SA Post Office SOC Amendment Bill [B24-2013] & SA Postbank Limited Amendment Bill [B25-3013]: deliberations

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Communications

18 September 2013
Chairperson: Mr S Kholwane (ANC), Acting Chairperson (for a period): Ms R Morutoa (ANC)
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Meeting Summary

The Department of Communications (the DOC) briefed the Committee again on the South African Postbank Limited Amendment Bill, and then on the South African Post Office SOC Amendment Bill. Members reiterated previous concerns that they were not provided with hard copies of the presentation, and a comparison with the Act, prior to the meeting.

DOC noted that the Postbank Act had been due commence in July 2011, when the South African Reserve Bank advised DOC of various anomalies. There were concerns that an unfair advantage was provided to the Postbank, by saying that it could benefit from the grant of a banking licence without having met the licensing criteria. A Task Team, also referred to as a Working Committee, was set up, with representation from the Reserve Bank, National Treasury, DOC and Post Office, to deal with the issues. The contents of the 2005 Memorandum of Understanding between the Ministers of Communication and Finance were explained, stressing that the Department of Finance was supposed to introduce a dedicated piece of legislation exempting the Postbank from some banking requirements, to allow it to fulfil its specific mandate of providing financial services to “unbanked” sectors of society. That legislation was not passed, hence the need to clarify the Postbank Act. Each clause of the Bill was presented and explained. References to the Banks Act were removed, and it was made clear that the Post Office was to be the controlling company for Postbank. Section 9, which referred to realisation of the objects of Postbank, was amended. The requirement for concurrence with the Minister of Finance was removed from certain sections. The Banks Act would prevail, in the event of any conflict in interpretation. Members queried the reasons for removing definitions of the Registrar of Banks, but were satisfied on the explanation that it was no longer referred to in the principal Act. They sought clarity on why there was initially a different arrangement, and whether there was any guarantee offered by National Treasury. They were very critical when the National Treasury representative present could not respond specifically, and commented that this was not the first time National Treasury failed to send suitable representatives to assist the Committee. Later, however, she was able to report back, having consulted with colleagues, that no guarantee was envisaged. Members questioned the meaning and scope of the ‘fit and proper’ requirements. They queried whether advertisement in two national newspapers would not exclude some sectors of society, but did not take the point further. The policy behind the Bill was clarified by Postbank and the DOC. Members went through the Bill again, comparing it to the principal Act, and indicated their in-principle agreement with clause 1, but debated if a more neutral definition was needed for “Minister”. They suggested that clause 2 needed to be in plain language. They agreed with the repeal of clauses 3 and 4, pointing out that the deleted section 8 could well have been unconstitutional. Members asked that, in future, departments must each address letters of confirmation to the Committee on their discussions. Members supported clause 5 and clause 6, although they wanted the State Law Advisers to report back whether the wording relating to the Minister created any administrative vacuum. The concept of “fit and proper” was discussed under clause 7. Members noted the changes in clauses 8 to 14 but did not comment.

The DOC then presented the latest amendments to the South African Post Office SOC Limited Amendment Bill, 2013. In an earlier meeting, the Committee had instructed the DOC to remove everything from this Bill except the amendments that were needed to effect the “clean break” principle, following a ruling of the Constitutional Court, and the clauses specifying when interest must be paid. The repeal of sections of the 1958 Act, relating to the government guarantee, was raised as a concern in submissions, but the DOC and Committee had agreed that this amendment would not be pursued. The Department indicated, and Members agreed with the removal of un-needed definitions from clause 1. Clause 5 was also no longer needed, as it related to the transfer of provisions from the 1958 Act to the 2011 Act, which was not being done now. The Long Title had been amended to address the new scope of the Bill. The Schedule originally detailed several deletions from the 1958 Act, but this was now removed and replaced with a new Schedule, that specified only a new section 10B, dealing with the clean break principle, and a new section 10F, specifying how interest would be paid on the moneys paid out under the clean break principle. Section 10B was worded generally, and would cover the Post Office Retirement Fund (PORF) and Telecom Pension Fund. Different time periods were set out for payment, and for when interest would be calculated. Interest would not be backdated, but would apply only from the date of promulgation of the Bill. Provisions were inserted to deal with what would happen if it was impossible to make payment to the former spouse. Members sought clarity on the interpretation of “days” and, whilst they felt it would be useful to insert “calendar days”, this was not consistent with earlier style and was not really necessary. They were concerned whether the funds should backdate interest, and whether this was likely to be challenged in court. Members agreed, in principle, to the amendments to the Long Title, and clauses 1 to 3. They questioned, in clause 4, whether the Banks Act should not be defined, but the Parliamentary Legal Advisers cautioned against making technical amendments that would not be of real consequence, because the submissions process would delay the Bill’s passing. Members agreed to the deletion of clause 5 of the bill. They were broadly in agreement with the new Schedule, but questioned the reasoning behind different time frames, which were explained as linked to administrative technicalities when money was to be transferred to another pension fund. The DOC was asked to provide cleaned up versions of both Bills for the formal voting process.
 

Meeting report

Opening Remarks
Ms R Morutoa (ANC) begins the meeting by notifying that she had been requested by the Chairperson Mr S Kholwane (ANC) to stand in for him until he was able to attend the meeting. She noted the apologies from those unable to attend, and those who had to leave early.

South African Postbank Limited Amendment Bill: Department of Communication briefing
Ms Rosey Sekese, Director General, Department of Communications, apologised that no copies of the presentation document were distributed, but confirmed that this was the same presentation as given on 6 August 2013.

She noted that the South African Postbank Act (the Act) was signed off by the President on 1 December 2010, with a commencement date of 22 July 2011. The purpose of the Postbank Act was, firstly, to provide for the incorporation of the Postbank Division of the South African Post Office, secondly to provide for the transfer of the enterprise of the division to the new Postbank company, and thirdly to provide for the governance and functions of the Postbank. The Act further provided for the incorporation of the Postbank and stipulated that it must be registered as a bank after it had satisfied the requirement of the relevant banking legislation. During the process of the implementation of the Postbank,; the South African Reserve Bank wrote to the Minister of Communications with some concerns.

At this point, Ms S Tsebe (ANC) interrupted the presentation by requesting a hardcopy of the presentation. When the Chairperson asked if she wanted the meeting to be halted, pending copies being distributed, she confirmed that she merely wanted an assurance that they would be produced.

Ms Tsebe was given a copy, and this displeased Ms W Newhoudt-Druchen (ANC), who said that it was unfair for the Department of Communications (DOC) to favour one member of the committee over others, and requested a copy as well.

The Acting Chairperson agreed that every Member needed a copy.

Mr S Kholwane (ANC) took over as Chairperson.

Ms G Kilian (COPE) raised a point of order, reminding Members and the DOC that she had specifically asked, on the previous day, that copies of the presentation today must be made available. All documents must be provided to the Committee in sufficient time for Members to study them, so that they could do their work appropriately.

Ms Morutoa said Committee Members had valid concerns, and hoped the Department would admit that this was incorrect, since in several previous meetings it had been made clear that supporting documentation was required seven days prior to the meeting. She suggested that the meeting continue.

The Chairperson said the DOC had already made this presentation and what it was expected to do today was to take the Members through the Bill. He hoped that this Powerpoint presentation would speak to each of the clauses, not deviate from the Bill and introduce new issues. He encouraged Members to go through the presentation, which made the reading of the Bill clearer.

Ms Sekese continued to present the slides.

When the DOC was in the process of implementing the Act, the Deputy Governor of the South African Reserve Bank (SARB) wrote to the Minister of Communications, noting that some aspects of Postbank were contrary to the Banking Act. Unless those were corrected, no licence would be provided. The DOC tried to engage with the Reserve Bank, but it was clear that amendment of the new Act would be required. One of the main issues was that the Postbank Act provided an unfair advantage to the Postbank, over other registered banks, by saying that it could benefit from the grant of a banking licence without having met the licensing criteria. Subsequently, in order to ensure that the matter was regularised, DOC agreed with the Reserve Bank on establishment of a committee which consisted of the SARB, National Treasury, the Department of Communication and the Post Office, to address the contentious issues.

She noted the background: Postbank was set out in the 1998 White Paper, and a Memorandum of Understanding (MOU) was signed by then the Minister of Communication and the then Minister of Finance in 2005. The subsequent actions of the DOC on the issue were governed by that MOU, which set out policy and process for the restructuring and the incorporation of the Postbank. The MOU and the Policy recommended that the incorporation process be done in terms of a dedicated Act from National Treasury. It was envisaged that the Postbank needed an exemption from the normal regulation framework governing the normal process, so as to be able to fulfil its primary objectives of providing financial services to the rural people who did not make use of banks, and to strike a balance between the developmental obligation and commercial availability. Due to the delay by the Ministry and Department of Finance in completing the dedicated Finance Act, the South African Postbank was left with no option but to lodge its application in terms of the Banks Act. DOC therefore needed to amend the Postbank Act, to clarify the issue of exemption with certain provisions of the banking legislation.

Mr Willie Vukela, Chief Director: ICT Postal Policy, Department of Communications, said he was going to present the Bill clause by clause, word for word, and said that no changes or improvement had been made to the Bill since the last presentation.

The Amendment Bill consisted of a preamble and 14 clauses.

Preamble
Mr Vukela said the Preamble set out to amend the Post Bank Limited Act of 2010 to deal with provisions which may negatively affect the operational autonomy and independence of the Office of Banks, and to remove any inconsistencies with the Banks Act.

Clause 1
This clause amended section 1 of the Act by deleting the definition of ‘‘Registrar of Banks’’.

Clause 2
This clause would amend section 3 of the Act, by deleting references to section 37(2) of the Banks Act. This followed corporate governance principles as well as the controlling company issue that the Post Office would become the controlling company of the Postbank.

Clause 3
This provided for the repeal of section 4 of the principal Act.

Clause 4
This provided for the repeal of section 8 of the Act. Once again, there was removal of references to the Banks Act provisions.

Clause 5
The amendment to section 9(1) would add wording to empower the company to enable it to realise the objects referred to in section 2. Section 9(3)(b) was deleted.

Clause 6
This clause provided for the amendment of section 13 of the Act by substituting paragraphs (f) and (g), and inserting a new paragraph (h) to the Act.

Clause 7
Mr Vukela noted that this clause would amend section 14(1), by substituting wording in paragraphs (a) and (b). Amendments were made to section 14(4)(d) as well.

Clause 8
This clause would provide for the deletion of section 15(2)(e).

Clause 9
This clause amended section 18(3)(a), substituting new wording.


Clause 10
This clause substituted new wording for section 25(1) of the Act. Mr Vukela drew Members’ attention to the removal of the words “with the concurrence of the Minister of Finance”. A similar substitution was made in section 25(3).

Discussion
The Chairperson at this point asked Mr Willie Vukela to pause because some Members wanted to raise issues.

Ms Morutoa said she was having problems with the way Mr Vukela was presenting the Bill. Not all Committee Members had legal training, and although they were aware of the problems, they wanted to be given a fair understanding of what was being done. Although Mr Vukela was presenting the amendments, he was not comparing the new wording to the original wording of the Act, so Members were a little confused on exactly what words were being removed.

Ms Kilian agreed that the Committee needed to engage with the principal Act and Bill together to be able to clean up the problems of the Act. The Department should be telling Members what exactly was inserted or deleted, and what the impact of these changes was. For instance, the references to the dedicated Banks Act were being removed, but the DOC had not really explained this point.

The Chairperson agreed that he shared these concerns. He had anticipated that there would be difficulties in dealing with the presentation that was not making specific reference to the principal Act, and explaining the impacts. This should ideally have been done from the start of the presentation. However, he requested that Mr Vukela finish his submissions, and then, once the principal Act was circulated, Members should compare the wording.

Continuation of Department’s briefing
Clause 11
Mr Vukela noted that this clause was amending section 26 of the Act, by deleting subsections (2) and (3).

Clause 12
This proposed to insert a new section 26A, which would provide that, in the event of conflict between the provisions of the Banks Act and the South African Postbank Act, the provisions of the Banks Act would prevail.

Clause 13
An entirely new section was substituted for section 30 of the principal Act.

Clause 14
This clause set out the short title of the Bill.

Discussion
The Chairperson reiterated that Members would need to compare the Bill and Act before asking more detailed questions, but asked if there were questions of clarity.

Ms Kilian asked why the definition of ‘‘Registrar of Banks’’ was included in the principal Act, but was now believed to be redundant.

Mr Vukela responded that this was done because in the Act, there had originally been provisions which had provided that the Minister of Communications must seek concurrence with the Registrar of Banks. However the Register of Banks was being given powers, with the Reserve Bank, as an autonomous office, and there would not have to be concurrence. Powers were being given back to the Registrar of Banks to simply apply the Banks Act – the general national law in the sector – to supervision of the Postbank.

Ms Kilian then asked whether the Postbank was going to report to the Minister of Communications, or would it report to the National Treasury as did other banks in the country.

Ms R Lesoma (ANC)asked what was stopping the Postbank from complying with the terms of the Banks Act in totality, and why there had been an initial difference on compliance. From the DOC’s presentation, it seemed that government had decided to set up a bank underwritten by government. She sought clarity on this point, saying that Members were still confused.

Ms S Tsebe (ANC) asked about the involvement of the National Treasury regarding the amendment in the definitions. When the Act had been dealt with initially by the DOC, there had been serious engagements with the National Treasury, as it was a key role player. Furthermore, there had been a lot of questions on the mandate of the Postbank, because this seemed to have nothing to do with communications but rather with finance.

Ms O Groenewald, Senior Financial Analyst, National Treasury, said that although there was a Task Team set up playing a role in this matter, she was not a member of that Team, and that the member from the Team was not able to be present at this meeting. One of the issues that the Task Team needed to deal with was the reporting process. It was National Treasury’s view that Postbank must report to the National Treasury. She was not sure whether there were guarantees at this stage, but could check up on this with the Task Team and report back.. 

The Chairperson had a problem when the relevant National Treasury officials failed to attend the Committee meetings, noting that this was a recurrent problem.

Mr Vukela said the DOC had a very strong working committee, as signed off by the two Ministers, and this consisted of members from National Treasury, DOC, Post Office and Postbank. The committee was charged with seeing the incorporation process to finality. When the Deputy Governor of SARB wrote the submissions on amendment of the Act, he had proposed a legislative review mechanism, which had produced this Bill. All the stakeholders were in agreement on the Bill. The DOC noted that the Bill was an indication that its work was done, and it was happy that Reserve Bank make a pronouncement on the matter.

Mr Vukela stressed that the Deputy Governor of SARB wanted compliance with all the set requirements. DOC and the Post Office were committed to that, and were now ready to comply with all provisions of the Banks Act. No special limitations would apply any more, because all exemptions had been removed from the Act, by way of this Bill. Government would, however, incubate the Postbank by doing risk assessments, and this would enable the Postbank to grow.

Ms Morutoa felt the National Treasury was failing the Committee because each time issues were referred to it; the Committee received negative responses. She was critical of the fact that National Treasury was sending officials to attend the meetings who were not sufficiently knowledgeable on the subject matter, thus having to refer back to others.

Ms Morutoa wanted clarity on what people would be regarded as “fit and proper”, under the clause 14 amendments, to take up management  positions of the Postbank.

Ms Tsebe asked whether it would be correct to advertise in two national newspapers on serious matters, including the one raised, relating to executive membership of the Postbank. She seemed to recall that the Committee had earlier expressed its unhappiness with this provision. The provision around two national newspapers meant that those members who were not serviced by banks at the moment would not be included.

Ms Kilian requested that if the Task Team of the National Treasury had issues, these be relayed to the Committee through the Director General or another senior official, so that they could be properly clarified. She wondered if there was even any need to change the definitions section of the principal Act, noting that ultimately the National Treasury was supposed to be guarantor of all the monies held by the Postbank.

The Chairperson noted that the meeting was meant to deal with the Bill, and anything not directly related to the Bill was slowing the process. The majority of the concerns went to policy matters rather than legislative issues, and these should have been fully explained in earlier briefings by the DOC. However, they clearly still did need to be addressed.

The Chairperson agreed with Members that the attendance of the right officials from National Treasury was a concern. Often, there had not been proper representation when critical areas had been raised, and no apologies were conveyed to the Committee. the National Treasury understood the policy but lines had to be drawn between policy and legislation, as Cabinet needed to give a resolution on certain contentious policy issues. This Committee was essentially confused on certain issues because of the weaknesses of National Treasury in the whole process. Initially, National Treasury confirmed to the Committee that the Bill was correct and would be passed, but events of this meeting indicated otherwise.

Mr A Steyn (DA) said the Committee Members was tasked by Parliament to apply their minds and bring forward, for adoption by the House, legislation that was workable, and would improve lives of people. He was very concerned to hear that Task Teams were still working on issues that could affect the amendments that the Committee was being asked to decide upon now. This should have been completed before the amendments were presented to the Committee. The Members still did not have a clear idea what the issues were, and how they could affect the Committee processes.  

Mr Steyn asked whether the Preamble should not give more detail on the sections being referred to, so that the Committee would be able to satisfy itself that the Bill was seeking to address the right issues.

Mr Steyn thought that there was no need to amend the definitions, as they did not harm anything.

Ms Lesoma asked that Members accept the good faith of the official from National Treasury and note that she was not incompetent but merely not skilled or experienced on the issues being raised. She thought the technical Task Team should perhaps have been complemented by a political joint committee or Task Team. This was because of Mr Vukela’s submission that the Bill would bring the Postbank completely in compliance with the Banks Act, and she would have liked to have heard the political argument on this.

She noted that at this point it seemed like the Committee was dealing with policy issues rather than legislative issues.

Ms Tsebe and Mr C Kekana (ANC) requested that the Committee continue with the processing of the Bill process, as provided in the Parliamentary Rules, and comparison between the Bill and Act. The current political discussions were time-consuming.

Mr Kekana said that ultimately the functionality of the Postbank would only be tested when it was in operation. If there were any further amendments needed, they would have to be addressed by the Committee at that point.

Ms Kilian said it was necessary for the Committee to review and make any additional clean-ups to the Bill at this stage. Some issues had been raised and could not be ignored. The implementation of the Act had been delayed for three years, and if these concerns had been raised earlier, the Committee could have amended the Act then, especially since all Members of the Committee had agreed upon the need to extend Postbank services to all sectors of the country that were presently “unbanked”, with no access to banking services.

The Chairperson said Ms Kilian had clearly made her point, and this was the policy behind the Act and Bill. If clarity was needed on policy issues, they had to be addressed by the politicians, but this could be done, if necessary, when the Committee had done its clause by clause deliberations.

Ms Sekese said the Bill had been read on the same day as the Post Office SOC Limited Amendment Bill, and both were approved for submission by Cabinet to Parliament.

Ms Groenewald noted that she had in the meantime managed to get some answers on the issues raised earlier from her colleagues. She was not intending to address any policy issues. The National Treasury had no problems that could delay the process of the Bill. In terms of the reporting structures, there were no pronouncements by the Task Team on any changes around Postbank reporting to National Treasury. Postbank would remain a subsidiary of SAPO, and would follow those reporting structures. There was no guarantee for Postbank discussed with the Task Team. The operations of the Postbank would be overseen, like those of any other commercial bank, by the Registrar of Banks. In the past, the National Treasury had bailed out the Postbank on depositors’ funds, but there were no explicit guarantees at this stage.

Mr Shaheen Adam, Acting Managing Director, Postbank, South African Post Office, said the Task Team was referred to as a Working Committee, and it included members from DOC and National Treasury It had been involved with the initial legislative processes. National Treasury an other stakeholders foresaw no particular challenges with the Bill. The purpose of the Bill was to ensure the autonomy of the SARB and ensure that a due process was followed when Postbank was applying for a licence. Matters discussed at the Working Committee were operational matters for instance, seeing that Postbank had been granted funding from the National Treasury earlier in the year, how it must report on funds, what a project player would be, organisational matters and the whole process of handling the incorporation and specifically legislative issues.

Mr Adam noted, in answer to Ms Morutoa, that the “fit and proper requirement” envisaged that the person must have the highest level of ethics, no conflict of interest and, specifically to meet Postbank’s own requirements, should have some level of banking expertise, in distinction to the general “fit and proper” requirements in other legislation.

Mr Michael Blackbeard, Specialist Legal Counsel, SARB, noted that the SARB had been concerned with the principal Act because it had seemed to incorporate certain supervisory functions that were not appropriate. The Bill had now amended this wording, and the SARB was in agreement with the Bill. All the supervisory functions remained in the Banks Act. This was merely the first step for the Postbank to become a Bank but it had to comply with all the other requirements of the Banks Act.

He added to the comments of Mr Adam by stressing that “fit and proper” related to fitness, experience and qualifications of an individual to be appointed as director of a bank. The Registrar’s task was to see that this happened. A Director had to be approved by the Registrar.

Mr Themba Phiri, Deputy Director-General: ICT Policy and Strategy, DOC, concluded that the DOC believed that it had done its work properly. The work of the Task team was purely operational, and it did not have the authority to make decisions on matters approved by Cabinet.

The Chairperson noted that the Bill “belonged” to the DOC and that it could be the only department charged with changing it. He asked that all Members compare the amendments to the principal Act.

Mr Vukela said the Bill’s Preamble spoke to the core of the mandate, and how the Bill sought to achieve it.

Ms Newhoudt-Druchen asked whether the preamble had any amendments.

The Chairperson responded by saying the Preamble to the Act would be amended.

Mr Vukela said the Bill and the Principal Act both had a preamble. The preamble created a yardstick of the Bill.

Committee’s clause by clause deliberations
Clause 1
Mr Vukela spoke to the need for amending the definitions section of the Act. He reminded Members that the definitions section of the principal Act was being amended, by the deletion of the definition of Registrar of Banks. He noted that the first section of any legislation dealt with the interpretation of any terms used in the rest of the Act. The general rule was that nothing should be defined if it was not referred to anywhere else in the Act. The definition of ‘‘Registrar of Banks’’ was no longer  needed, because all references to the Registrar of Banks had been removed from the rest of the Bill.

Mr Malusi Ncolo, State Law Adviser, Office of the Chief State Law Adviser, added that the purpose of defining a word was to make it understandable to readers. If a word had not been referred to in the Bill, there was no need to have it in the definitions clause.

Mr Kekana supported the move to delete the term ‘‘Registrar of Bank’’ because it was of no further application.

Ms Tsebe agreed.

Mr Steyn wondered why the definition section did not specifically spell out the definition of the “Minister of the Department of Communications” or “Minister responsible for communications” but rather referred to him as the “Minister of Communications”. Earlier resolutions showed that the committees were adopting specific definitions for titles, according to the sectors being dealt with>

The Chairperson and Ms Kilian equally asked for the neutral definition for the term Minister, saying that if the portfolio name were to change, there would not be a need to change the legislation.

Mr Ncolo responded that there was no harm in saying “the Minister charged with the administration of the department” as it was a matter of specificity. The term “Department” had already been defined by the principal Act.

Mr Vukela agreed that there was no harm for a neutral definition of the term Minister. However the “Department” needed to be defined, if the Minister was defined as one charged with the mandate of that department.

Ms Morutoa requested for clarity, in section 1, on the definition of Postbank referred to under section 61.

Mr Vukela said the Postbank had already existed, but in a different shape and form, as a division of the Post Office. The principal Act was giving Postbank a separate legal status and confirming its status as subsidiary of the Post Office.

Clause 2
Mr Vukela reminded Members that the words ‘‘and section 37 of the Banks Act’’ were to be deleted. This made the Post Office the sole member and shareholder, on incorporation into a company. This was in line with the corporate governance principles and the Companies Act.

Ms Kilian and the Chairperson thought the terminologies being used by were inconsistent and incomprehensible. They both requested the Parliamentary Legal Advisers to look in to them, and try to re-word them in plain English.

Mr Kekana noted that the Committee was not an English grammar class, and that the interpretation of complex technology should be left to the State Law Advisers. However, in general, he preferred use of plain language.

Mr Vukela said wording used in the Bill followed a general practice, and he agreed that sometimes specific terms were used in the construction of laws, but were not in common ordinary usage, but also appreciate the concern. He asked that the legal advisers think of how best to word the legislation.

The Chairperson noted that the use of this jargon was originally meant to suggest that legal people were out of the ordinary. This was not the case any longer, and the Committee would try to ensure that the situation was ‘saved’.

Clause 3
Mr Vukela reiterated that clause 3 sought to repeal section 4 of the principal Act, which related to registration as a Bank.

Members were agreed on the necessity of repealing this section.

Clause 4
Clause 4 sought to delete Section 8 of the Act, since exemption from tax liability should be a subject of a money bill.

Ms Kilian wondered why the National Treasury did not pick up this oversight at the time when the principal Act was passed.

Ms Tsebe agreed with the repeal.

Ms R Morutoa requested clarity on the exemption, and why section 7(a) to (c) was not applicable.

Mr Alf Wiltz, Legal Advisor: ICT Policy Development, Department of Communications, said that the initial intention was that the Postbank should become a new company. If it did so, it would attract tax. National Treasury had advised that this transaction would not be likely to attract any tax. However, he noted that money bills had to be introduced under the auspices of National Treasury. If section 8 remained in the form it was currently, it was ultra vires and this was the reason that the DOC wanted to delete it.

Mr Adan said the South African Post Office (SAPO) had looked into and tried to analyse the matter. There was the risk of a huge tax liability in the incorporation process of the Postbank. He agreed that once the tax threat was removed, it was no longer necessary to have the section exempting it from tax, and so it would not be necessary to go through a money bill process. SAPO welcomed and supported the amendment.

Ms Kilian requested that, in future, if a matter like this was being discussed between departments, formal letters had to be addressed to the Committee, confirming that each of the departments was happy with what had transpired from the discussions. She noted that section 8 in its current form was in any event unconstitutional, as only the Minister of Finance could introduce a money bill.  

Clause 5
Mr Vukela reminded Members that clause 5 was amending section 9 of the Act. It made reference to section 2, and deleted sections 9(3)(a) and (b). The Registrar was allowed autonomy and independence to regulate the financial sector, because he established the policy regulations. There was no need for the Minister of Communications to be involved.

Mr Steyn supported the amendment as tabled. He requested that the legal teams must look seriously into being consistent in the amendment procedures.

Clause 6
Mr Vukela said that clause 6 would add an additional requirement in section 13 of the Act, to make it clear that no person may be appointed as or remain a board member if such person was not fit and proper to hold the office of a member of a board of a banking institution, as contemplated in the Banks Act. The word ‘‘or’’ was removed, to give effect to the new additions.

Ms Newhoudt-Druchen asked if the Bill was making any specific mention of specific sections in the Banks Act, and if there would be a need to amend the Banks Act separately.

Mr Vukela said that the mention of the sections of the Banks Act in this Bill were sufficient to effect the amendments to that Act, once this Bill was passed.

Mr Steyn asked whether Postbank would not give any submission if not requested by the Minister.

Mr Phiri said that Mr Steyn was referring to an administrative procedural point. The Minister had to start the process, as instructed by the law, and other individuals were expected to comply with the Ministerial requirements. The Minister was the only authority mentioned in this case.

The Chairperson asked the State law Advisers to look in to the matter and report back to the Committee whether there was any problem or vacuum created.

Clause 7
Mr Vukela noted that section 14 of the Principal Act was amended by the substitution of section 14(a) and (b), and the substitution of wording of section 14(4)(d).

Ms Morutoa asked what the concerns were giving rise to this clause.

Mr Wiltz said that the matter of “fit and proper” had earlier been considered in section 13, and a person who was not found “fit and proper” would be disqualified as being a member of the Board. There was also the removal of the references to the Registrar of Banks in this section. The reason was that the principal Act provided for a two-stage approach. A nomination committee would work on the public nominations, and would make the recommendations to the Minister. Originally the Post Office had to make recommendations to the Minister, but before doing this had to get approval from the Registrar of Banks. This had created a practical obstacle. The Registrar of Banks would actually do its function of determining “fit and proper” under the Banks Act, when a banking application was made.

Ms Newhoudt-Druchen asked if “fit and proper” excluded people with mental illness and mental disabilities.

Mr Ncolo said that the phrase “fit and proper” was not intending to introduce any element of discrimination, but was trying to maintain the highest standards for those persons working in the banking sector.

Clause 8
Mr Vukela summarised that clause 8 was deleting section 15(2)(e), which was no longer necessary following the addition of section 13(1)(h).

Clause 9
Mr Vukela noted that clause 9 would amend section 18 to make it clear that the Managing Director of the post bank must be a fit and proper person to hold the office of Chief Executive Officer of a banking institution, as contemplated in the Banks Act.

Clause 10
Mr Vukela summarised that clause 10 sought to amend section 25 to ensure that the powers of the Minister to intervene fell away once the company was registered as a banking institution in terms of the Banks Act.

Clause 11
Mr Vukela reiterated that sections 26(2) and (3) were being deleted.  was amended by the deletion of subsections (2) and (3) of the Principal Act.

Mr A Steyn (DA) asked whether the remaining subsections would automatically be renumbered.

Clause 12
Clause 12 proposed to insert a new section 26A to provide that in the event of any conflict between the provisions of the Banks Act and this Act, the provisions of the Banks Act would prevail.

Clause 13
Clause 13 would amend section 30 of the principal Act to ensure that any exemption under the Banks Act, which was applicable to the former Postbank immediately prior to the transfer date, would similarly be carried over and applied to the South African Post Bank Limited, from the transfer date until it was registered as a bank as contemplated in Section 3.

Clause 14
Clause 14 contained the short title

South African Post Office SOC Limited Amendment Bill, 2013 [B24-2013]: Department of Communications briefing:
Ms Sekese noted that the DOC had been requested to look at and comment on the two main issues covered in this Bill, namely the “clean break” principle, and the question of interest. The drafting team had worked on a new proposal, and the State Law Advisers had also given their input. The result was that there was now  a proposal to insert a new Section 10B in the 1958 Act, to deal with the clean break. A new Section 10F would be inserted in the same Act, to deal with the interest.

Mr Wiltz confirmed that the Department and State Law Advisers had worked together on the issues, and took the Members through the latest version of the SAPO SOC Limited Amendment Bill.

Clause 1
Mr Wiltz said that the proposals included the omission of the definitions of “child”, of “Post Office Retirement Fund”  and “rules”. There were consequential amendments required at this stage because a number of amendments in the original version of the Bill had since been abandoned, leaving only a few issues in the latest version for consideration. This had meant that several of the definitions were now no longer needed. The only definition that remained to be included was the one that concerned the Post and Telecommunications and Related Matters Act.

Committee members agreed with these amendments.

Clause 5
Mr Wiltz noted that this clause would now be falling away altogether. This had dealt with seven pensions-related provisions that the Department had originally proposed transferring to the 2011 Act. However, the DOC had now decided that the 1958 Act would remain in force so it was not necessary to transfer them.

Long title
The Long Title of the Amendment Bill now had deletions and additions made to it, to ensure that it reflected what the revised Bill would be doing.

The Schedule
Mr Wiltz said the Bill initially had a very long Schedule, that sought to correct many things in the 1958 Act, and to remove all references to the “post office” from the 1958 Act. Now, however, that had been abandoned. The schedule of the original version of the Bill would fall away. It was being replaced with the one presented in document [B24-2013].The purpose of the Schedule was to amend certain sections of the 1958 Post and Telecommunications Act.

Mr Wiltz then took the Committee through the changes being effected by the Schedule.

New Section 10B
Section 10B of the 1958 Act had been found, by the Constitutional Court, to be unconstitutional, and the Court had given the Department a period of time to resolve the issue by amending the legislation. He noted the new wording, with the insertions indicated by underlining. The underlined wording now provided for attachment among of a pension fund, b a valid court order made as part of the divorce proceedings, or by decree on the dissolution of a valid customary marriage.

He noted that the wording of section 10A would remain as it was in the 1958 Act. This section had related to the state guarantee and the Department and Committee had agreed during a previous meeting that it should remain in the 1958 Act.

Committee members agreed that these amendments reflected the intention.

New section 10F
This was linked in to clause 5 in the Bill as originally worded. It was related to the “clean break”  principle that was outlined earlier. Essentially, the changes to the wording of the Bill dealt with the principle behind the Constitutional directive. A new Section 10F was to be introduced, into the 1958 Act, dealing with the payment of interest on pensions, pending divorce or dissolution of a customary marriage.

There was some discussion as to whether this principle should be made applicable only to the Post Office Retirement Fund (PORF), or whether it should apply also to the Telecom Pension Fund.  The 1958 Act dealt with these two successor companies simultaneously. It was very difficult, when preparing the new section 10F, to say it would only apply to the PORF. Therefore the proposal was that there should not be a specific mention on the pension fund concerned, which would mean that the provisions would apply equally to both the PORF and the Telecom Pension Fund. However, if the Committee wished, the reference to “pension fund”  could be amplified and specific reference made to each of the separate funds. However, this could lead to later problems; if only the PORF provisions were amended, there was a risk that the Telecom Fund might be declared unconstitutional. He noted that the Telecom Pension Fund had been consulted when the initial draft was prepared, because this amendment had referred to it. That consultation was sufficient to cover the present position.

Section 10F provided for how the matters would work in practice. This new section ensured payment for the actual pension component, in accordance with the divorce order, within 60 days. If the former spouse has not indicated how s/he wanted payment, the relevant Fund must pay directly to the former spouse, within 30days.

Paragraph (j) dealt with all divorce orders granted from1991 to 2013, which had not been paid to date because the clean break principle had not applied.  These sums had vested and it was shown in the Bill how they had to be paid. This enables all the previous divorces to be catered for, in the interest of fairness.

Mr Wiltz noted that linked to this was the question of when interest would start accruing. The question was whether the interest had to be paid from 1991, or the date of the divorce order in each case, or only from a future date. The principle had been agreed, that there could not be retrospective payment. Hence, interest would be paid from the date on which the Bill was passed. The Bill made specific provision for how interest would be paid, and the PORF had been consulted on, and was satisfied with the wording of the Bill.

Section 10(F)(2)(g) provided for modes of payment of pensions, by election by the former staff, where the pension fund had 60 days to make the payment. Mr Wiltz pointed out that there were some amendments, following the comma in the original wording. The rates were determined by the statutes and the rules set by the Minister of Finance. If payment was not made in the stipulated 60 days, interest would start to accrue.

Paragraph (i) catered for the scenario where it was now impossible to make payment to the former spouse. In this case, there would be an obligation on the relevant pension fund to retain the money for the time being, and pay interest on it at the relevant time. The amendment added the words “as determined”, with a reference to the statutes, for greater clarity.

Ms Morutoa, acting again as Chairperson, asked for clarification on the new Sections 10E and F, questioning what type of “days”  were referred to – whether it was working days, or calendar days.

Mr Wiltz noted that “days”  were not defined in the 1958 Act, but the general practice, where something was not specifically defined, was to accept that this would be calendar days. If the Committee wanted, the wording of the new section could be amended to refer specifically to ‘ “calendar days”.

Ms Groenewald, National Treasury, asked for clarity on the fact that the DOC was now proposing that clause 5 be deleted from the Bill. Section 10A of the 1958 Act dealt with the State guarantee, and its retention meant that the State would be responsible for guaranteeing the pension funds.

Ms Tsebe said that there had been much confusion on the question of the State guarantee, and the Committee was no longer going to be deleting the provisions that dealt with the State guarantee under the 1958 Act. If National Treasury had been attending meetings regularly, it would be aware of this.

Ms Tsebe said that whilst she did not have a problem in principle with inserting “calendar” before “days” in the revised section 10F, she wondered if this would be consistent drafting style. Perhaps this could be dealt with elsewhere

Ms Tsebe wondered if the DOC could possibly be found, by a Court, to have erred on its decision not to backdate interest, should it be taken to court by any of the pensioners concerned in the previous divorce matters. Parliament had been passing much legislation which had later been used against departments.

Ms Tsebe was disturbed to hear that the DOC was speaking on behalf of the Telecoms Pension Fund and asked if the matters had specifically been settled with it.

Ms Lesoma said it was unfair for the former spouses not to have been paid their pension monies on the clean break principle. She wondered if government was likely to succeed if challenged in court on this issue.

Mr Steyn said that as a general principle laws should not be made retrospective. Definite boundaries should be set in this Bill, to cater for those already divorced but whose pension funds had not been released earlier.

Clause by clause deliberations
Mr Kholwane took over as Chairperson again, and asked Members to go through each of the clauses, indicating whether or not they were satisfied with them.

Long title, clauses 1 and 2
Members indicated their satisfaction with the amendments to the Long Title, amendments (in clause 1) to section 1 of the principal Act, and clause 2, which was now amending section 3 of Act 22 of 2011.

Clause 3
It was noted, by Members, that clause 3 amended section 8 of the 2011 Act, by inserting wording that aligned with the King III Codes of Corporate Governance. A person appointed as a board member of the Postbank would be accountable to it.

Mr Steyn, Ms Tsebe and the Chairperson asked why “are”  was being omitted from one place and reinserted in another.

Mr Wiltz responded that this was a technical grammatical correction, and Members need not waste time on it.

Clause 4
Mr Wiltz reiterated that this clause was amending Section 11(4)(c) of the principal Act.

He reiterated that there was now a requirement that all members of the Board must be “fit and proper” because Post Office would become the controlling company, as provided in the Banks Act. Section 44 said the members of the Post Office must be fit and proper, and this was therefore also being specifically stated for the members of the board of its subsidiary, Postbank.

Mr A Steyn (DA) noted that although there was a reference, in this section, to the Banks Act, it was not defined in the 2011 principal Act.

Mr Wiltz said this was not necessary; it was adequately cited on the only instance in which it was named in that legislation.

Clause 5 
Mr Wiltz repeated that the whole clause was now to be deleted.

Members of the committee agreed to this, and said it was not necessary to consider it further.

Mr Steyn said that he had picked up another reference to the Banks Act.

Mr Wiltz responded that in this case, and if it was done, then perhaps there was a definition needed for the Banks Act.

Ms Xoliswa Mdludlu, Principal State Law Adviser, Office of the Chief State Law Adviser, believed that it would then be in line with good drafting practices to define it, although it may not strictly speaking be necessary.

The Chairperson requested that best drafting style be adopted.

Dr Barbara Loots, Parliamentary Legal Adviser, said that she understood the reference to best drafting practices, and this was the standard procedure for other Bills. However, the Bill had to be passed and she suggested that, rather than introducing new amendments that would require fresh consultation, and since this was really not of any particular consequence, the wording be left as it was.

The Chairperson clarified what the Committee could and could not do at this stage, stating that he did not think its powers were limited.

Schedule
Mr Wiltz noted again that the whole of the Schedule would be removed from the Bill as originally presented, and a new one was inserted.

Mr Steyn sought clarity on what the expiry date was for payment of the pension, once the claim was lodged in terms of the new section 10F(2)(g), whether it would be 45, 60 or 120 days.

Mr Wiltz responded that the number of divorces affected by this could be as high as 600. Most of the matters had been dealt with in terms of working out the compensation amounts; the pension funds just needed to wait until the Bill was passed to be able to start paying out. The prescribed period was precisely as set out in the schedule, the new section 10F(2)(g).

Mr Steyn still was not clear why the different periods were even mentioned, and questioned why the money could not simply be paid, within 30 days after the choice had been made. He noted that even where parties did not convey any preferred option, the payment would be made even sooner.

Mr Michael Faasen, General Manager: Retirement Funds, South African Post Office, said that  when the Fund had written to the non member spouse to make a choice, and had received a response, the payment would be done on the same day as the response. The Fund would immediately do the payment, whether in cash or a transfer to another fund. The non-member spouse would not be required to wait for the 120 days to administer the service. These times frames were put in place as a guide within which the Fund and the non- member staff could access their monies.

Mr Steyn still needed more explanation on the matter. He thought it unfair that non-member spouses who did not make any election would receive their funding before those who did make an election.

Mr Faasen responded that when a non member spouse exercised an option to have money transferred to another fund, there was quite a long administrative process involved, particularly since the receiving fund might take long to respond to the request of the transferee fund (the SAPO). It could, in his experience, take up to 90 days to get the necessary information from the new Fund. Best practice principles had to be adhered to. Most of the processes involved large insurance companies, and did often take a long time.

Ms Tsebe asked whether there would be any problem of simply shortening the 120 day period to 30 days. If the spouse had died, she wondered where the money would go.

Mr Ncolo responded that if the spouse in question had died, the law on succession would come into play, and payment would be made either in terms of the will, where there was one, or under intestate succession principles, if there was no will.

Mr Vukela said the Department would like to make the process shorter, but it must be recognised that this was linked to working practices. The Pension Funds would have to follow a cumbersome process, which usually took longer than 30 days. However, the DOC was willing to try to comply with that if the Committee wanted to insist upon it.

Mr Faasen noted that the time taken on the process would be shorter if the non-member elected to be paid in cash, and for this reason, the interest would start accumulating after the 30 days had passed. However, he reiterated that if this money was to be transferred to another fund, the process always took longer, and the exact time could not be anticipated.

The Chairperson apologised for the confusion around the timeframes. He asked that the Committee be provided with the “cleaned-up” version of the Bills, to vote finally on each Bill and prepare its reports to the House.

The meeting was adjourned.

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