Electronic Communications Amendment Bill [B17-2013]; ICASA Amendment Bill [B18-2013]; SA Postbank Limited [B25-2013] & SAPO SOC Ltd Amendment Bills [B24-2013] : Deputy Minister briefing

Meeting report

The Chairperson suggested the briefings begin with Electronic Communications Amendment Bill, followed by the Independent Commission Authority of South Africa (ICASA) Amendment Bill, the South African Post Office SOC Ltd Amendment Bill, and finally the South African Postbank Limited Amendment Bill.

Ms J Kilian (COPE) suggested looking at the bills with a critical deadline first.

The Chairperson noted that the order of presentation was not indicative of importance. The Bills being presented were currently out for public comment with a deadline of 16 August.

Introduction by Deputy Minister of Communications
The Deputy Minister of Communications, Stella Ndabeni, began by introducing the delegation and noted that Mr Willie Vukela Chief Director, ICT Postal Policy, was experiencing flight delays and would be late, but upon arrival would present his portion. She noted that the Department of Communications (DoC) felt it was necessary to have these amendment bills to clarify certain sections of the Acts as there had been different interpretations of these sections that need to be alleviated. She noted the importance of competition in the Communications sector as it led to healthy business - with this she noted the necessity for the harmonization of competition processes. The state of the Universal Service and Access Agency of South Africa (USAASA) was addressed, and the changes would require a great deal of adjustment in USAASA's functioning.

Deputy Minister Ndabeni said that the DoC had decided to defer some issues, including the establishment of a Spectrum Management Agency. This was because more research had to be done to establish what it should be and the scope of its mandate. The spectrum was a scarce resource that belonged to the government but was used by other key components, this was why the DoC required more time to address the issue. They intended on working with other agencies to establish this and present a plan to Parliament. The revision of the ownership provisions was based on the purpose of use of the spectrum.

Electronic Communications Amendment Bill briefing
Ms Mameetse Mphahlele, DoC Chief Director, ICT Economic Policy Development, said that the Electronic Communications Act (ECA) had been in effect for seven years but vast changes had occurred during that time span that created the requirement for new amendments. The ambiguity of the ECA had led to interpretation challenges which was another reason for amendments. The market failures of the past as well as the high cost of communication were taken into account when they decided to revisit the ECA. The initial Act repealed the Telecommunications Act of 1996. The ECA was created to foster convergence in the ICT sector. It provided separation between the policy-making and regulation roles of the Minister and the Independent Communications Authority of South Africa (ICASA) along with providing the legal instruments to encourage competition in the sector. The ECA protected the interests of the consumers and encouraged strategic investment and innovation. Ms Mphahlele noted that decisions made by the High Court had dated some parts of the ECA as evidenced by the Altech case of 2008. The speed at which technology had been developing was a large factor in the decision to amend the ECA.

There had been a period of consultation to consider what changes should be made to the ECA which received such a response that it had to be extended by two weeks. Over 40 written submissions had been received with over 500 pages to consider; the ECA was revised in accordance with these submissions. The process entailed government consultation with the Infrastructure Development Cluster, the Competition Commission and the Department of Finance. The changes were presented to Cabinet and received approval in May 2013 and it was subsequently introduced into Parliament in July 2013.

The objectives of the amendments included:
▪ Insert new, amend existing and repeal obsolete definitions;
▪ Align the ECA with the provisions of broad-based economic empowerment legislation;
▪ Refine provisions related to licensing;
▪ Decrease turn-around times for consultative processes;
▪ Make further provisions towards ensuring effective competition amongst persons licenced under the Act;
▪ Remove regulatory bottlenecks;
▪ Require the Minister of Communications to establish a council to advise the Minister on broadband policy and implementation;
▪ Make further provision for the discounted rate at which internet services must be provided to schools and other educational institutions;
▪ Authorise the Minister to require that certain information be submitted to the Minister;
▪ Make provision for the fiduciary duties of members of the Board of the Universal Service and Access Agency of South Africa;
▪ Provide afresh for the appointment and conditions of appointment for the utilisation of money in the Universal Service and Access Fund.

The presentation continued by listing the specific definitions that were changed, added or deleted to ensure that the definitions in the ECA were properly aligned to the standards of the International Telecommunication Union (ITU), were not outdated or inadequate due to technological advancement. Definitions changed to meet ITU standards included: assignment and allocation. A definition of broadband was added to the Act as well as clarity on the definition of days which refer to calendar days and not working days. The definition of common carrier was revised to ensure that anyone who provided signal could not do so in a exclusive or discriminatory matter.

The only change made to Section 2 was the phrase “historically disadvantaged persons, including black people” was changed to “broad-based black economic empowerment.” The amendment to Section 3 had allowed the Minister of Communications to issue policy directives to USAASA in addition to ICASA. To align the Bill with ITU regulations and the Cabinet-approved Radio Frequency Spectrum Policy for South Africa, words had to be substituted in Section 4. ICASA now had an obligation to inform the Minister in regards to their intent to make regulations.

Changes to Chapter 3: Licensing Framework (Sections 5-19 of the Act) included the closing of some loopholes, and called for strengthened coherence between ICASA and USAASA. ICASA had the power to impose additional terms and conditions to any individual or class licence subject to the provisions of Chapter 10.

The Licensing Framework chapter covered changes to the application for and granting of individual licences. The DoC was working to ensure that the legislation cohered with the Broad-based Black Economic Empowerment (BBBEE) regulations and that it was reflected in the licensing framework. This section included the amendment that written consent must be obtained from ICASA if someone wished to let, sub-let, cede or transfer the control of an individual licence. This provided greater oversight for ICASA which addressed one of the issues which was causing problems. In respect to class licences, the Amendment Bill stated that ICASA may issue a class licence provided that the class licence provided by one individual did not collectively assume the scope or coverage of an individual licence. The amendment addressed the concern raised that ICASA had been reacting too slowly to applications for licensing. This issue was taken into account by stating that if ICASA did not reply to a licensing request in writing within 30 days it would be deemed that permission had been given. This would ensure that ICASA was delivering more prompt responses.

Chapter 5: Electronic Communications Networks and Facilities (Sections 20-29) were where the major work was to be done. These sections dealt with ICT infrastructure. Ms Mphahlele noted that the current Act talked about guidelines. This proved to be an issue as many had deemed the term too vague. To combat this any mention of the word guideline had been replaced by policy or policy directions - this would take away the legal uncertainty of the term. To create the proper infrastructure and harmonisation between the government and municipalities there had to be a way to fast track work so that things could keep moving. This meant governmental departments working in cohesion to ensure the proper measures were in place to get the job done.

The DoC addressed Chapter 6: Radio Frequency Spectrum Policy stating that the concept of assignment was introduced to confirm ICASA's licensing role in this regard and would assert the authority they had. Once again ICASA was responsible for giving written consent for any form of transfer of a radio frequency spectrum licence and a decision about an amendment to a licence must be made within 60 days. The amendment in section 35-36 closed a former loophole by stating that anyone possessing equipment and facilities must obtain approval from ICASA.

The amendments to Chapter 7: Interconnection were regarded by the DoC to be very important. The focus had changed from financial feasibility to economic feasibility in situations of facility interconnection. This shifted the focus from costs to benefits. The amendments provided clarity on how essential facilities were to be treated and provided promptly - this method promoted a non-discriminatory access regime.

The presentation skipped to amendments to Chapter 9: Broadcasting Services. The amendments stated ICASA had the power to regulate the scheduling of infomercials, programme sponsorships and advertisements, this was a change as they were previously regulated under regulations issued in 1999. The common carrier must submit its tariffs for approval by ICASA before they could be implemented. Provisions such as these would provide strengthened regulatory oversight.

Chapter 10: Competition put in place provisions to encourage a competitive market place. ICASA was permitted to prescribe regulations to determine markets which had ineffective competition and could subsequently impose pro-competitive regulations on such licences. The ECA was amended to contain a list of pro-competitive licence terms and conditions.

Ms Mphahlele presented the amendments to Chapter 13: General. These amendments included that the public could access government directory, information and related services free of charge. This system was currently being provided by the State Information and Technology Agency (SITA) on behalf of the Department of Public Service and Administration. The wording of the ECA was changed to ensure that no licensees may collect or charge any calls made to the centre. The Minster of Communication was empowered to establish a National Broadband Council to advise the Minster. Further adding to the powers of the Minister was the addition of an amendment to ensure the Minister had access to information held by ICASA, USAASA or any other person if the information pertained to the performance and function of the Minister. The e-rate provision was extended to all public and private schools as well as to all private and public institutions of higher learning.

On Chapter 14: USAASA, Ms Mphahlele stated that the provisions made it clear that USAASA was subject to the Public Finance Management Act of 1999. The amendments continued by strengthening the provisions in place for the good governance of USAASA. These provisions in the ECA included a framework for the removal of any Board member where good cause was shown by the Minister that the Board member had violated their role or duties as a member. The roles and duties of the Board members were explicitly spelled out. The conditions and termination of employment for a CEO had been added to the ECA. The conditions under which a CEO could delegate powers to an employee of the Agency and the statement that the Agency was under the direction and control of the CEO had also been added to the ECA.

Amendments to Sections 80-91 of the ECA focused on the Universal Service and Access Fund (USAF) run by USAASA. Amendments stated that the Minister of Communications, acting in concurrence with the Minister of Finance, may prescribe additional uses of money in the USAF from time to time. This section was amended to state that ICASA was required to review the definition of 'under-serviced areas every two years, and USAASA must make recommendations to the Minister every two years to determine the meaning of need persons. USAASA was given the responsibility of collecting any money owed to the USAF from the Authority.

Discussion
Before questioning could commence Ms AF Muthambi (ANC) requested a small break for a caucus meeting which was granted by the Chairperson.

Thereafter, questioning began with Ms J Kilian (COPE) who began by asking for some clarity in regards to the background of the bill. She stated that she knew the importance of the issues addressed but asked if the current process was not jumping the gun as there had yet to be a policy review process. Ms Kilian requested clarification in regards to who was the main department in control of this Act as previously the responsibilities had been divided into different departments. She asked if the presentation today meant DoC was the party responsible? People in remote areas were still not receiving service, thus USAASA had failed the mandate set out for them. Did ICASA have the capacity to deal with the extension of the operations being assigned to them as they had already been stretched quite thin?

Ms M Shinn (DA) noted that the bills had been extensively revised and that she believed that this was a step in the right direction. She did however express her concern with the time frame to process the bill, she asked if the House Chairperson had been consulted in regards to the scheduling of Parliament and whether it was realistic to process four bills. She questioned whether this process was under too many time constraints.

Ms Muthambi noted that the ANC had requested a mini caucus meeting to address some of the issues subsequently raised by Ms Kilian and Ms Shinn. She noted that the policy review process informed the legislative programme and that ICASA was a Chapter Nine institution.

Deputy Minister Ndabeni stated that the policy review process came to an end in March 2014 and the ensuing legislation went into place in 2015. However, it was necessary to take into account issues that need intervention in the near future rather than waiting any longer. The DoC was playing a critical role in acting proactively to try and progress the processes necessary, including broadband rollout.

Mr Themba Phiri, DoC Deputy Director General: ICT Policy Development, addressed the comment about ICASA being a constitutional institution and stated that no measures relating to this had been tampered with.

Ms R Morutoa (ANC) indicated that she believed that for one of the first times in this Committee, all parties were in agreement about the policy review. If not done properly, the review process would just have to be repeated again the following year. With regards to the structure of USAASA, it would determine who would be working for USAASA and would determine whether the current structure was appropriate.

Mr C Kekana (ANC) asked the DoC whether this was the time to sit back since they stated that the policy review would finish in 2014 and the implementation would be in 2015. They needed to act with purpose and their actions must coincide with the policy review. Even if the policy review was not complete, they must act and hope that their actions align with the policy review in the future.

Ms Kilian said that since they were attempting to amend four Bills they would have to be classified as priority to be passed. She asked the DoC delegation what provisions could be put in place to enable better oversight while the policy review was done. The right to pass bills rested with Parliament so they could potentially pass certain critical aspects of the Bill and wait for the rest.

The Chairperson stated that he was sure that no Member would say it was fair for children in schools to not have internet access for two years because they had to wait for a policy review. The processes of Parliament were not the concern of the DoC, but rather of the Committee and the Committee must address them.

Deputy Minister Ndabeni replied that the DoC understood the role of the legislative arm in this process and noted that the issues they had presented were those previously raised by the Committee. She noted the prior criticism that some of the changes violated the duties of ICASA but this was not an issue as the changes did not violate the Constitution. Ms Kilian raised a good point by asking who was the lead in this project, the DoC was the leader but they would be working with key role players throughout. During his State of the Nation address President Zuma gave a clear mandate that broadband must be rolled out nationwide. She agreed that waiting until 2015 was far too long and that action must be taken. She appealed the Committee that this was a major plan, connecting people and aiding businesses, as well as forming new spectrum allocation provisions essential to the future prosperity of the country.

Mr A Steyn (DA) indicated that the decision regarding the time frame for processing these Bills would not be able to be made at that moment as they did not have all the information required to do so. There was much work to be done on these Bills and when the Committee had all the information, further steps could be taken. He stated his desire to continue the presentations on the other Bills.

Deputy Minister Ndabeni shifted the focus of the meeting by beginning to explain the importance of the Postbank and Post Office Bills, stating that the reason they created these Bills was to offer an alternative to the "Absa Banks" for those who needed one. In order to obtain a banking licence, the Postbank had to comply with what the Reserve Bank requested of them.

Mr Kekana stated the Postbank had been in discussion for a long time and the objective should be to provide a service for the poor but one which was sustainable. There were similar practices all over the world and a model for South Africa had been theorized about enough and it was time to implement.

The DoC noted that Mr Vukela had still yet to arrive so they would instead present the ICASA Amendment Bill in the meantime.

ICASA Amendment Bill briefing
Deputy Minister Ndabeni giving a brief insight to the background of the changes being made to the Bill. It had been observed that over time the operations of ICASA needed to be updated to meet the changes that had occurred. The challenges faced by ICASA were in their scope of operations, as well as their accountability and effectiveness. The DoC noted that these challenges had arisen from the institutional design, legislative design, policy constraints, regulatory framework and the lack of an institutionalised framework for monitoring performance. These challenges had led to the slow functioning of the decision making process, a lack of visible policy goals and a lack of general engagement with the stakeholders.

Consultation on the Bill was subsequently extended by two weeks due to the written requests of some stakeholders. Tthere were more than 30 written submissions received and all submissions were analysed. The Deputy Minister noted the DoC's desire to ensure that the work between ICASA and its stakeholders improved.

Ms Mphahlele took over the presentation and noted the objectives of the ICASA Amendment Bill:
▪ Inserting new, amending existing, and repealing obsolete definitions
▪ Providing further clarity on the powers and duties of ICASA
▪ Introduce mechanisms to ensure the accountability of committees and ICASA and councillors
▪ Confirm the use of electronic communications networks and services for the purpose of electronic transactions.

The amendment made to Section 3 included the addition of a new subsection which clarified the process which someone must go through if they were aggrieved by the actions, decisions, or findings of ICASA. These complaints would be handled by the Complaints and Compliance Committee (CCC) and would require the use of the court system.

Section 4 was amended to included the provision that ICASA had the authority to make recommendations to the Minister on matters to be dealt with or previously dealt with in regards to the Electronic Transactions Act. The amendments noted that the ECA had only provided ICASA with limited sanction abilities and no ability to determine penalties or further sanctions. These powers were introduced in the Amendment Bill. Although separate legislation existed for the regulation of the postal services sector, it was found to be more appropriate if they were brought into the same section so that ICASA's scope was clear. It was deemed necessary due to ICASA's stature as a multi-functional regulatory authority. ICASA was directed to conclude concurrent jurisdiction agreements with other institutions and these agreements must be reviewed every three years. The amendments addressed the powers of delegation of the Council noting that no one Councillor or Committee of ICASA had the power to make a decision about licensing.

Sections 4B and 4C dealt with the time frames that ICASA was required to deal with inquiries. These time periods had been shortened to render results more quickly, but for cases in which substantial research was needed the period could be extended. The word “day” in this context referred to business days.

Section 5 included amongst the qualifications and expertise of persons appointed as councillors: experience and knowledge in the area of information technology and consumer protection. The amendments to Section 6A reinforced the collective decision making of the Council and stated that it was more appropriate to measure the performance of the Council rather the performance of an individual. These reviews were to take place once a year at minimum.

Ms Mphahlele noted in Section 7: Terms of Office, that a Chairperson could be appointed for one additional term after the initial term for a period of five years. The Chairperson had to vacate office within 45 days after the term had expired. Section 7 was amended to include the provisions that councillors were required to serve full time unless they were involved in academic pursuits or occupied office as members of public interest bodies or organisations. However these situations must be coincide with the Code of Ethics and be disclosed in the Register.

Section 11: Meetings of Council amendments stated that Council was to meet at least once a month and the Chairperson could appoint an acting chairperson who was a councillor if unable to attend. The CEO must be invited to attend meetings of the Council but did not have the right to vote. Amendments to Section 11A further added to meeting protocol stating that meeting minutes would be published on the ICASA website within 14 days of the minutes being confirmed and signed. A further amendment stated that any decision regarding a licensing or regulatory matter by the Council must be made available to the public.

Amendments to Section 11B were in regard to the introduction of a Code of Ethics which would be introduced to improve governance and accountability. Ms Mphahlele stated that the new Code of Ethics echoed the principles that Chapter 9 Institutions were expected to uphold. This code included a provision stating the implementation of a register for the declaration of gifts, benefits and gratuities received or derived by councillor. This register would be presented to the National Assembly and would be open for inspection by the public.

The DoC had addressed a concern of the Committee about punishment for malpractice by councillors by adding a section on conflicting interests which stated that the amount of a fine for failing to disclose an interest in a matter before the Council meeting would be increased from R250 000 to R1 million. Ms Mphahlele stated that this would serve as a deterrent that was previously not in place to discourage malpractice and promote transparency and good governance.

The goal of the amendments made to Section 14: Staff and 14A: Appointment of Experts was to tighten the provisions related to the staff and administration of ICASA. These amendments included enabling ICASA to appoint experts from outside the country without first seeking permission from the Minister. It stated that staff must carry out the day to day operations of ICASA as directed by the CEO in accordance with their annual plan. The provision calling for an annual plan was noted in Section 15A. This would provide the ability to more accurately forecast time frames and the funding requirements of ICASA. Section 14C was amended to improve the confidentiality of sensitive information.

Amendments to Section 17A called for the establishment of the CCC and stated that members were to be appointed for a term of three years with the ability to renew for one additional term. The amendment clarified some procedural matters with the CCC including the provision that that persons who were not licencees but who were in breach of the Act or the underlying statutes were able bring a complaint or a dispute to the CCC. This applied to licencees. The amendments made to Section 17F were to strengthen the relationship between Council and inspectors appointed to investigate complaints and the like on behalf of ICASA. The provisions note the documents that inspectors must present when applying for a warrant for investigation. Amendments to Section 17H accounted for the value of money having risen since the Act first passed by raising penalties and fines. This would serve as a further disincentive to licencees who wish to operate outside the scope of legislation.

Discussion
Ms Shinn commented that since this Act was only bested by the Constitution it was very important for it to be correct.

Ms Kilian stated that the structure of ICASA had been the topic of discussion in the Committee and that many of their concerns had been addressed in the presentation. She noted the impact this Act had across many different sectors and asked the DoC if these changes were going to be effective and if they could be implemented with the current staff the ICASA had.

Deputy Minister Ndabeni responded by affirming the confidence of the DoC in the ability of ICASA to fulfill the mandate set out before them. The new provisions provided for more accountability amongst employees as they clearly demonstrate the work that had to be done and the regulations that had to be followed. ICASA would require additional funds to implement some of the changes. This decision lay within the powers of Parliament and it was ultimately its decision to determine how effective and fast this Bill would be put in place.

Ms Mphahlele noted that the DoC had done studies which compared ICASA to international regulators and discovered that ICASA was the only regulator that was a Chapter 9 institution and the only one with a full time council.

The Chairperson noted that in some countries the regulators and related policy was pushed by the Ministers and that this project would require some unbundling of the regulators.

Ms Muthambi asked since the DoC was presenting so much information today, which amendment process was the most important. She asked if reducing the number of councillors had been considered.

Ms Kilian spoke on the financing of ICASA and stated that in the past they had given money to ICASA and had received an ineffective institution in return. She asked if any models had been consideredinvolving payments made to Treasury for spectrum fees and licensing fees. This would make licencees more accountable and ensure that payments were being made.

Ms W Newhoudt-Druchen (ANC) asked if there was in fact no Code of Ethics at this stage and who was responsible for creating it.

Deputy Minister Ndabeni replied that they had considered a hybrid funding method in which they used government funding and where ICASA was allowed to keep a portion of the fees it collected but these matters would be dealt with in more detail by the ICT policy review. She noted that the Act stated that the Code of Ethics would be developed by the Minister.

Ms Muthambi asked if the DOC took some of the responsibilities of ICASA, would it limit its independence?

Ms Morutoa asked how issues of this nature were addressed in other countries and what countries did South Africa look at as examples.

Deputy Minister Ndabeni replied that the amendments provide ICASA with the ability to delegate certain tasks involving the spectrum. If this was not the case, its scope of action would be too great to handle.

Mr Phiri stated that the issue of a spectrum agency was outlined in the White Paper on Broadcasting. He noted that Members must acknowledge that spectrum was a scarce resource which was one of the reasons it was controlled by government and the role of the DoC was to domesticate the provisions put in place for spectrum management.

Ms Kilian commented that issues such as what countries were being followed as examples on how they would manage spectrum had to be to an extent that was not considered government politicising.

The Chairperson noted that countries where Ministers were driving policies in communications were more progressive in this regard than in South Africa and the problems of having an independent regulator must be solved.

Deputy Minister Ndabeni went back to Ms Morutoa's question about what countries South Africa was looking at as examples of regulators by stating that they had bench-marked the United States, India, the United Kingdom, Australia and Botswana.

Mr Kekana reminded the DoC that communications, roads and railways were the pillars for economic development and these amendments were crucial.

South African Postbank Limited Amendment Bill briefing
Deputy Minister Ndabeni commented that primary reason for amendments to the Postbank Act was to ensure that it was properly aligned with the Banks Act.

Mr Willie Vukela Chief Director, ICT Postal Policy, gave a brief background to the Postbank Act, which was brought put into place in July 2011. Its purpose was to incorporate the Postbank division of the South African Post Office and it must be registered as a bank after the requirements of the relevant banking legislation was met.

During the implementation of the Act, the South African Reserve Bank (SARB) Deputy Governor wrote to the Minister highlighting some provisions in the Postbank Act that were inconsistent with the Banks Act. Some provisions gave the Postbank an unfair advantage over other registered banks because they allowed the Postbank to be awarded a licence without meeting the requirements that the others had to meet. Following thse concerns, the Legislative Review Committee was formed which was comprised of SARB, the National Treasury, SAPO/Postbank and the DoC.

The Office for Banks was responsible for registering banks and enforcing all the requirements of the Banks Act as well as the supervision of institutions registered as banks. This supervision entailed covering the establishment of certain capital and liquidity requirements, the continual monitoring of the institution's adherence to the legal requirements formulated in terms of supervisory standards, guidelines and statements of best practice recommended by the Basel Committee on Banking Supervision (BCBS). These practices were in place to adhere to the mission of promoting the soundness of the domestic banking system in South Africa.

After reviewing these responsibilities and concerns it was determined that amendments needed to be made to the Postbank Act. The Postbank had become a separate public entity to avoid infringing the powers and functions of the Office for Banks. Mr Vukela reiterated that these amendments were to remove any inconsistencies with the Banks Act.

The Amendment Bill sought to address and change 14 clauses as follows:
Clause 1: delete the term “Registrar of Banks” since it was deemed redundant.

Clause 2: amend section 3 of the Act which dealt with the incorporation of the Postbank through the deletion of the exclusion of section 37 of the Banks Act. Section 37 dealt with the permission to acquire shares in a bank or bank controlling company, with that inclusion it enabled the Office of Banks to monitor and approve share acquisitions.

Clause 3: delete section 4 of the Postbank Act because it dealt with the registration of Postbank as a bank; this would ensure that Postbank would adhere to the same requirements as others as laid out by the Banks Act. The removal of this section ensured that there was no overlap between the Banks Act and the Postbank Act.

Clause 4: delete section 8 of the Postbank Act which addressed tax liability; this was deleted because it should have been the subject of a Money Bill carried out by the National Treasury.

Clause 5: amend section 9 of the Postbank Act as it overlapped with the Banks Act in regards to some of the powers and duties listed. This clause ensured that the Acts did not conflict and that the Bank Act was the primary source of guidance.

Clause 6: insert an additional requirement in section 13 of the Postbank Act to clarify that no person would be appointed or remain a Board member if not deemed fit and proper to hold office as set out in the Banks Act.

Clause 7: amend section 14 of the Postbank Act to remove references to “fit and proper” and the required “concurrence of the Registrar of Banks” because the additions noted in clause 6 negated the need for them. Clause 7 ensured the alignment of section 14(1)(b) with section 8(5) of the South African Post Office SOC Ltd Act.

Clause 8: delete section 15(2)(e) since it was deemed unnecessary following the additions to section 13.

Clause 9: amend section 18 to make it clear that the Managing Director of the Postbank must be fit and proper to hold the office of Chief Executive Officer of a banking institution, as contemplated in the Banks Act.

Clause 10: amend section 25 to ensure the power of the Minister to intervene once the Company was registered as a banking institution in accordance with the Banks Act. This amendment was an addition to the section of the Bank Act which provided guidelines to addressing mismanagement.

Clause 11: amend section 26 of the Postbank Act to remove the requirement of the Minister to make policies for the Postbank. This change was made because Postbank had to adhere to the regulations relating to Banks which were subordinate only to the Banks Act. The mission of the Office of Banks was to promote the soundness and good practices of the domestic banking system and it was deemed that if Cabinet was required to approve policies and changes to policies it would compromise this objective.

Clause 12: insert a new section 26A which stated that the in the case of conflict between the provisions of the Banks Act and the Postbank Act, the Banks Act would prevail.

Clause 13: amend section 30 of the Postbank Act which stated that an exemption under the Banks Act applicable to the former Postbank immediately prior to the transfer date shall apply to the South African Postbank SOC Limited until it was registered as a bank as contemplated in section 3. This ensured that the Postbank continued to operate as an entity of the South African Post Office until it was registered as a bank in terms of the Banks Act.

Clause 14: noted the short title of the Act as the South African Postbank Amendment Act, 2013.

Mr Vukela said departments and stakeholders had been consulted, including the Department of Finance, the South African Reserve Bank, the South African Post Office SOC Ltd and the Postbank Division of the South African Post Office. The Bill had been published in the Gazette for public comments.

The presentation concluded with the statement that the alignment of the Postbank legislation and the Banks Act would fast-track the corporatisation of the South African Postbank. The legislation realised the goal of creating a financial institution for the mass mobilisation of savings and investment from the broad community and created a bank of choice for the lower income group.

Discussion
Ms Shinn remarked that the slides were marked confidential and wondered why.

Mr Kekana noted that the Postbank must come to fruition as it was a vital link between urban and rural areas which allowed for the transfer of funds between the two.

Ms Kilian noted that this Act had been been processed by Parliament quite some time ago and its lack of implementation, made the Committee look bad. It had taken too long considering there was little disagreement between parties about what had to be done and after three years there was still no implementation. She believed that this piece of legislation must be prioritised as it provided a key asset to those who previously had not been able to obtain banking.

Mr Vukela replied that Ms Kilian was correct in stating that this Act had been in the works for quite some time and agreed that it must be processed now as too much time had passed. He noted a significant change in the Act related to the Minister. The Minister no longer had powers. No longer could the Minister make regulations or be a shareholder, this enabled the Act to provide more transparency and better governance. He stated that if this Bill were to be passed, it would be one of the best pieces of legislation they had done.

Ms Kilian asked for clarification as to whom the Postbank was required to report to.

Mr Vukela noted that the Postbank would be required to report to the Registrar of Banks and that it would operate on the same lines as other banks, receiving no special treatment. This removed some of the autonomy of the Postbank and subsequently held it more accountable.

Afternoon session
South African Post Office SOC Limited Amendment Bill briefing
Deputy Minister Ndabeni noted that the purpose of the Bill was to review some of the old provision that had become dated and update them to comply with modern Acts. These changes were done at the request of the Constitutional Court.

Mr Vukela took over the presentation and explained that the Post Office Pension Fund was established in October of 1991 and was done in terms of the Post and Telecommunication-Related Matters Act of 1958 (PTMA) and was subsequently renamed the Post Office Retirement Fund (PORF) in 2005. The pension fund was operated by a Board of Trustees as a separate legal entity from the South African Post Office (SAPO). Problems arose when a Ms Ngewu applied to the Constitutional Court for relief that would allow her to obtain immediate payment of her share of the pension interest benefit from her former spouse's pension fund which was awarded to her upon their divorce. The PTMA did not address any “clean break” principle when the case involved divorce - thus not allowing spouses to access their share of the pension benefit upon divorce. The Constitutional Court found that the PTMA was inconsistent with the Constitution because it did not provide a “clean break” provision. The Court subsequently suspend the order for eight months in order for the conflicting legislation to be addressed. This process had to be completed by 11 November, 2013.

The objective of the amendments was to transfer pension related provisions from the PTMA to the South African Post Office SOC Limited Act. Upon doing so, it called for the payment of pension interests to the former spouse upon their divorce or dissolution of a customary marriage. Governance provisions between the Post Office and the Postbank would also be improved. The amendments sought to improve and strengthen the governance relationship between SAPO and the Postbank as its subsidiary by ensuring that all members of the Postbank Board were fit and proper persons as noted in the Banks Act.

The Amendment Bill was divided into seven clauses which were:
Clause 1: Sought to insert new definitions for “child”, “Post Office Retirement Fund” and “rules”

Clause 2: Sought to replace the words “Post Office Act” with Post and Telecommunication-related matters Act wherever it appeared in the Act.

Clause 3: Amended section 8(2)(a) by removing the requirement which stated that the Managing Director of the Postbank must be one of the members of the Post Office Board. It amended section 8(5) by removing the requirement that when the Board recommends persons for appointment to the Board of the Postbank they must nominate non executive members of the Board of the Post Office. This was amended to ensure that the appointment criteria of the boards of SAPO and Postbank aligned.

Clause 4: Sought to amend section 11(4)(c) to ensure members of the Board were fit and proper persons to manage the affairs of the Post Office in its capacity of a controlling company as in section 44 of the Banks Act.

Clause 5: Called for the insertion of provisions that were necessary to ensure the continued existence of the PORF and the matters pertaining to it:
▪ Clause 5.1 called for the continued existence of the PORF, this clause was necessary because it ensured the continued existence despite the repeal of section 9 of the said Act by the Bill.
▪ Clause 5.2 called for the continuation of the Rules of the PORF that were made under section 10 of the PTMA despite the repeal of the section by the Bill. These rules provided for proper control and management of the fund.
▪ Clause 5.3 was added to ensure the financial sustainability and feasibility of the PORF and ensured that the PORF was properly monitored.
▪ Clause 5.4 protected the benefits of the members of the PORF during their membership and upon their exit from the fund. It allowed the PORF to make certain lawful and regular deductions from the benefits of members when such members ceased to be members or when they exited the fund. It further enabled the PORF to amend its rules to give effect to the “clean break” principle.
▪ Clause 5.5 sought to protect, preserve and safeguard the benefits of the members of the PORF against claims of creditors. The provision ensured that the pension benefit may note be attached if a beneficiary becomes insolvent, the benefit revives after rehabilitation and the claims of creditors were satisfied.
▪ Clause 5.6 this clause was based on section 10D of the PTMA and was necessary to enable the PORF to convert to a private pension fund by becoming registered under the Pension Funds Act which was subjected to the approval of the Minister of Communications after consultation with the Minister of Finance. This provision was deemed necessary because it was foreseen that the statutory funds may in the future be required to become private funds to align with the terms of the Pension Funds Act.
▪ Clause 5.7 this clause allowed members of the PORF to remain members if they had been transferred or seconded to a subsidiary company of the Post Office.
▪ Clause 5.8 called for the continuation of the tax rights and benefits noted in subsection 8(4) of the PTMA. These rights and benefits apply to officers and employees of the DoC that were transferred to the Post Office and were required to continue until all such officers and employees had exited the PORF.

Clause 6: This clause provided for the repeal of the law mentioned in schedule 1 of the Act.

Clause 7: The clause for the short title which was the South African Post Office SOC Ltd Amendment Act, 2013.

Mr Vukela noted that the Departments of Justice and Constitutional Development, Department of Finance, SAPO, PORF, Telkom South Africa, the Constitutional Court and civil society via a call for public comments in the Gazette were consulted in this process.

The presentation concluded by reiterating that the main purpose of the Bill was to allow for the transfer of pension related provisions in SOPA to be moved from the PTMA to the South African Post Office SOC Ltd Act. Mr Vukela noted that the inclusion of the “clean break” principle was added due to the court finding that the exclusion of such a principle was unconstitutional.

Discussion
Ms Kilian again noted that the presentation was marked confidential and wondered why.

Mr Vukela responded that this was because the presentation was previously brought to Cabinet and at that time it was confidential The removal of this word for this presentation had been neglected.

Mr Kekana asked if when the Bill was passed could they call their relatives who had previously been denied claims. He wondered if the Act would act retroactively for those who were affected by the law of 1958.

Mr Vukela acknowledged that this was a very good question and noted that situations such as that mentioned by Mr Kekana had occurred elsewhere but this case was quite groundbreaking because it had previously never happened due to the considerable court requirements. This issue would have be further studied and consultation would have to be done in order to provide the Committee with a better answer.

The Chairperson thanked the DoC for their presentations.

South African Broadcasting Corporation (SABC) board nominations
The Chairperson noted that a meeting was planned for the following day to address this but since Members had training the following day they had to address the issue now if members agreed.

Ms Muthambi noted the importance of their training the following day and agreed.

The Chairperson noted that the nomination process had closed and they had received 147 nominations for the 12 places available. He noted that they had received a request for an extension and the Committee must discuss this.

Ms Muthambi noted the letter received dated 19 July asking for an extension to the deadline. If an extension was given it would had to have been an open extension so as to provide equal opportunity and avoid special treatment.

Ms Shinn noted that the Chairperson had approached Members individually on the day the request was sent and she had responded, but was of the opinion that if 147 people could get their nominations in on time why could this one not?

Ms Kilian agreed and noted that situations such as this had occurred in the past and that they were rejected. If one person was given an extension they would have to open up the entire process again which she believed would make a mockery of Parliament. She firmly believed that opening the process again would be ludicrous.

The Chairperson noted that judging the strong reaction of the Members, an extension should not be granted. Nevertheless it was required that it be brought forth to the Committee and discussed.

Ms Kilian asked whether the issue of the signing of the acceptance form would be addressed as in the past people had been nominated for a position and had not accepted or completed the proper forms.

The Chairperson stated that when applications were received, the Committee Secretary communicated with those who had incomplete applications. After this process, if the person's documentation was still incomplete how could they be expected to be held accountable as a board member if they could not account for themselves? He also pointed to the fact that they had only 12 positions for 147 nominations.

Mr Steyn asked for clarification on whether a decision had been made to address the extension request. Only individual opinions had been stated. A decision should be put on record.

The Chairperson noted this and stated that it was the opinion of the Committee that no extension would be granted.

Ms Morutoa suggested a shortlist of 30 candidates should be made.

Ms Shinn suggested a shortlist of 36, which was three times the amount needed. This would streamline the process and enable the Committee to thoroughly interrogate nominees.

Mr Steyn noted that he would be comfortable with either number stating that depending on the quality of candidates, they should have a minimum of 30 and a maximum of 36.

Upon agreement from the other Members, a minimum of 30 candidates and a maximum of 36 candidates would be shortlisted.

Mr Steyn asked whether the verification process had occurred and the 147 nominees was the final number.

The Chairperson stated that the verification process was to be completed by October and that it was a difficult deadline to meet.

Ms Kilian noted that when looking at the parliamentary schedule there was much to take into consideration. Such as constituency weeks and prior commitments.

Ms Morutoa asked why they did not shortlist first and verify after in order to cut down on the process, which would take a great deal of time otherwise.

The Committee discussed the interview process by noting how long they could go and that they could be mentally taxing. Block interviews were briefly suggested before being seen as ineffective.

Ms Kilian suggested restricting interview times to an hour as that would ensure that the Committee had to be concise with their questioning. Last time, they did such a process that at times it felt as though the Committee spoke more the interviewees.

The Chairperson agreed with this statement and noted that the Committee did indeed speak too much during interviews and that they would have to cut down on preambles in the future.

Ms Morutoa noted that some Members had commitments elsewhere due to August being Woman’s Month and the time constraints could be too much.

The Chairperson noted her concern.

Ms Shinn stated that if they wished to get the process done in a reasonable amount of time they must have a shortlist in place by the following week.

The Chairperson agreed and noted that this was to be done.

Ms Kilian noted that in the meantime the administrative process could be done in order to ensure it did not create any problems later in the process. She suggested interviews should begin on 27 August and then the Committee could look at detailed profiles beginning during the first week of September.

The Chairperson noted that 26 August to 6 September would be a constituency week so that put a further time constraint on the process.

Ms Shinn suggested working through the constituency weeks to alleviate some of the time constraints faced.

The Chairperson noted that this was a possibility because otherwise the time constraints were very difficult.

It was agreed by all Members that it would be a difficult process due to the time constraints and sheer number of nominations, but they noted that they would begin the following week with the formation of a shortlist.

Before the conclusion of the meeting Ms Kilian noted an issue that would have to be addressed very soon by the relevant departments which was the accusations brought forth in Parliament accusing USAASA of serious fraud.

The Chairperson noted that they would have to look into this issue more seriously and check if any other departments had done any more research into the matter. He wished Members good luck in creating their shortlists.

Meeting adjourned.

[Apologies were noted from the Minister of Communications who was unavailable due to a meeting called by the President; Mr G Schneeman (ANC) and Ms L Van der Merwe (IFP)].