administrator and that the next draft would also include that the costs of the administrator would be to the entity’s account and not the Department’s account.

Mr G Hill-Lewis (DA) asked what would happen in the case where an entity was insolvent and could not pay.

Adv van der Merwe said that if it was insolvent then the appointment of an administrator was the wrong step as a liquidator needed to be appointed.

The Chairperson said she hoped that by the coming Friday 14 June the Committee would be able to give the list of changes to integrate it into the Bill following which parties could propose amendments to it. She was targeting adoption of the Bill by 21 June.

The meeting was adjourned
 

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