Special Economic Zones Bill [B3-2013]: flagged issues and members' proposals

Meeting report

Special Economic Zones Bill [B3-2013]: deliberations
Adv Johan Strydom, dti legal advisor, said that the Portfolio Committee Amendments to the SEZ Bill (the A Bill) had been discussed clause by clause on 14 June and the B Bill incorporated all the amendments (see [B3B - 2013]). He said the Department requested the opportunity to speak on a memorandum it had sent the Committee and then the legal advisors could lead the Committee on the few issues that still needed consideration.

Memorandum
Mr Kaya Ngqaka, dti Chief Director: Special Projects, said that the dti’s position on the proposal to insert pre-incorporation agreements into the Bill was that pre-incorporation agreements, for leases and the like, were allowed and common law applied in those cases. The case for pre-incorporation agreements was that the application process might be long but the dti felt that company registrations were happening faster and the Inter-Governmental Relations agreements would assist in reducing red tape. There was a fear that pre-incorporation agreements may open loopholes and that the processes that the Department had put in place would not necessarily be followed. The Department felt that they opened themselves up to challenges from operators which might in fact lengthen the process. The Department felt that the proposed clause should not be included in the amendments.

Ms S van der Merwe (ANC) agreed and said it should not be included.

Mr W James (DA) concurred.

A and B Bills: flagged issues
Adv Charmaine van der Merwe, the Parliamentary Legal Advisor, said there were not many issues remaining and took the Committee through the B version of the Bill.

On p4 line 24 of the B Bill, she confirmed that the Municipal System Act was the correct Act.

In Clause 8 (p6 line 45), she said that previously, members of the Advisory Board, both governmental and non-governmental, were grouped as one. For purposes of clarity, this clause had been redrafted to separate the governmental and non-governmental members. 

On p9 line 50, clause 19(2), contained the proposal for an interim Advisory Board in the case where the Advisory Board was dissolved.

On p10 line 35, a subsection, clause 22(3) dealing with where the Minister’s report had to be tabled, was missing and this had to be sorted out with the printers.  

Ms van der Merwe asked why the word ‘new’ was in Clause 19(4)

Adv Strydom replied that when a Board was dissolved, it was dissolved in toto. If there was an impression that ‘new’ members meant that only some members were taken off the Board then that was the wrong impression.

Adv Monwabisi Nguqu, State Law Advisor, concurred and said ‘new’ meant ‘newly appointed’, even though some members might be from the old Board.

The Chairperson pointed out that in clause 19(1) it spoke of the dissolution of the Advisory Board or a committee of the Board.

Mr James said it should read “ ..appoint the members of the new  Advisory Board..” and that ‘or a committee” be removed as that was an example of bad governance.

This was agreed to by the members.

Adv van der Merwe said that concern had been raised by the dti over clause 25(4) which stated that a PPP had to operate in a SEZ as a company.

Mr Ngqaka replied that it had initially felt that the term companies might exclude other types of legal entities. After further consultation, it felt that the current Companies Act was accommodating enough and that PPP’s were therefore catered for.

Adv van der Merwe said that in clause 25(1), sub clause 1(b) used to be sub clause (7). There was no change in content, only re-arranging the clauses to read better. 

Clause 30(3) confirmed that businesses could continue operating if the SEZ designation had been withdrawn from an area, but that it could no longer apply for SEZ incentives.

In clause 39 the word ‘IDZ’ was used without definition, so it had used the existing defined phrases ‘industrial development zone’ and the term ‘IDZ Regulation’.

Adv Nguqu noted that in clause 29(1) it appeared as if ‘and the licensee concerned’ should be included after ‘..Zone Board concerned, …’, otherwise the comma had to be removed.

Similarly in clause 29(3) after ‘…Zone Board..’ it should read ‘..Zone Board and the licensee concerned…’

In clause 29(4) he noted that ninety days should be written in numbers.

Ms van der Merwe raised a query regarding clause 31

Adv van der Merwe replied that the wording had been slightly contradictory, so now clause 31(1) covered the transparent, fair procurement process SEZs had to follow.  Clause 31(2) catered for when there was a PPP where there was no need to appoint an operator through a procurement process.

Members’ and parties’ proposals
Mr X Mabasa (ANC) asked if cooperatives had been incorporated into the Act. Could cooperatives operate in SEZs?

Mr Ngqaka replied that they could as they were a valid form of business and the Department planned to assist Small and Medium Enterprises (SMEs) and cooperatives to be developed.

Mr Mabasa asked if it could specifically be included in the Act.

Mr Ngqaka said the Act spoke to all forms of enterprises.

Mr G Hill-Lewis (DA) asked what the virtue of getting an operator’s permit from the Minister was when the SEZ Board had already vetted the applicant, given the complexity of the application process and the time required to complete the process.

Mr Ngqaka replied that the permit was to ensure that criteria had been met. The Minister would only be endorsing the decision, not re-doing the whole process.

Mr Hill-Lewis said clause 32(2) spoke of applying to the Minister for an operator’s permit yet clause 32(3) talked of the Advisory Board receiving the application.

Mr Ngqaka said that if one referred to clause 11(1)(d) on the functions of the Advisory Board, the  Advisory Board considered applications and recommended courses of action to the Minister.

Adv van der Merwe said that they had proposed a redraft. In sub clause 3 ‘after receipt of the application’ would be deleted. It would then read “The Advisory Board ~ a) must consider the application b) may require an application to submit additional information necessary to consider the application c) request an applicant to appear before it to make an oral submission at the applicant’s expense d) may require any interested party, including an organ of state, to comment on such an application in writing and e) recommend to the Minister whether the applicant would be a suitable candidate.’

The Chairperson said that the Committee would like copies of the proposed redraft via email and that the printer’s copy would have to be checked.

Mr Hill-Lewis asked if the word ‘includes’, in Clause 4(2), meant that the list that followed was comprehensive or that it could be other things.

Adv Nguqu said it was not exhaustive and did not limit one to the list only

Mr Hill-Lewis suggested an addition to the list; ‘the generation of additional economic activity which creates employment opportunities’. He said the key issue in his proposal was the creation of new economic activity in the form of new industries.

Mr B Radebe (ANC) said he supported the idea of new economic activity rather than the displacement of existing industries to new areas.

Ms van der Merwe felt that it was covered in the Preamble.

The members agreed that it be placed as sub clause (i)

Mr Mabasa said the Preamble should provide for broadening economic activity by promoting amongst others, SME and cooperatives as sub clause (j)

Mr Radebe said the state would be putting a lot of incentives into SEZs and these should cater for broadening participation. He acknowledged that the SEZs would have big companies but they had to be responsible and use the supply chain to broaden participation in economic activity.

Mr L Waele (ANC) said South Africa had made a decision to strike a balance on targeting the export market and the domestic market. The 2008 economic meltdown should serve as a lesson that countries should diversify their industrial activity. Having a car manufacturer set up in an SEZ with its value chain supplies coming from its home country did not make sense.

Adv van der Merwe said she proposed an amendment to clause 4(2)(h) by inserting ‘including the broadening of participation by promoting SME and cooperatives…’  after the word ‘located’.

The members agreed to this.

Mr Hill-Lewis said section 21 dealt with support measures and nothing prevented other parts of government providing their own support measures. He wanted that made explicit  and proposed a sub clause 21(3) ‘municipalities, provincial government and state entities may design their own support measures and incentive schemes if they so wish’

Mr Ngqaka said that the Department did not have the power to instruct provinces or design incentives but that they were not precluded from designing their own incentives to be more competitive.

Mr Waele said his  local government experience showed it was important to integrate the development plans to enhance development objectives.  Municipalities must be aligned to provinces and it must be compulsory that all bodies work together under the IGRF Act.

Adv Nguqu said nothing precluded municipalities and provinces from providing their own incentives.
Mr Hill-Lewis said that he would amend the proposal to begin ‘ Nothing precludes municipalities, provincial government and state entities to design their own support measures and incentive schemes if they so wish’

Mr Hill-Lewis said that in clause 23(2) industrial development objectives was only the first part of section 4(2) and proposed that 23(2) read ‘in its application demonstrate the extent to which the designation of the area as an SEZ achieves the provisions of section 4’     

This was not accepted.

Mr Hill-Lewis said clause 26 and 27 dealt with the strategic and business plans which had to be submitted to the minister, 3 months and 2 months respectively, before the end of the financial year. Could this not be one report? He said both referred to being submitted to the Minister, should it not be to the Advisory Board.  

Mr Ngqaka said the strategic plan was a long-term view and the business plan was for the financial year and indicated the source of funding and targets. It was submitted to the Minister because he was the executive authority and he worked with the Advisory Board in carrying out his mandate.

Mr Radebe said the Minister needed the reports as he himself had to table a report before Parliament.

Mr Hill-Lewis discussed Clause 30(1), on the withdrawal of designation of a SEZ. He said his earlier amendment, dealt only with the first point, of furthering of government’s industrial objectives, and of Section 4, but this clause did not refer to the purposes of section 4, only to the first point in section 4. He felt it would read better if it said after the word ‘gazette’, ‘…withdraw the designation of an area as special economic zone which does not further the objectives of section 4.’ with the rest of the section remaining as it was.

Mr Ngqaka did not feel this would be a problem.

Mr Ngqaka brought to the attention of the Committee the proposed deletion of the clause about the withdrawal of an operator’s permit where the Commissioner of the South African Revenue Services had to consult with the Minister. SARS had approached the Department and said that the clause should not be removed because the clause allowed direct communication between the Commissioner and the Minister in the light of the Minister of Finance not having direct access to information due to confidentiality clauses. SARS had called for an urgent follow up meeting with the dti.

Adv Strydom referred members to clause 35(4) in the A Bill where it called for the omission of paragraph (c). The Department was now proposing that sub clause (c) be retained.

The members agreed to this subject to the meeting of the Department with SARS.

Mr A Alberts (Freedom Front+) asked if the Minister’s strategy plan would be brought before Parliament like IPAP. Should Parliament, as a matter of course, always be consulted when policy decisions like the strategy plan was made.

The Chairperson said that as changes in legislation came back to Parliament, he was probably talking of secondary legislation, like the regulations, and that in some cases the Committee had indicated that the regulations should come back before the Committee. She said that he had the prerogative to call the Minister to bring the regulations before the Committee.

The Committee agreed to consider this matter in the constituency period.
 
The meeting was adjourned