Lotteries Amendment Bill [B21-2013]: deliberations; Legal Metrology Bill: briefing

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Trade and Industry

17 September 2013
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

Legal Metrology Bill: In its briefing, the Department of Trade and Industry said the Bill was necessitated by international best practices and was being introduced to replace trade metrology to ensure that South Africa had the technical infrastructure to guarantee that products originating in the country were safe and well suited for intended purposes. Legal metrology entailed ensuring the appropriate quality and credibility of regulatory measurement results in the health, safety, environmental and trade domains through traceability of measurement and development of technical regulations. It encompassed the monitoring or enforcing of measurements made in the indicated domains, consumer protection, as well as the levelling of the playing field for industry. Legal metrology was also concerned with issues such as risks of misuse of the instruments, tampering and accidental influences on the measuring instrument, as well as the traceability of such measurements, thus providing an appropriate level of credibility of measurement results in the regulatory domain.

The objectives of the Legal Metrology Bill was to expand the scope of trade metrology to legal metrology; to strengthen the enforcement of legal metrology; to develop the appropriate legislative framework; to protect consumers against short measure; to establish a level playing field for industry; and to support local industry competitiveness. The Bill also addressed governance issues by changing the corporate structure from an entity with a Board to that of a trading entity. The current landscape of trade metrology in South Africa was also characterised by limited funding resulting in under-inspection of industry and non compliance to regulations, outdated penalty in the Act, as well as lack of training institutions for inspectors. The National Regulator for Compulsory Specifications (NRCS) which was responsible for trade metrology would still take responsibility for the administration of legal metrology. Through the new legislation, there was going to be extended scope into legal metrology through regulations coupled with impact assessments, improved enforcement through increased market surveillance, increased penalties, continuation of use of South African National Standards (SANS) as basis for regulations, regulation of verification and repair activities to counter conflicting interest as those who carried out repair activities would be different from those who would undertake verification activity , as well as exploration of synergies with the rest of NRCS. Contraveners of the provisions of the Bill may be fined, albeit there was no stated or precise monetary value in the Bill, or imprisoned for a period not exceeding 10 years. Contraveners may also be penalised with both fines and imprisonment.
Members welcomed the introduction of the Legal Metrology Bill, noting that it was indeed a step in the right direction. They however sought clarity on what the relations with other sister governmental departments and agencies would be in terms of the Bill, as well as the difference between the Advisory Committee on Metrology and the Advisory Forum and why the latter was replacing the former. Members also inquired on the conformity of the Bill to the World Trade Organisation’s (WTO) standards, as well as with standards of South Africa’s trading partners.

Lotteries Amendment Bill: The Department, at the request of the Committee, presented a revised organogram and expanded explicitly on the different functions of the various bodies within the renamed National Lotteries Commission. The Minister would be responsible for the appointments of members of the Board, the Distributing Agency members after consulting the Board, as well as a lottery operator or organ of State after consultation with the Board. The National Lotteries Board would appoint a Commissioner in consultation with Minister and would be the Trustee of the National Lottery Distribution Trust Fund. The board would also monitor performance of the Distributing Agencies and conduct reviews for decisions of the distribution agencies upon a complaint being lodged by aggrieved applicants, while also performing oversight role over the Commission and Commissioner’s performance. The distribution agencies would evaluate, consider and adjudicate applications, and also conduct own dispute resolution before the board can intervene. The distribution agencies would be operationally accountable to the board. Both the board and distribution agencies would play the role of effecting the internal dispute resolution mechanisms and one of their functions was to conduct distributional review mechanisms. The lottery operator (licensee) must comply with all conditions determined by Minister after consulting the board governing the operation of the licence, while the operator must submit to continuous inspections by the board or commission to ensure all conditions of licence were adhered. The National Lottery Distribution Trust Fund (NLDTF) would receive contributions from the operator, and 24% of whatever was made as profit would go to NLDTF. The National Lotteries Commission must openly and transparently exercise all functions assigned by the Minister, board and any law. The Commission must also ensure proper running of lottery and sports pools, and conduct research for proactive funding at own initiative or as requested by the board or Minister. Finally, the Commissioner would be accountable to the board and must perform all financial and administrative functions and any duty assigned by the board in relation to the commission.

The Committee considered and deliberated on the latest version of its proposed amendment to the Lotteries Amendment Bill. The definition of distribution agency had been refined to perfectly depict its functions. The process the National Lotteries Board would undertake for review of applications after a formal complaint by an aggrieved person had become more explicit. The term “solicit” in page 3, line 35 of the Bill would however be substituted with “invite”, and the substitution in line 10, page 4 of the Bill would read as “five years which may be renewed only once for a period not exceeding five years”.

The notion of an organ of state intervening and running the national lottery under some instances for eight years, however, sharply divided opinions among Members as they failed to reach an agreement on the notion as well as the reasons advanced for it. While some Members maintained that the reasons advanced for the state to run the lottery, which were related to the situation where a suitable licensee was not found or a revocation of licence, were not enough for state to intervene and that government entities were often characterised as inefficient. Other Members contended that it was important to avoid a situation where a private company would hold the nation and its people into ransom and that there was also a wrong perception that the private sector was immune to corruption and maladministration, hence it was wrong to assume that the private sector was the only sector capable of running businesses.

The Chairperson, after noting the different political parties’ position on an organ of state running the lottery, commented that Members were nowhere near reaching a compromise. Contrary to some opinions, the notion of the state running the lottery was referred to in the policy document. The onus lay on the Committee to decide if the nation wanted the state to have an enabling provision to intervene in the business of lottery.
 

Meeting report

Department of Trade and Industry (dti) briefing on the Legal Metrology Bill 2013
The Chairperson welcomed everyone present and remarked that the Committee had received an apology from Mr Garth Strachan, Acting Deputy Director General of the Industrial Policy Development Division in the Department of Trade and Industry, who was attending another meeting on behalf of the Minister and Director General of the Department. She requested the Department to proceed with the presentation on the Legal Metrology Bill.

Mr Tshenge Demana, Chief Director of Technical Infrastructure of the Industrial Policy Development Division in the Department of Trade and Industry presented the Legal Metrology Bill, focusing on the background and rationale for the Bill, the Bill’s objectives as well as its provisions. He noted that the Bill had been earlier sent to the Parliament, which was busy proof reading the Bill.

Mr Demana provided background to the Bill, stating that globalisation was increasing the demands on countries to demonstrate that they had the technical infrastructure to guarantee that products originating in their territories were safe and ‘fit for purpose’. Technical infrastructure which comprised standards, quality assurance, metrology and accreditation was also used in Industrial Policy Action Plan (IPAP) to lock out non-compliant products and lock in South African products to export markets. Technical infrastructure was expected to meet the standards and measurement challenges required by trade, health, safety, environmental considerations, as well as considerations necessary for globally dispersed manufacturing platforms. There was thus a need to maintain and improve relevant institutions in order for such institutions to remain relevant as the platform for global economic efficiency and market access of products. 

Legal metrology, according to Mr Demana, was utilised for the regulation of measurements that directly affected consumers and while it also ensured that the quality and credibility of such measurements that were used directly in regulation and in areas of trade. Legal metrology entailed ensuring the appropriate quality and credibility of regulatory measurement results in the health, safety, environmental and trade domains through traceability of measurement and development of technical regulations. It encompassed the monitoring or enforcing of measurements made in the indicated domains, consumer protection, as well as the levelling of the playing field for industry. Legal metrology was also concerned with issues such as risks of misuse of the instruments, tampering and accidental influences on the measuring instrument, as well as the traceability of such measurements, thus providing an appropriate level of credibility of measurement results in the regulatory domain.

Mr Demana highlighted the international practices in legal metrology, stating that the International Organisation of Legal Metrology (OIML) was established in 1955 with the signing of the OIML Convention by 24 countries. Currently however, there were 59 member states and some 54 corresponding members. South Africa acceded to OIML in 1998. The OIML was established to disseminate information on legal metrology principles, to develop and promote international best practice, to eliminate barriers to trade caused by legal metrology, as well as to develop and promote Mutual Recognition Acceptance Agreements in legal metrology.

Mr Demana however noted that trade metrology was presently being used in South Africa. The use of trade metrology can be traced back to 1902, and it came under the auspices of the Department of trade and Industry. The function was transferred to the South African Bureau of Standards (SABS) in 1991, but in 2008, it became the responsibility of the National Regulator for Compulsory Specifications (NRCS) which had a dedicated division with the NRCS responsible for trade metrology. Trade Metrology Act No. 77 of 1973 did not provide for regulation of legal metrology measurements, and it also used the South African National Standards (SANS) as basis for regulations. The current landscape of trade metrology in South Africa was also characterised by limited funding resulting in under-inspection of industry and non compliance to regulations, outdated penalty in the Act, as well as lack of training institutions for inspectors.

Mr Demana stated that the new Legal Metrology Bill would replace the Trade Metrology Act, but the NRCS would still be responsible for legal metrology, and this shift was necessitated on best global practices Through the new legislation, there was going to be extended scope into legal metrology through regulations coupled with impact assessments, improved enforcement through increased market surveillance, increased penalties, continuation of use of SANS as basis for regulations, regulation of verification and repair activities to counter conflicting interest as those who carried out repair activities would be different from those who would undertake verification activity , as well as exploration of synergies with the rest of NRCS. The expanding scope of legal metrology encompassed changes in agriculture, industry, transportation and technology, as well as the movement of direct sales of products to multiplicity of transactions through production, wholesaling, processing and retail trade. Also, quality and regulatory measurements such as environment, health, and safety had been introduced, while the establishment of water, gas, electricity, and telephone utilities had led to the expansion of the scope of trade measurements. The expanding scope of legal metrology contributed immensely to the introduction of the Bill as the nation presently lacked the legislative basis appropriate for the expanded scope of legal metrology. Through the Bill, the Metrology Advisory Committee would be replaced by an Advisory Forum, appointed by the Minister to provide advice on legal metrology, and also to NRCS.                              

Mr Demana stated that the Legal Metrology Bill which was considered as framework legislation to ensure longevity was prepared by the State Law Advisers with input from the Department, Technical Infrastructure as well as the Legal Metrology Division at the NRCS using the OIML model law as well as the policy paper as basis. The Bill had also been subjected to public comments, and the comments had been reviewed. The Bill had been discussed by the National Economic Development and Labour Council (NEDLAC) Legal Metrology Bill Task Team and signed-off by NEDLAC on 25th of July 2013.  The 2001 NEDLAC Standards, Quality Assurance, Accreditation and Metrology (SQAM) review made recommendations with regards to the amendment or drafting of five Acts, and legal metrology was now the last one to be amended.

Mr Demana highlighted the objectives of the Bill, noting that the Bill was to expand the scope of trade metrology to legal metrology; to strengthen the enforcement of legal metrology; to develop the appropriate legislative framework; to protect consumers against short measure; to establish a level playing field for industry; and to support local industry competitiveness. The Bill also addressed governance issues by changing the corporate structure from an entity with a Board to that of a trading entity.

He expanded on the application and administration of the Bill, noting that the Bill would be administered by the NRCS, whose authority lies with the Chief Executive Officer reporting to the Minister. The NRCS also administered the National Regulator for Compulsory Specification Act No. 5 of 2008 as well as the National Building Regulations and Building Standards Act No. 103 of 1977. The schedule to the Legal Metrology Bill addressed changes in governance structure of NRCS in terms of NRCS Act. The Bill would be applied to measurable products and services, measurements in trade, health, safety and the environment, as well as measuring instruments used for a prescribed purpose. Medical measurements such as temperature and blood pressure, safety measurements such as speed and alcohol as well as environmental measurements such as emissions and water pollution can be included if prescribed by regulation.

Mr Demana indicated that the legal metrology technical regulations followed the same requirements as in the NRCS Act for compulsory specifications. The Minister must declare a SANS technical regulation in respect of any measuring instrument or any product or service which may affect fair trade, public health and safety of the environment. The Minister can however make a regulation after a defined process if a SANS was not available. Formal procedure for introducing new technical regulation would be followed, and this procedure included carrying out a regulatory risk and impact assessment.

Mr Demana noted the Bill provided for the Minister to prescribe requirements, through a regulation, to restrict verification officers from repairing prescribed measuring instruments. Non-conforming products, services and instruments also stood the risk of being confiscated, destroyed or dealt with as deemed fit, and the costs of doing so may be recovered from person or persons responsible for the instrument or products. NRCS must however inform the Minister within 21 days of taking such actions. Formal provision had also been made for schemes and marks in the proposed legislation, but the Chief Executive Officer of NRCS must authorise and maintain a register of verification marks, repair marks and protective seals.

He stated that contraveners may be fined, albeit there was no stated or precise monetary value in the Bill, or imprisoned for a period not exceeding 10 years. Contraveners may also be penalised with both fines and imprisonment. The financial implication is catered for under the allocation the Department provided for the NRCS in terms of the mandate of the current Trade Metrology Act No. 77 of 1973. The Bill also provided for fees similar to the NRCS Act, which would be paid by industry and would be determined through an annual consultation process. Fees would be determined per legal metrology regulation based on the cost that the regulator would need to incur to regulate effectively and efficiently.

Discussion
The Chairperson remarked that there was an indication about two years ago on the need for the Bill, as well as the need for the review of funding and structures relating to metrology. She noted she was pleased to see that some of the issues had been addressed, and hoped that both the industry and consumers would be protected through the Bill.

Mr W James (DA) commended the clarity in the presentation, noting that the Bill was a step in the right direction. He however asked what the application of the Bill would be in the instance of the security sector, and whether there would be any restrictions in terms of innovations relating to the security sector. He requested for clarification on the governing structure especially the changing reporting lines between the Minister and NRCS.

Mr Demana replied that the NRCS currently had a Board, NRCS’s CEO reported to the Board while the Board reported to the Minister. The Department was however looking at taking all regulators directly in which case the regulators would become the trading entities. There would no longer be a requirement for the Board as the CEO would report directly to the Minister. The idea behind the change was based on the fact that regulations were part of what the government was supposed to be doing as regulations were much more directly related to government work. It was not necessary to have intervening supervisors between the Department and the agencies. Hence all the agencies of government that were regulatory in nature would report directly to the Department.

Mr Stuart Carstens, General Manager of Legal Metrology in NRCS, added that the act related to measurements made in the trade domain, health, safety as well as environment, and thus would not impact on security innovations.

Mr A Alberts (FF+) sought clarification on the difference between the Advisory Forum and the Advisory Committee, and why the former was replacing the latter. He requested an elaboration on what was meant by the government being one of the parties, which the Department alluded to as one of the regulatory challenges. He asked what the other four Acts referred to in the presentation were, and what the process of confiscating, destroying or dealing with non-conforming instrument entailed.

Mr Asogan Moodley, Chief Executive Officer of NRCS, stated that government was currently responsible for adjudication in terms of instruments, but when government became a party through the new Bill, the instruments that were applicable to government such as legal instruments, blood pressure tests and medical instruments at all hospitals and road traffic equipments. The move out of being the referee to being a party by the government would involve the process of calibrating, verifying and approving government instruments. Non-conforming instruments would not be used as it would not be good for the public. Restraining a person repairing from verifying was to allow someone else to verify what he had repaired, following the principle that referees cannot at the same time be the players.

Mr Carstens added that the scope of the Advisory Committee was presently small, but the Advisory Forum would give more scope to the Minister on what they should be involved with.

Mr Z Wayile (ANC) asked what the roles of other government departments and agencies would be especially on non-conformity issues, and whether there was any collaboration between departments. He also asked to what the extent the Bill and regulations conformed to the World Trade Organisation’s (WTO) standards. He requested clarifications on the objectives of the Bill especially the improvement of competitiveness and ensuring a level playing field.

Mr Demana replied that the Department was collaborating with the Customs on one of the Customs’ project. The competitiveness of South Africa’s industry would be improved because every player would know what the requirements were. There would be an objective basis to meet the requirements, and these players would be competitive in that sense. Transparency in the requirements would also go a long way in levelling the playing field.

Mr Carstens added that the legislation was written around South Africa’s obligation to the WTO. The legislation would strengthen South Africa’s position in that the measurement made would advance the nation’s credibility to other members in the WTO and the country’s trading partners. In terms of competitiveness, if the nation aligned itself to international standards, it would open markets for South Africa’s industry and products.

Mr G McIntosh (COPE) commended the penalties stipulated in the Bill, stating that it was sensible to give discretion to the courts to decide on what the penalties were. He noted it was apposite to avoid prescribing to the courts what the penalties should be.

Mr McIntosh asked the Department to clarify the difference between regulatory, legal and trade metrologies. He requested explanation on why the regulation to stop verification officers from repairing prescribed measuring instruments was in the Bill.

Mr Demana replied that trade metrology entailed measurements that had to do with trade. In trade metrology, measurements mostly dealt with mass, volume, length among others.  Legal metrology referred to measurements expanded to include things such as pollution, blood pressure, speeding while legal metrology and regulatory metrology were used interchangeably in the Bill.

Mr McIntosh referred to clause 12(3) in the Bill, and noted that reference was not made to the NRCS Act in the subsection. From a drafting perspective, it was possibly not right if the National Regulator who was not controlled by the Act was appointing or approving the Advisory Board in terms of the Act. It was interesting to note that the Advisory Forum relating to the Act would be appointed by another entity brought into action by a different Act.

Mr Moodley replied that the NRCS was established in terms of the NRCS Act, and the CEO of the NRCS was also appointed in terms of the NRCS Act. The NRCS was responsible for the administration of the National Building Regulation (NBR) and the current Trade Metrology Act. In terms of the governing structure therefore, it was a given to always refer to the NRCS Act and there was also a reference back even in the NBR. Hence, the CEO in the Legal Metrology Bill was defined as the CEO for the NRCS Act. The NRCS as the administrative body would define the terms of reference which would be submitted to the Advisory Forum for approval, and same would be sent to the Minister for consent and signature.

The Chairperson requested the Department to use a product to clarify the difference between trade metrology and regulatory metrology.

Mr Carstens referred to the electricity meter, stating that it could either be a trade metrology or regulatory metrology. It was a transaction as the regulator would charge consumers for the measurement made. The measurement must also be regulated to ensure that what consumers were paying was the right price to pay.

The Chairperson asked the Department if there were requirements South Africa was supposed to meet with the WTO and the European Union.  She further asked if the legislation would assist South Africa as the nation was currently facing a lot of challenges relating to non-tariff barriers.

Mr Moodley replied that the legislation would assist South Africa. The European Union would require assurances that goods exported to Europe complied with certain minimum specifications and the Legal Metrology Bill would help South Africa in meeting that requirement.

The Chairperson asked if South Africa’s metrology had ever been questioned by the European Union.

Mr Carstens replied that it had previously been questioned, noting that the fishing and wine industries had had their products sent back from Europe before owing to issues relating to metrology.

The Chairperson referred to the penalties, stating that 10 years maximum imprisonment would indeed be strict on the face of it but the damage done to South Africa’s international trade might be severe. She asked if the maximum years for contravening should be set at 10 years, as contravention could cost the economy millions if the nation’s credibility dropped.

Mr Carstens replied that that was what informed the decision to leave it open to the courts in order to give the commensurate fine taking into account what damages had been done to the economy.

The Chairperson responded that she was happy to hear that as it would serve as a deterrent to people committing fraud.

Mr James noted that although it was important to protect the South Africa’s credibility, the nation should not leave punishment for the courts to decide. It was apposite to look at international best practices and consider what the penalties were in other countries. Perhaps the Department would need to research on this and report back to the economy.

Mr Demana replied that the Department suggested fines based on turn over but the but the State Legal Advisers felt that the legal people would be able to make a case based on the risk and judges would be able to apply their minds and give an appropriate fine.

Mr Carstens added that Australia had fines 100 000 and 250 000 Australian Dollars for small business and large business respectively.  The Department would however need to do a comparative analysis of what obtained in other countries and report back to the Committee.

The Chairperson remarked that the Committee needed time to do an in-depth study of the legislation. She however commended the Department for the presentation and for unpacking the issue of metrology.

Lotteries Amendment Bill: deliberations
Mr MacDonald Netshitenzhe, dti Chief Director of Policy and Legislation, referred to the revised organogram and expounded on the different functions of the various entities as outlined in the Lotteries Amendment Bill. The Minister would be responsible for the appointments of members of the Board, the Distributing Agency members after consulting the Board, a lottery operator or organ of State after consultation with the Board. The National Lotteries Board would appoint a Commissioner in consultation with Minister and would be the Trustee of the National Lottery Distribution Trust Fund. The board would also monitor performance of the Distributing Agencies and conduct reviews for decisions of the distribution agencies upon a complaint being lodged by aggrieved applicants, while also performing oversight role over the Commission and Commissioner’s performance. The distribution agencies would evaluate, consider and adjudicate applications, and also conduct own dispute resolution before the board can intervene. The distribution agencies would be operationally accountable to the board. Both the board and distribution agencies would play the role of effecting the internal dispute resolution mechanisms and one of their functions was to conduct distributional review mechanisms. The lottery operator (licensee) must comply with all conditions determined by Minister after consulting the board governing the operation of the licence, while the operator must submit to continuous inspections by the board or commission to ensure all conditions of licence were adhered. The National Lottery Distribution Trust Fund (NLDTF) would receive contributions from the operator, and 24 per cent of whatever was made as profit would go to NLDTF. The National Lotteries Commission must openly and transparently exercise all functions assigned by the Minister, board and any law. The commission must also ensure proper running of lottery and sports pools, and conduct research for proactive funding at own initiative or as requested by the board or Minister. Finally, the commissioner would be accountable to the board and must perform all financial and administrative functions and any duty assigned by the board in relation to the commission.

Ms Zodwa Ntuli, dti Deputy Director General (DDG): Consumer and Corporate Regulation, added that the functions of the different entities in the Lotteries Amendment Bill had been clearly defined in the Bill. The distribution agencies’ function, for instance, had been spelt out in the Bill as the Bill only consistently referred to the assumption considering evaluating and adjudicating on applications and also reference to proactive funding by the National Lotteries Commission. The Department, in developing the standards, was of the opinion that there was a difference between the operational level standards and the higher level standards that can sit in the regulation. The process of internal review mechanism must be transparent and known to all stakeholders, and this needed to be explicitly stated in the regulations. The legislations must also allow the Minister to prescribe the turnaround times in terms of applications and how long it would take to make payments.

The Committee noted that there was a better understanding of how the different functions of the various entities or agencies mentioned in the Lotteries Amendment Bill were laid out.

The Chairperson, alluding to the revised A-list of the Lotteries Amendment Bill which contained the Committee’s proposed amendment to the Lotteries Amendment Bill, asked the Department if the highlighted parts marked in red would help the Committee make ample progress on the Bill.

Ms Ntuli replied that the revised A-list would definitely advance the progress made on the Bill.

The Chairperson invited the Legal Advisers to take the Committee through the revised A-list.

Mr Johan Strydom, dti Legal Adviser, noted that if the Committee reflected on the areas marked in red on the A-list, all the basic issues the Committee had raised and the Committee’s proposition on such issues would come to the fore.

Mr Strydom commented on clause 1(f) of the Bill where the new definition of distribution agency which would be inserted in the clause. The definition would read as person appointed by the Minister in terms of section 26A read together with section 26B(3) of the Lotteries Act 1997, and the omission of “to distribute money, but not any department in the national or a provincial sphere of government.

Ms Ntuli responded that the Department was proposing the inclusion of the stated omission for the purpose of clarity and to avoid misinterpretation.

Mr Strydom referred to clause 4, noting the proposed insertion of ‘among others’ on page 3, line 43 of the Bill. Paragraph (b) in Page 3, precisely line 50 was also to be omitted and replaced with ‘manage the staff and its financial, administrative and clerical functions’. In line 10 of page 4, “renewable term not exceeding five years” would be omitted and substituted with “term which may be renewed only once for a further period not exceeding five years”.

Mr G Hill-Lewis (DA) proposed that the substitution in line 10, page 4 of the Bill should read as “five years which may be renewed only once for a period not exceeding five years”.

The Committee and Department agreed to the proposal.

Mr Strydom stated that the Committee also proposed that in clause 10, line 37 of Page 9 of the Bill, there should be a substitution of “conduct or authorise” with “request”. He however noted that the word “shall” in line 18 of page 9 should be substituted to reflect the discretionary power of the board. In Paragraph “r” on line 41 in page 9 of the Bill, the word “have the power” was substituted with “recommend to the Minister” as the power to solicit applications for grants belonged to the Commission and should not vest on the board.

Mr Strydom indicated that the new substitution in clause 22(c)(3) now related perfectly to the functions to be performed by the distributing agencies.

The Chairperson noted the arrangement of “evaluated, considered and adjudicated”, and stated that the sequencing of the word would perhaps have to change.

Mr McIntosh asked if section 26(3)(b), (c), (d) and (e) mentioned in clause 22 referred to the Lotteries Act or the Lotteries Amendment Bill.

Mr Strydom replied that the reference related to section 26 in the principal Act.

Mr Strydom stated that there was a proposition to omit lines 14 to 19, and to substitute with a provision for distribution agency to provide progress reports. The ceiling on the number of people appointed to the distribution agencies would be removed with the proposed omission of “nine”, as determination in each category would be made by the Minister on the basis of 26B(2) of the Bill.

Mr Hill-Lewis indicated that he thought what the Committee had earlier agreed on was that the number should not exceed nine.

Ms Ntuli agreed that was the decision of the Committee.

Mr Hill-Lewis noted the proposal for the omission on page 16 in line 27 of clause 24, stating that the function of distributing grants was being taken from the distribution agency and not added to that of the Commission.

Ms Ntuli replied that the Department in an earlier meeting with the Committee had distinguished between disbursement and distribution as the Department reiterated that the one of the functions of the Commission would be to distribute after a decision had been made on where the funds were going so that the commission would pay. The Department had been advised to keep the word “pay” in the Bill.

The Chairperson responded that it would seem logical to include it in the functions of the Commission and put it up front.

Ms Ntuli replied that the Department would consider the Chairperson’s suggestion, but the outlining the process might be tantamount to spelling out the operational functions of the entities.

Mr McIntosh alluded to clause 31 which he stated was partly linked to the newly proposed clause 26G, and further expressed his concern that people could assume that there would be an automatic revision of the grants or whether the distribution agencies had to review every application . Perhaps it was necessary to remove “is” and put “may” in the new section 26G(1) that was proposed by the Committee, so that it would not mean that the board would automatically review applications.

Ms Ntuli replied that the new section 26G(2) outlined the process the board would undertake to review after a formal complaint by an aggrieved person. Clause 31 however referred to a situation where the grant had been made but was now being used for the wrong reasons. The grant was likely to be stopped, reduced or withdrawn.

Mr Strydom added that the term “is” should not be read as a compulsion, and clause 31 was entirely different from section 26G.

Mr Lonwabo Sopela, Parliamentary Legal Adviser, made reference to page 3, line 40 of the Bill, where it was stated that the commission may solicit for applications, and asked how applications solicited for by the Board would be differentiated from other application. It was necessary for the Committee to look into this.

The Chairperson replied that she was of the opinion that the application being referred to related to proactive funding.

Ms Ntuli referred to page 3, line 35 of the Bill as the part of the legislation that provided for proactive funding. The aspect Mr Sopela was alluded to was referring to an invitation or call for application.

Mr James stated that there was a difference between solicited grants and unsolicited grants.

The Chairperson noted that the solicitation for applications therefore meant a general call for application. She suggested that the term “solicit” in page 3, line 35 of the Bill should be substituted with “invite”.

The Committee agreed to the proposal.

Mr Hill-Lewis requested clarification on the Committee’s proposed amendment to clause 30, page 18 of the Bill, particularly the substitution of the distribution agencies with the commission.

Mr Strydom replied that the clause was an amendment the Lotteries Act, and the amendment was stating that the payment by the board in respect of a grant should not be made to the distribution agencies but the Commission.

Mr Hill-Lewis stated that he did not understand why the board would pay it over, as the fund was supposed to be coming from the NLTDF.

The Chaiperson replied that the board was the trustee of the NLDTF.

Mr Strydom indicated that the Committee also proposed to omit line 54 and 55 in clause 31 of the Bill, and substitute with a provision that granted power to the Minister to prohibit, withdraw or reduce certain grants.

Mr Hill-Lewis alluded to instances where payments were being made in tranches, and asked if the provision also allowed for tranches to be stopped if found to be used wrongly.

Ms Ntuli replied that that kind of instances ware accommodated under “withdraw”.

The Chairperson indicated it was time for the Committee to consider the issue around an organ of state running the lottery business in South Africa, as well as whether it was necessary to substitute the two years in line 24, page 10 of the Bill with eight years.

Mr Hill-Lewis maintained he did not see a genuine reason why the state would want to run the lottery. He noted that the reasons being advanced for the state to run the lottery, which were related to the situation where a suitable licensee was not found or a revocation of licence, were not enough for state to intervene. Even the allusion to state intervention in the lottery made in the policy document on lottery did not provide enough justification for an organ of state to run the lottery business.

The Chairperson replied that the justification for an organ of state to run the lottery was clearly made in the policy document especially Pages 28 and 29 of the document. The running of the lottery by the State could go a long way in putting the private sector on its toes. The fact however remained that there would be no reason for the government to run the lottery if it was run properly.

Mr Hill-Lewis responded that the explanation advanced for the need for the Bill in the explanatory memorandum to the Bill did not include the state directing resources to needy areas. He also did not understand why the state wanted control of the lottery when it owned 20% of Gidani (Pty) Ltd.

Mr James remarked that he had not heard a compelling argument on why the state wanted to run the lottery, noting the state running Lotto could easily lead to a situation where the Lotto would be hijacked. There was no genuine reason for wanting to create an organ of state to run the lottery.

Mr N Gcwabaza (ANC) noted that it was imperative to prevent a situation where the operations of lottery would be suspended because a licence had been revoked. It was also apposite that when a licence was withdrawn, an organ of state should run the lottery for eight years so that there would be no disruption.

Mr Wayile stated that there were no compelling reasons to suggest that an organ of state cannot run the lottery. It was wrong to assume that the private sector was the only sector capable of running businesses. There was also a wrong perception that the private sector was immune to corruption and maladministration. The government, through the notion of an organ of state, did not intend to paralyse the national lottery. The Bill was explicit enough to specify when an organ of state must come in.     

Mr McIntosh said he did not understand why the state would like the option of controlling the lottery by running it, stating that it was absolutely unnecessary. The state can however control the lottery business through the licensing requirements. Generally, the state did not run things as efficiently like the private sector.

Mr James alluded to the reports on the annual evaluation of government departments, noting that some departments were always performing poorly. It was not only presumptuous for the state to presume itself to know all the needs of the citizens, but also dangerous. The Brazilian government had devised a way of distributing grants through the banks and it was very efficient. The Democratic Alliance (DA) would vigorously oppose giving a blank cheque to an organ of state without knowing the details of such organ.

Mr Hill-Lewis noted that the whole notion of an organ of state running the lottery was completely lacking in detail. There had been no convincing argument as to why it was necessary.

Mr Gcwabaza stated that the decision to appoint an organ of state by the Minister if the need arose was far from being an irrational decision. The issue was not about the 20% share the state had in a lottery company, but it was important to avoid a situation where a private company would hold the nation and its people into ransom. The person or organ of state running the lottery must also be allowed to run a full course of eight years in order to avoid disruptions or interruptions.

Mr Macdonald noted that the Department came to the Committee with two issues relating to the Bill. The public responded to the issues as there were references to merits of having a state-run lottery such as localised technology transfer and improvement in procurement. The Department also provided instances of countries such as Australia and China that had the state running the lottery. The Department had argued that it was possible for the state to run the lottery as it was being done in some countries. It was now left for the Committee to make a decision on the Department’s proposition.

Ms Ntuli added that the Department had made its case explicitly clear to the Committee, and it was now up to the Committee to decide. It was the State lottery, with the state licensing people. If the objectives were not met and the people were not running it well, then it behoved the state to come in and intervene. It was not about the state acquiring control but the Department was recommending an enabling for the state to intervene.  

The Chairperson, after noting the different political parties’ position on an organ of state running the lottery, commented that Members were nowhere near reaching a compromise. Contrary to some opinions, the notion of the state running the lottery was referred to in the policy document. The onus lay on the Committee to decide if the nation wanted the state to have an enabling provision to intervene in the business of lottery.

The Chairperson stated that the next meeting on the Bill was scheduled for 20 September 2013 where there would be in principle agreement clause by clause on the Bill.

The meeting was adjourned.
 

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