Voting on Auditing Profession Amendment Bill (deferred); Financial and Fiscal Commission Amendment Bill: submission on appointments; Committee Programme

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Finance Standing Committee

18 February 2015
Chairperson: Mr Y Carrim (ANC)
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Meeting Summary

Scheduled voting on the Auditing Profession Bill did not take place. A Parliamentary legal adviser; the National Treasury and a Committee researcher provided comments in preparation for voting, but it emerged that submissions on the Bill had not yet been properly processed. The Chairperson decided that voting had to be deferred.

Deliberations on the Financial and Fiscal Commission (FFC) Amendment Bill focused on the full-time and part-time appointments to the FFC, especially with regard to the position of Chairperson. The FFC Acting Chairperson and other members of the Commission were given the opportunity to pronounce on the matter. Arguments advanced in favour of a full-time Chairperson were recognised as powerful by ANC Members and the Chairperson, and there was general endorsement. The DA was reluctant to pronounce on the matter, as there were reservations about FFC past performance, and concerns about a bloated State. The FFC argued that the newly created CEO position was not in itself sufficient to align the Commission with its constitutional mandate. The FFC needed a full-time Chairperson who could represent the Commission and engage with political organisations, provincial legislatures and the community. Without a full-time Chairperson the Commission would in effect be directed by the secretariat, and its constitutional form would be compromised. Given the importance of the position and the practice in most of the Acts regulating other constitutional bodies, it was deemed highly advisable that the Bill stipulated a full-time Chairperson position. The National Treasury declared itself willing to support full-time appointments. The Treasury and the FFC indicated that even where the law did not prescribe about full-time or part-time appointments for constitutional bodies, there was a trend to appoint full-time Chairpersons and sometimes commissioners. The Chairperson concluded that the Standing Committee felt that there had to be at least one full-time position. A position would be formulated in the ANC study group. Opposition parties could pronounce in due course.

In the consideration of the draft strategic framework and programme for 2015, the DA commended the strategic framework, but advised emphasis on fiscal consolidation. The Chairperson questioned the need for that. There was general concern with Eskom and the energy crisis, and the finance implications of that.

Meeting report

Voting on Auditing Profession Amendment Bill (deferred)
The Chairperson asked a Parliamentary law adviser to comment on amendments.

Adv Frank Jenkins, Senior Parliamentary Legal Adviser, responded that the terms “registered candidate auditors” and “candidate auditor” had been inserted into various sections of Act 26 of 2005. The amendments had been discussed with state law advisers. The only amendment that caused uncertainty was Clause 5 on Registration of individuals as registered auditors and candidate auditor - which was a substitution for section 37 of the principal Act. It was suggested that the date of the Act in Clause 14 be changed from 2014 to 2015 in the short title.

Adv Empie van Schoor, Treasury Chief Director, Legislation, noted that the National Treasury had prepared an A list of proposed committee amendments in cooperation with the Independent Regulatory Board for Auditors (IRBA). There were reservations about the insertion of the term “registered auditor”.

The Chairperson asked the Committee researcher about a document prepared by researchers.

The Committee researcher replied that it was in agreement with Adv Jenkins. All amendments were supported.

The Chairperson asked if a meeting had been requested with an entity who had made a late submission.

Adv van Schoor replied that it had not been done.

The Chairperson said the Bill could not yet be voted on, if that were the case. The Committee Report could be adopted informally. The report recommended, inter alia, that the low representation of the previously disadvantaged in the auditing profession be recognised. The Committee recommended that new innovative ways be found to represent the previously disadvantaged adequately.

Financial and Fiscal Commission (FFC) Amendment Bill [B1—2015]: deliberations
Adv van Schoor noted that the crucial issue was that of full-time and part-time appointments. Currently the executive had to decide about the matter.

The Chairperson said that the Committee could not accept that only the CEO would be a full-time appointment. His party's study group feel that the matter had to be left open. Mr Bongani Khumalo, FFC acting Chairperson, had submitted that the Chairperson had to be a full-time appointment.  He asked if there were other significant amendments.

Ms Phumelele Ngema, Parliamentary Legal Adviser, replied that appointments was the most crucial issue. The parliamentary legal advisers would make proposals when the Committee had decided. State law advisers were engaged. There was concern over duplication of provisions. There was limited provision for vacancies to be filled.

The Chairperson asked about the position of Treasury.

Adv van Schoor replied that Treasury was in support.

The Chairperson asked about the position of the FFC on the appointment of a full-time Chairperson.

Mr Bongani Khumalo, FFC Acting Chairperson, replied that the responsibilities of the Chairperson was conflated with the position of accounting officer. The Chairperson as accounting officer had to represent the Commission in all engagements. If a CEO was appointed, that person would have to attend to the strategic objectives of the Commission. The type of people appointed to the Commission tended to be very busy. His experience as Chairperson had been that he had to count on the co-operation of the secretariat, when under pressure. Commissioners had to take responsibility for direction, but it was hard to get a quorum together for a meeting. If all commissioners were part-time, the secretariat would eventually make the decisions.

Prof Nico Steytler, FFC Commissioner, added that a full-time Chairperson would be the political head. It was not just a career. The Chairperson had to engage with other political organisations. It was not just an administrative position. The Chairperson had to engage with political heads in Parliament and in provincial departments. The acting Chairperson had attended over 60 meetings in the previous year. Travelling and preparation had to be done. A full-time Chairperson had to be versed in a wide range of matters, and able to speak in his own right. He suggested that retired persons be selected for part-time appointments, people who could in fact do a part-time job full-time. Leadership in the Commission depended on direction from the Commissioners. Professionals had to be brought together in meetings. When quick decisions had to be made about the Division of Revenue Bill, a full-time person was required to get Commissioners to sit together. A comparison with Chapter 9 institutions showed that all had permanent full-time Chairpersons. In some cases that was provided for in the legislation, and in others not. The FFC could not be taken seriously without a full-time Chairperson. He referred to a statement by the then Minister of Finance, Trevor Manuel, that the FFC was also a financial conscience: "Our invitation to the FFC is to act decisively both as participant and conscience to government".

Prof Daniel Plaatjies, FFC Commissioner, added that the Public Service Commission had nine full-time members. A lack of full-time members would evacuate the constitutional form of the FFC. Operational responsibility would be moved to the CEO and the administrative staff. The FFC had to assist the executive with the division of revenue. There would be a systematic reduction of the FFC role, with the Commission having to account to officials in the Treasury. The CEO had to be the person who would provide strategic direction and interact with the Treasury and national and provincial governments. The FFC was not to be made into a research unit. It was an independent and autonomous entity that had to assist with the division of revenue. Its competence had to be protected. Care had to be taken that responsibilities of the Commission were not evacuated.

Dr B Khoza (ANC) urged that the matter be resolved. The FFC had a major role to play. There was the challenge of municipalities being unable to generate revenue. The division of revenue was critical. There were issues such as the viability of municipalities, and whether a municipality was to be demarcated as such or not. She wondered why things had been allowed to take so long, and why the Treasury had not yet appointed a CEO. The FFC had to be an institution run by people in permanent positions. There were urgent matters for the FFC to attend to. Metro municipalities were able to create their own revenue, but there were service delivery backlogs. Treasury had to sort the matter out. Local government was weak and needed institutional support to strengthen it. It was advisable to write to the Minister and exert pressure.

The Chairperson responded that there was no need to write to the Minister. The Bill was in the hands of the Standing Committee, and the Committee would decide about it. The FFC was a very important institution, but it had to be more in terms of powers and functions. There was a need to support local government. It might be necessary to make a constitutional amendment regarding the powers and functions of the FFC. The Standing Committee would reach a decision and finalise the matter in party study groups.

Ms D Mahlangu (ANC) agreed that the Standing Committee had to make recommendations. Propositions had to emerge from discussion in study groups. The Chairperson could communicate with the Minister.

Mr D Ross (DA) asked if a full-time Chairperson and CEO was being considered.

The Chairperson replied that it was so.

Mr Ross said that there had been no contribution from the FFC in preceding years. The DA was concerned about a bloated state. Local government had to be enhanced and educated. He asked what the FFC had done about the payment of bulk suppliers, through directing the equitable share directly to them.

Mr Ross asked about FFC recommendations on the energy crisis. The FFC had a role to play in evaluating the past. He appreciated that the acting Chairperson had attended 60 meetings in the previous year, but the question was what issues had been discussed, and what proposals made to local government. It had to be asked if it was feasible to expand the scope of the FFC.

The Chairperson replied that Mr Ross was asking unfair questions. The FFC did not need to reply to them. The Minister had appeared before the Committee while the Bill was drafted, about the separation of the Chairperson and CEO positions. Writing to the Minister about it would have implied seeking permission. The Minister had promised that the Bill would be delivered within a month, and adhered to the promise. The Committee had agreed that the broader role of the FFC had to be looked at, as the FFC was a constitutional entity. The executive had to take the FFC seriously.

Adv van Schoor noted that the proposal that the Chairperson be a full-time appointment, was not included in the Act. Acts that prescribed for constitutional bodies sometimes contained prescriptions about part-time or full-time appointment and sometimes not. All the Public Service Commission members were full-time appointments. The same applied to the Institute for Chartered Accountants of South Africa (ICASA). Options were provided for, but in practice appointments were full-time. The Standing Committee had to decide whether the Act had to prescribe the appointment of a full-time chairperson.

Dr Khoza remarked that the Demarcation Board Chairperson was a full-time appointment. The President appointed the Chairperson.

Ms P Kekana (ANC) noted that Adv van Schoor had said that the Minister had discretion regarding full-time appointment in some boards. If the Minister was granted discretion it was not necessary to insert about full-time appointment in the Act. The Minister could take recommendations from the Standing Committee.

Mr Khumalo said that the FFC and the Treasury had looked at constitutional bodies to align the FFC to the PFMA. That was why the Public Protector was also included in the list of entities examined.

The Chairperson asked if full-time appointment to the Commission for Gender Equality was written into law. It was odd to have an organisation of full-time members with a part-time Chairperson. He asked about the position with regard to the Independent Electoral Commission (IEC).

Adv van Schoor responded that a distinction could be drawn between full-time and part-time.

Adv Jenkins asked if there was scope for a full-time member on the board. The FFC Act did not explicitly prescribe a full-time Chairperson, and did not allow for full-time board members.

The Chairperson remarked that Cabinet could say no to the full-time appointment of a Chairperson and/or any other commissioner.

The Chairperson asked how the need for a full-time Chairperson could be formulated.

Prof Steytler responded that there had not to be competition between the Chairperson and commissioners. The FFC needed a public face to engage with politicians and the community.

Prof Plaatjies added that the Chairperson had to be a full-time Chairperson. There was a difference between the Chairperson and the CEO. The CEO was the equivalent of a Director-General of a State department. The Director-General had operational and administrative responsibilities, but the Chairperson was the head of the FFC. The current phraseology was not helpful. The Director-General of the Public Service Commission was like a CEO, but the Chairperson had to make sure that the Commission did its work, and had to engage with political entities.

The Chairperson noted that there were powerful arguments in favour of a full-time Chairperson, as the Chairperson had a big role to play. The CEO could not represent the FFC in Parliament, nor make quick decisions. If the Chairperson was not full-time, the CEO would be too powerful. He asked Adv van Schoor to respond to arguments made.

Adv van Schoor replied that a different proposal had been made to Cabinet. However, the case for a full-time Chairperson was formidable, and she was disposed to support it. There could also be one or two other full-time members.

The Chairperson remarked that counter-arguments had to be anticipated and dealt with. He asked how it could conceivably be possible for a part-time Chairperson to do the work properly.

Adv van Schoor replied that part-time appointments could be reluctant to interact with staff.

The Chairperson asked about quick decisions.

Adv van Schoor replied that it could not be predicted. Members could be capable or not.

The Chairperson asked what would happen if an outside agency wanted to meet with the political head.

Adv van Schoor replied that if all members were part-time, a political head might not be available.

The Chairperson asked what would happen if the CEO became too powerful, and could not be overseen.

Adv van Schoor replied that it depended on the strength of the Chairperson. There was a tendency for full-time Chairpersons and CEOs to fight.

Dr Khoza noted that there had in fact been tensions between the Chairperson and CEO in the Municipal Demarcation Board. The separation of powers was blurred. Conflict seemed to arise if the Chairperson was a technocrat who wanted to get overly involved with operations. It was unacceptable for a CEO position to remain vacant for long.

The Chairperson said that the ANC would meet in a study group to formulate a position. The law provided for at least one full-time position.

Ms Mahlangu felt that a full-time Chairperson and one other full-time appointment would be in order. The status of the Chairperson could not be the same as that of members.

The Chairperson said that a precise formulation could be decided on. The Standing Committee felt that there had to be at least one full-time position. Opposition parties could present positions in due course.

Consideration of draft Committee strategic framework and programme for 2015
The Chairperson remarked that it had to be considered how the nine-point plan set out in the SONA, impacted on the Standing Committee. The nine-point plan aimed to ignite growth and create jobs. The Committee programme could not merely be a reaction to executive initiatives. The Committee had to be more effective in processing the Medium Term Budget Policy Statement (MTPBS) in the current year. It had to be decided what else had to be added to the draft programme with regard to the MTPBS and the Budgetary Review and Recommendations Report (BRRR).

Mr Ross commended the draft programme. The strategic framework would prove to be helpful. There had to be greater emphasis on fiscal consolidation. He asked if there could be a presentation on the energy crisis, with the focus on Eskom and pricing.

Ms Kekana said that the Committee had spoken to SARS about unintended consequences of load shedding.

Mr Ross referred to the Eskom funding crisis.

Dr Khoza noted that the State had committed R23 billion to Eskom. Questions had to be asked about value for money, and how funds had been generated and spent. The Committee could not be concerned with the crisis in the same manner as the Public Enterprises Portfolio Committee. The concern of the Finance Standing Committee had to be with the impact of power cuts on taxes and the economy. There were efficiency issues related to value for money.

The Chairperson remarked that all issues had a finance aspect to them. The budget would indicate where the R23 billion was from. A study of State Owned Enterprises (SOEs) could be added to the programme. The Committee researcher had done work on Eskom. With reference to the BRRR, it had to be asked how revenue had been affected by the Eskom crisis.

The Committee researcher noted that there had been a report by the Energy researcher in the previous year. The report did not focus on Eskom, but considered policy changes in the energy sector. The role of the Department of Energy was looked at, with a focus on the energy mix, and such matters as the shale gas reserve. Renewable and nuclear energy had to be considered. The question was whether Eskom could benefit from exploring coal reserves.

The Chairperson concluded that it was an important generic report. The Standing Committee was interested in financial implications. He questioned the need for a focus on fiscal consolidation, as stated by the DA.

Dr Khoza agreed that an ANC focus was desirable.

The Chairperson adjourned the meeting.

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