Special Economic Zones Bill: negotiating mandates; Legal Metrology Bill: Department of Trade and Industry briefing

Meeting report

The Chairperson suggested the Committee go through each province’s negotiating mandate alphabetically and asked members to be succinct in the reading of the mandates supplied by their provinces.

Special Economic Zones Bill [B3B-2013]
Eastern Cape Negotiating Mandate
Mr Xola Pakati (ANC/Eastern Cape) presented Eastern Capes negotiating mandate and stated that the Eastern Cape voted in favour of the Bill but it had two fundamental issues which it wanted to be addressed before the finalisation of the Bill: Governance structures; Issues of funding. It stated that the Eastern Cape did not want to overhaul the Bill but these two items were not addressed clearly in the Bill.

Free State Negotiating Mandate
The Free State was not able to present a mandate during the meeting.

Gauteng Negotiating Mandate
Mr Mafika Mgcina (ANC; Gauteng) presented the Gauteng negotiating mandate and stated that Gauteng supported the principles and details of the Special Economic Zone Bill with proposed amendments. In clause 25, it proposed inserting “subsection 7”: “The Minister must make regulations on:
- Composition of the Special Economic Zone Board;
- The term of office of the Special Economic Zone Board;
- Functions of the Special Economic Zone Board;
- Code of good conduct and disclosure if interests for the Special Economic Zone Board; and
- Any matter which is required for proper implementation or administration of this Act”
In clause 38, it proposed inserting “subsection 4”: “The Minister must make regulations regarding:
- The prescribed time periods applicable for the SEZ Board to decide on the approval or disapproval of a licence of an application to locate a business within the Special Economic Zone; and
- The practice / procedure to govern appeals brought against SEZ Board decisions.

KwaZulu-Natal Negotiating Mandate
Mr D Gamede (ANC/KwaZulu-Natal) stated that the KwaZulu-Natal delegation supported the Special Economic Zones Bill.

Limpopo Negotiating Mandate
Mr Gamede read on behalf of the Limpopo province and stated that the province voted in favour of Bill with amendments to:
- Establishment of a SEZ advisory board (clause 7) where all nine provinces were represented on the SEZ advisory board
- Functions of the advisory board (clause 11) where licences/investors needed to be monitored to ensure that they gave back to communities where SEZs were located as well as M&E in the SEZ needed to be conducted continually
- Support measures (clause 21): there needed to be specified time frames for distribution of incentives after an application had been submitted and a beneficiation and skills transfer plan
- Designation of SEZs (clause 24) where SEZs need to be established in remote rural areas
- Governance and management of a SEZ (clause 25) where traditional leaders need to form part of the SEZ board and its members needed to have equal representation of women, youth and people with disabilities.

Mpumalanga Negotiating Mandate
Mr A Nyambi (ANC; Mpumalanga) stated that Mpumalanga was in favour of the Special Economic Zones Bill without any amendments but had noted some general observations in its report.

Northern Cape Negotiating Mandate
Mr K Sinclair (Cope; Northern Cape) stated that the Northern Cape voted in favour of the Bill and although there were no amendments, it recommended that certain principles needed to covered:
- The establishment of SEZs should extend beyond cities; rural communities should also be considered in order to benefit from their establishment
- The SEZ in the Northern Cape should not be limited to Upington Solar Park only;
- The Gamagara Mining Corridor should also be considered as a SEZ
- The State Diamond Trader should relocate to Kimberly to promote diamond beneficiation in the province;
- Pixley Ka Seme Region should be considered as an SEZ for wool processing in the country.

North West Negotiating Mandate
Mr Gamede read on behalf of the North West Province and stated that it agreed to the SEZ Bill but recommended that the Advisory Board needed to take more responsibility in making decisions around the designations, the companies in the SEZ and the criteria of which businesses or services are offered in a SEZ and not have all powers residing in the Ministry as it would create more red tape.

Western Cape Negotiation Mandate
Mr F Adams (ANC; Western Cape) stated that the Western Cape was in support of the SEZ Bill with amendments. In clause 36(2)(a) after the word “operator” insert “and a SEZ board”. In clause 36(3) to insert the word “operator and the”.
 
The Chairperson said he would give Ms Charmaine van der Merwe: Senior Parliamentary Legal Advisor, Mr Johan Strydom, dti’s Law Advisor, and the Department a chance to respond to the recommendations and amendments made by the provinces. He required the Department to provide written answers to the Committee by the end of the business day.

Department response to negotiating mandates
Ms van der Merwe said she would touch on mandates which had offered recommendations. In regards to the concerns raised by the Eastern Cape on governance and funding, those issues had been unpacked during the briefing on the Bill in the National Assembly but a similar presentation could be given to the NCOP if requested. In regards to Gauteng and its recommendation to insert a “subsection 7” in clause 25, that insertion was unnecessary because there was already catch-all regulation in the Bill. In terms of the Minister making regulations on the composition of the Special Economic Zone Board, she would caution against that because within the Public Finance Management Act (PFMA) there were no requirements for such boards to have a prescribed composition and term of office. With respect to the other Gauteng recommendations, the Bill already talked to those provisions and additional insertions were not necessary, especially in clause 38. By inserting a “subsection 4” the particular provisions in that clause would interfere with commercial transactions which this Bill was trying to facilitate.

The Western Cape recommendations dealt with the inclusion of definitions in certain clauses. Although its recommendations were understood, when composing the Bill the drafters followed the drafting convention policy which allowed for definitions to be stated only once in the entirety of the Bill.

Limpopo’s recommendations were more concepts than amendments. One needed to be careful and understand that the Intergovernmental Relations Framework Act would apply side by side with the SEZ Bill and as stated in the Constitution all spheres of government were required to work side by side. Therefore she would advise against an SEZ advisory board that was too large. The recommendation that investors needed to be monitored to give back to communities was something she would advise against and flag. On the creation of support measures, where the Minister may determine and implement support measures, including incentive schemes, for operators and businesses operating within SEZs, such a provision could be included but one needed to be cognisant that SEZ targets may change over time in this country and incentives needed to go through a number of departments before they were approved and follow a specific economic policy, therefore this particular recommendation would be flagged as well. Its next recommendation stating that SEZs need to be established in remote rural areas was more of an oversight matter and inserting such an amendment would make the Bill clumsier. In regards to appointing traditional leaders as part of the SEZ board, one must be again be cautious having a large advisory board. If a SEZ was established on traditional land, that would require special consultation because it dealt with a broader issue. In ensuring that the board had an equal representation of women, youth and people with disabilities, it was not necessary to include that in the Bill because the Women Empowerment and Gender Equality Bill would talk to equal representation in the work place and although not a requirement, clause 7(5)(b) did make a provision for gender equality.

The Chairperson thanked Ms van der Merwe for her explanations and asked the Department to further elaborate its stance on the recommendations requested by the provinces.

Ms Nonceba Mashalaba Acting dti DDG and Chief Director: Product and Systems Development & Monitoring and Evaluation Unit, said she fully agreed with Ms van der Merwe’s deliberations and dti took note of the Chairpersons request for written responses.

Mr Kaya Ngqaka, dti Chief Director: Infrastructure Investment Support Unit, said he agreed with Ms van der Merwe’s explanations, since the Bill was a framework, there would be rules and regulations businesses would have to adhere to. He agreed with Limpopo’s recommendation that all nine provinces were represented on the SEZ advisory board. The provinces in which the SEZs were established in would have the leverage to make direct inputs and those inputs would guide the national board on how the Bill would be designed. The functions of the advisory board was more of an operational issue, and in the Department’s policy, it stated that the dti would establish the M&E system which would monitor the SEZs and those within the SEZs would work with the Department to help monitor as well.

On clause 21 which dealt with the issuing of support measures, the Department could not specify what its incentives would be, since SEZs typically required quick decision making, it left the area of incentives open to allow for flexibility. The designation of SEZs could be anywhere in the country as long as that particular area held a strong business case. One must take into consideration that there were many instruments that could be used in conjunction with SEZs to achieve economic objectives such as rural development strategies. The SEZs were part of a bigger picture that would create value chains and linkages with other industries.

The Chairperson asked the Department where the SEZs would be located.

Mr Ngqaka said in the Eastern Cape it would be located in the OR Tambo region;
Gauteng: Johannesburg;
Free State: Lejweleputswa;
KZN: Ethekwini.
Limpopo: Sekhukhune, Vhembe;
Mpumalanga: Ehlanzeni;
Northern Cape: Siyanda;
North West: Bojanala
Western Cape: Cape Town.

The Chairperson said he had asked the question about location to gauge whether SEZs would actually be established in rural areas. From what was described by the Department, it seemed most of the SEZs would be in urban areas. Although rural areas were not being ruled out it was important that SEZs were established there in the long run, to prevent the burden of migration due to a lack of employment.

Mr Ngqaka said at the moment the Department was conducting preface studies, and there was an agreement from each province in regards to where they wanted their SEZs to be located but provinces were not limited to a single SEZ, they had the option of expanding if they chose to.

Mr Johan Strydom, dti Law Advisor, spoke about the proposed amendments to the B version of the Bill which dti had prepared. He noted that the dti had been approached by the South African Revenue Service (SARS) to omit the word “import” in clause 24(5)(a) because the word import would restrict the customs procedures to be applicable only to custom import procedures.

The Chairperson asked if Members agreed with the omission of “import” in clause 24(5)(a).

Mr B Mnguni (ANC; Free State) said he agreed with Mr Strydom’s proposed amendment and Mr Adams seconded his proposal.

Ms van der Merwe, Parliamentary Law Advisor, said she would advise against the Gauteng proposals because they were sufficiently addressed in the Bill.

Mr Mgcina said Gauteng raised the issues about regulations and functions of the SEZ board because there needed to be a mechanism to ensure that board members followed a particular framework and stayed in line within that framework. Gauteng would be comforted if such issues were addressed in the Bill.

Ms van der Merwe said the functions of the SEZ board were definitely covered in the Bill but composition and terms of office as well code of conduct and disclosure of interest were covered in other legislation such as the Public Finance Management Act (PFMA) or the Municipal Finance Management Act (MFMA). There were also non legal instruments such as the King Report which talked to governance.

The Chairperson said Gauteng’s concern was that such instruments needed to be spelled out in the Bill.

Ms van der Merwe said it was not necessary to spell out such provisions because the incorporation of those Acts were specified in the Bill.

Mr Pakati said the PFMA did not pronounce itself on some of the questions raised by Gauteng. The PFMA dealt with matters of governance and defined boards as accounting authorities. It did not talk about the term of office which was a matter dealt with outside of the PFMA.

The Chairperson said he wanted Ms van der Merwe to advise the Committee specifically on term of office.

Ms van der Merwe said board composition, term of office and code of good practice were dealt with to some extent outside the Bill. If one looked at the SEZ board it was a commercial entity which ran the business of the SEZ. The comparison which must be drawn was with other public entities and other business enterprises. The other aspects of term of office, code of practice and board composition were part of corporate governance. She would caution against applying criteria for these requirements to this entity that differed from others, but if the Committee wanted to spell out those additional instruments there was no legal problem in doing so. 

Mr Nyambi said he did not understand the argument since there was no legal issue of adding the additional amendments to the Bill.

Mr Mnguni said it would be important to note that SEZs were a commercial board in the Bill so one could differentiate it from other boards.

Mr Adams said from his understanding, it was the licencee which must appoint a SEZ board. The Minister could not make a decision on behalf of a municipality to make such a decision. He would suggest that such discretion be left to the licencee instead of the Minister.

The Chairperson said the Bill was talking to the National Board and not local boards.

Ms van der Merwe said there were two boards represented in the SEZ Bill. The Bill dealt with the Commercial Board and the National Board in clause 7. The Advisory Board was part of the National Board and there was a clear composition in the Bill outlining its functions and terms of office. Clause 25 dealt with the company which would run the SEZ and that particular company needed to have a board which was governed by the PFMA and if the entity was established by a municipality it would be governed by the Municipal Finance Act.

Mr Mgcina said Gauteng’s point of contention was with the board that would run the SEZ in a particular area. The regulations of that board could not be open ended and therefore Gauteng was proposing for the Minister to possess more regulatory powers. Since there would be no legal issues for inserting those additional amendments, as a province Gauteng would be comforted if they were added.

Mr Mnguni said he agreed with the Gauteng proposals as they omitted any form of ambiguity.

Mr Adams said Gauteng’s proposals fostered a top-down approach which this Bill was trying to avoid.

Mr Sinclair said this matter need not be complicated because there was already legislation which covered all these matters.

Mr Nyambi said from the explanation given to the Committee there was not much contradiction and he agreed with Mr Sinclair that Gauteng’s proposed amendments had been correctly captured in the Bill.

The Chairperson said this issue would be revisited again.

Mr Mgcina said he agreed with the Chairperson and as long as the proposed amendments of the provinces were already mentioned in the Bill, it was content.

Ms van der Merwe said in order to settle this matter, her colleagues and herself would issue a proposal of compromise to provide for regulation that would talk to principles that would apply to all of these entities.

The Members agreed to that suggestion. 

The Chairperson asked Ms van der Merwe to move on to the next proposed amendment.

Ms van der Merwe said the next amendment was also by Gauteng for the insertion of a “subsection 4” in Clause 25 and she would once again caution against an appeal mechanism being put in place.  The nature of its proposals would be dealt with via competitive factors and should not be treated administratively.

The Members stated that they did not agree with Gauteng’s proposal.

Ms van der Merwe said the next proposed amendments were from the Limpopo province, where it proposed for the representation of all nine provinces in the SEZ advisory board as well the appointing traditional leaders to form part of the SEZ board. She would advise against the implementation of such amendments because there was a clear and important role for provinces to play in regards to SEZ and they would already be represented. In terms of traditional leaders being appointed, that was an issue that had to be dealt with nationally. The advisory board focused on SEZ expertise.

Mr Adams said these proposals should be left out.

Another proposal by Limpopo dealt with functions of the Advisory Board and the continual conduct of M&E in the identified SEZ. She would advise against this proposal because it was a function of oversight.

The Committee agreed to leave out that proposal.

The next amendment proposed by Limpopo dealt with support measures. She would advise against the issuing of incentives.

The Committee agreed to leave out that proposal.

On the Limpopo proposal for the designation of SEZs in rural areas, Ms van der Merwe said she would caution against that because it was a matter of oversight.

The Committee agreed to leave out that proposal.

In regards to its proposal for equal representation of women, youth and people with disabilities on the SEZ board, Ms van der Merwe said she would advise against that because there was the Women Empowerment and Gender Equality Bill that would talk to equal representation in the work place.

The Committee agreed to leave out that proposal.

Ms van der Merwe addressed the Western Cape proposed amendments. It wanted in clause 36(2)(a) after the word “operator” to insert “and a SEZ board” and in clause 36(3) to insert the word “operator and the”.  She advised against those insertions because they were more definitional and were not necessary.

The Committee agreed to leave out that proposal.

On the Eastern Cape proposed amendment to reword clause 31(2), Ms van der Merwe said she would not object to this clause but did not think there was a need for it.

The Committee agreed to leave out that proposal.

The Chairperson thanked Ms van der Merwe for her expertise as well the dti’s and reminded the Department about its written responses to the negotiating mandates.
 
Legal Metrology Bill [B 34B-2013] briefing
Dr Tshenge Demana, dti Chief Director: Technical Infrastructure, presented the Legal Metrology Bill to the Committee. The Bill aimed to promote fair trade and to protect public health and safety and the environment. Trade Metrology (Weights and Measures) was the administrative and technical procedures implemented to ensure the appropriate quality and credibility of measurements for trade transactions where a measuring instrument was the basis for the transaction. Legal Metrology meant the entirety of the legislative, administrative and technical procedures established by public authorities and implemented on their behalf in order to specify and ensure, in a regulatory or contractual manner, the appropriate quality and credibility of measurements related to official controls, trade, health, safety and the environment.

The Legal Metrology Bill extended beyond the scope of Trade Metrology through regulations coupled with impact assessments. It expanded enforcement through increased market surveillance, and it had provisions which made for effective and relevant penalties, and for regulating verification and repair activities to counter conflicts of interest. Moving into Legal Metrology would enable technological developments, developments in agriculture, industry and transportation. It would allow for the movement of direct sales of products to a multiplicity of transactions through production, wholesaling, processing and retail trade.

This new Act would apply to measurable products and services, measurements in trade, health, safety and the environment and measuring instruments used for a prescribed purpose. The new Act would be administered by the National Regulator for Compulsory Specifications and authority lay with the CEO to report to the Minister.


The Minister needed to declare a South African National Standard (SANS) a technical regulation in respect of any measuring instrument or any product or service which may affect fair trade, public health and safety or the environment. A SANS standard would be the basis for a technical regulation. Only if a SANS was not available may the Minister make a regulation in the Government Gazette.

The Bill made provision for the Minister to prescribe requirements, through regulations, to restrict verification officers from repairing prescribed measuring instruments. This would be informed by the risk associated by an area of regulation. This provision was made to address the conflict of interest.

Dr Demana went on to speak about compliance schemes and use of distinctive marks, penalties, the financial implications and the background to this Bill.

In his conclusion, he said that the current Trade Metrology Act  was inadequate and needed to be replaced with the Legal Metrology Bill. The current governance structure was not ideal, thus the entity would in future report directly to the Minister. The credibility of measurements would be assured and the financial needs of Legal Metrology addressed by the Legal Metrology Bill.

Discussion
Mr Sinclair said this Bill would be better deliberated in the Science and Technology committee because it was more suited to their expertise.

Mr Nyambi asked why NRCS offices were only situated in certain and not all provinces.

Mr Stuart Carstens, General Manager: Legal Metrology: National Regulator for Compulsory Specification (NRCS) said those provinces which already had offices situated in them had been decided on a while ago and due to financial implications they were unable to expand. However, the new Bill was allowing for the collection of levies which would be used to open up offices in more provinces based on the economic activity of the region.

The Chairperson said this Bill would be discussed further and thanked the Department for its presentation.

The meeting was adjourned.