National Ports Authority Bill: deliberation

Meeting report

PORTFOLIO COMMITTEE MEETING
12 AUGUST 2003
NATIONAL PORTS AUTHORITY BILL: FORMAL DELIBERATION

CHAIRPERSON: Mr J Cronin (ANC)

DOCUMENTS HANDED OUT:
National Ports Authority Bill 27July 2003 Working document # 2

SUMMARY

The Bill detaches the management and operation of ports from Transnet to the National Ports Authority of South Africa. The (divisional) National Ports Authority of SA will first transform into "National Ports Authority (PTY) Ltd", a private company with one shareholder (Transnet); and then the latter will transform into the National Ports Authority Ltd, a public company with one shareholder (The Shareholding Minister). The Bill also provides for the establishment of an independent ports regulatory body to be known as the Regulator.

The chief participants in the discussions were attorneys for the National Department of Transport, Transnet, the National Ports Authority of SA (NPASA) and the State Legal Advisor. Many of the discussions revolved around re-drafting and semantics.

The main focus was on the nature of the transition process (e.g. the formation of 'the board' and the possible issuing of shares as a means of facilitating the transfer), as well as discussion concerning the functions of the Regulator.

Discussion of National Ports Authority Bill

Mr Ntuli (Director of Maritime Transport, National Department of Transport) drew the Committee's attention to the Definition of Ports (p. 10 of Bill) and read out the phrase which had been added in for clarity: ''port' means the ports of Richards Bay, Durban, East London, Ngura, Port Elizabeth, Mossel Bay, Cape Town, Saldanna Bay and Port Nolloth or a port which has been determined as such in terms of section 10(2).'

The Chair required clarification as to whether the section regarding telecommunications had been deleted.

Mr Ntuli assured him that it had. He drew the Committee's attention to the Objects of the Act, section (e)iii where the word 'transfer' had been taken out and substituted with 'development'.

Mr Farrow (DA) wanted to go back to the matter of definitions regarding the offshore cargo handling facility. Previously this had had a definition, but it was absent now.

Mr Ntuli pointed out that this was not a definitional matter, but should be viewed more in the light of handling.

The Chair stated that nevertheless there was still a definition (which was unchanged), which could be found at the bottom of pg. 9.

Mr Ntuli explained that earlier versions accounted for this definition under port facilities, but now it was a stand-alone matter. He moved on to Chapter 2, referring to the three phases of establishing and incorporating the NPA. One potential way to deal with the third phase would be not to start a new company, but rather convert the Pty Ltd to a public company. He had been advised that this was the best way to deal with the last stage, and admitted that the handling of the last stage still needed to be refined.

The Chair stated that section 3.(1)a was a sticky section. He suggested that the Authority be known as a Propriety Ltd company, rather than a private company, as the word 'private' was subject to misunderstanding and misconstrual in public debate. In fact the company is a parastatal and still falls under Transnet.

Mr Penfold (lawyer for the NPA) said that he had had a suggestion that the Authority be called a public company throughout, although he would not have a problem if it were described as a Propriety Ltd.

Mr Orrie (lawyer for Transnet) suggested that they simply speak of the National Ports Authority Ltd., or that perhaps they should just refer to 'the Company'.

Mr Ainslie (ANC) drew the Members' attention to the fact that the 'functions' of the National Ports Authority were outlined, rather than the 'powers' of the National Ports Authority, as in a previous draft of the Bill.

Mr Swart (State Legal Advisor) stated that the ordinary dictionary definition of 'function' includes 'powers and duties' and that to include both words would constitute a tautology.

Mr Orrie felt that there was no harm in using both words.

Mr Orrie suggested that instead of a mechanistic approach as to when this section applies, 3.(1)a should instead refer to the date set by the shareholding minister, in terms of Section 27 (when the transfer happens).

The Chair observed that 3.(1)a seemed to refer to Step Two, while 27(i) seemed to refer to Step Three (of the three-stage process) , and that he would certainly accept this. 3(1)a was dealing with setting up the Corporation. While Section 27 entailed the transition from the corporation to the final phase. Why did Transnet not agree with this?

Mr Orrie replied that Section 27(viii) applied to the second phase as well. However, he felt this was a technical drafting point, which could be discussed afterwards.

Mr Ntuli admitted that from the look of 27(viii)a there might have been a confusion there. The intention was to refer to the authority after incorporation.

Mr Orrie suggested that the best way to deal with 3 and 27 would be to deal with the transfers chronologically.

The Chair stated that conceptually it would be a lot easier to deal with the first transfer first and the second transfer second. He added that the first transfer was a whole lot more complicated.

The Board

Mr Orrie pointed out that at the last meeting drafters were asked to deal with issues in relation to the board in terms of the divisional phase. It was envisaged that a statutory board would be created. In 3.(1)b it should be clearly spelt out which board was being referred to. He suggested that they change the wording to make clear that in this instance it was the 'divisional board' which was being referred to.

Mr Ntuli stated that if you read (b) while bearing in mind the definitions, any reference to the NPA would automatically mean a reference to a division. He took the point that the divisional board would still be within Transnet. The Divisional board would be appointed by Transnet and thus a statutory board could not be created.

Mr Orrie said the NPA as a division legally does not have a board. If the intention was to refer to the Transnet board, it didn't seem as if this aim had been achieved. If it is the divisional board that is being referred to, this should be stated. He voiced concerns regarding the concessionary process. Which board had the power to deal with concessions? He felt that further wording was necessary in order to dispel any conflict that may arise.

The Chair wanted to know if the Committee was intending to set up a divisional board.

Mr Ntuli pointed out that there already was a divisional board. He indicated that Transnet had previously been willing to empower this board. The issue that needed to be ironed out was to what extent this would occur. It was the details that could cause a conflict. He indicated that he was basing his information upon a gentleman's agreement which had taken place.

The Chair observed that this was a dangerous premise upon which to base anything.

Mr Ntuli said that unless Transnet was categorically against a divisional board, the divisional board would possess the power to act as a National Ports Authority Board.

Mr Orrie said the Transnet supported the idea of the board, and empowerment of the board. However, implication was that the legislation was referring to the Transnet board. All that he was saying was that the Committee must clarify which board it was referring to.

The Chair suggested that they add the word 'divisional', and then everyone would be happy.

Mr Swart stated that they should keep 3.(1)a in mind. For all purposes the National Ports Authority was deemed to be the authority.

The Chair said that for all purposes the National Ports Authority should enjoy the powers of the board.

Mr Ntuli said that 3 was a reflection of comprises reached. Transnet indicated that they don't have a problem. It supported the board as an independent authority in principle, even during the divisional phase. 3(1) only dealt with the divisional phase. Thus the phrase 'divisional board' was not a problem. At executive level there seemed to be commitment that the divisional board equalled the Board of the Authority. There were problems that needed to be sorted out. He pointed out that the Transnet Board had never been referred to before.

Mr Farrow (DA) wanted to know whether a time limit would be placed on the different phases of the transition.

Mr Ntuli stated that a time limit of three years had been proposed before proceeding to the final phase. If this last transition did not take place within three years, the minister would come in.

The Chair clarified that the Committee was saying that the second phase should not last longer than three years, but that it didn't have to last for that long.

Mr Orrie said that he felt it was unclear as to what the minister had the power to do if Transnet did not meet this deadline. Would this involve a ministerial intervention, or a jump to stage 3.

The Chair proposed that clarification be granted on the matter, which would hopefully lead to agreement.

Mr Orrie raised an issue as to the practical implementation of this matter. He suggested that they look at other pieces of legislation. He felt that this was not a substantive issue, but that from a practical side of things he could suggest wording to the drafters. This was not covered in the general clause.

Mr Farrow suggested that there should rather be more wording and clarity than less, as this would make more sense to users of the document.

Mr Ntuli drew the Committee's attention to Chapter 3, pg. 19. The phrase 'with concurrence' could create problems, and 'with consultation' could be substituted. In Clause 11(d) [Functions of the Authority], 'within' had been replaced by 'to', and 'and telecommunications' had been deleted.

'Must' vs. 'May'

Mr Farrow (DA) referred to the 'must' or 'may' issue that had been raised by COSATU. These issues related to Marine Services, safety and logistics, and the landlord function. He felt that these were important issues and needed to be covered somewhere.

The Chair wanted to deal with the safety issues, which were a COSATU concern. He asked Mr Ntuli to direct the Committee forward.

Mr Ntuli stated that some functions were a must, such as the regulatory and control function. He added that 11(g)vii should have been underlined as a new insertion. He stated that under 'musts' a new clause (i) had been inserted relating to the concern regarding definitions. The new 'agreement' thus meant any kind of concession or partnership.

Mr Farrow (DA) felt that the Committee should debate over the 'musts' and 'mays'. He wanted to know why the National Ports Authority must enter into agreements, as he would have though that this function fell under the 'may' category.

Mr Swart stated that the legislators had tried to divide the powers and duties. Agreements were regarded as duties. Furthermore he explained that there was a problem at another level, which was that the use of the word 'may' implies a discretion. This becomes problematic as soon as any rights become involved.

The Chair felt that this was exactly the point, as the Committee wanted to grant the National Ports Authority discretionary powers.

Mr Penfold drew to the Members' attention the changes in 11(g) which would oblige the National Ports Authority to assist with rescue operations over the entire South African coast. He felt that this was an inappropriate and onerous task, which had been dealt with in terms of the Search and Rescue Act anyway.

Mr Ntuli suggested limiting this function.

Mr Penfold commented once more on the 'must'/'may' issue. He felt that nothing in Section 11 should be seen as imposing any liability in terms of the law. Otherwise the NPA might find itself constantly defending actions.

The Chair suggested that at the end of the 'must' section, the 'musts' be qualified so that there was not any unreasonable liability imposed.

Mr Ntuli pointed out that other issues needed to be taken care of first. In terms of 11(u) he drew attention to the change in wording, as it was not the National Port Authority's function to approve or disapprove regarding licensing.

Mr Penfold said that there was a problem anyway in the phrase 'must licence or approve'

The Chair felt that surely 'licence' implies a discretionary process: one may or may not grant the licence.

Adv. Mphahlela (for the Department of Transport) suggested that the phrase: 'consider applications for licensing' be used.

The Chair suggested the wording 'must handle the licensing of'.

Mr Swart stated that in terms of (k) the phrases 'exercising licensing and controlling functions' had been used and he felt that this could be used in (u) also.

Mr Penfold had a problem with the definition of the Port repair facilities. Firstly, it was limiting, and secondly, he was unsure if it included the railways. He felt that an inaccurate description had been given, as all Port facilities could presumably be concessioned out, with this process not being limited to repair facilities. In terms of 56 he wondered why the word 'repair' was referred to at all.

Mr Farrow (DA) said that in terms of the functions of the NPA the role of the Metros should not be excluded. He believed that they could play a role in terms of providing certain services.

The Chair stated that he was glad that the DA, rather than the ANC, had suggested this matter. He agreed with it and felt that any variety of partnerships would be encouraged.

Mr Farrow (DA) spoke of 11.(1)d and the provision of road/rail access. He stated that 'provide' should be taken out, as this may be a function of Spoornet, rather than the Authority.

The Chair stated that the specific phrasing had been 'provide or arrange'.

Mr Farrow suggested that the Committee take out "provide" then. They seemed to be talking of a whole aspect of services: water, lights, etc. Would this be coming from municipalities, or what? Clarity was needed.

Mr Ntuli pointed out that is why the matter had been phrased as 'provide or arrange'. There were certain functions that the Authority as a landlord must provide. It had an obligation to provide certain basic infrastructure. It could however arrange for this to be done. Hence the formulation of 'arrange'.

Mr Orrie said that in terms of (e) he felt that the words 'within Ports' should be inserted at this point.

The Chair stated that this made sense, but that they were still stuck with (d). He wanted to know what 'arrange' meant. Presumably in terms of concessioning agreements, the National Ports Authority would be able to 'arrange for'. That phrasing would be a way to ensure that the National Ports Authority must fulfil this function.

Mr Penfold felt that the emphasis should be on the word access. The phrasing should not mean that the National Ports Authority must necessarily build or operate road and rail facilities, merely that they are obligated to provide access.

Mr Ntuli noted that in Section 12(g) he felt that the word 'foster' should be substituted for 'promote'. He wanted this to be inserted in a manner that did not undermine the objectives of the Act. He also drew the Committee's attention to Chapter 4 and stated that the wording might be changed from 'in concurrence' rather to 'in consultation with'.

Adv Mphahlele felt that there was a distinction between the phrases 'in consultation' and 'after consultation'.

The Chair asked the Committee which phrase they desired.

Adv Mphahlele stated that it seemed Mr Swart wanted 'after', but that others wanted 'in'.

Mr Swart confirmed that he wanted 'after'.

Mr Ntuli observed that 'in consultation' and 'in concurrence with' essential meant the same thing. The Chair agreed.

Mr Ntuli pointed out that in clause 16(i) there had been a change in wording.

Mr Penfold stated that from the National Port Authority's point of view there might be a problem, as not all concessioning related to longterm lease of land

Mr Ntuli stated that they had been trying to make allowances for the longterm lease of land, and that the concessioning process had been dealt with previously.

Mr Orrie felt that they should distinguish in (h) between longterm lease of property and longterm lease of land. He suggested that they delete (i) and in (h) talk about 'moveable and 'immoveable property. This followed the usual rules of interpretation.

Mr Ntuli felt that these matters pertained to separate things, as the National Ports Authority would not be approving any sale of land.

Mr Orrie observed that this could not be right, as the board still had to approve any transactions.

The Chair enquired which transactions he was speaking of, as the National Ports Authority was not going to be selling any land, but only purchasing it, or leasing it out.

Mr Orrie said that he understood the intention to be that land could be sold, with the authorisation of the Shareholding minister, as exemplified in Section 4.

Mr Ntuli queried as to whether section 4 should be deleted.

The chair wanted to know that if land was indeed sold how the process would be facilitated.

Mr Orrie said that there was an easy way to achieve this: (i) could be subject to 4; in terms of the Corporate Act board approval would be necessary.

Mr Ntuli said that coming to 4 he didn't see circumstances where the Authority would be in a position to sell. Therefore 4 should be deleted as impractical.

Mr Penfold complained that the way 4 was worded, meant that the National Ports Authority could not sell a building that they owned in the Midrand. He felt that the limitation on sales should be restricted to Ports themselves.

Mr Ntuli felt that to put 4 into perspective they could add the phrase: 'land within ports'.

The Chair agreed with this. He said they were talking about a transfer, not a sale, and that this was a difference. The National Ports Authority would remain in control.

Mr Ntuli stated that they did not intend buying land from Transnet.

Mr Orrie said if Mr Swart was satisfied that the term 'sold' did not include the concept of 'transfer', then he would be happy with the situation.

Mr Ntuli felt there was a distinction between the initial composition of the board and the filling of vacancies. The Committee would want the filling of vacancies to be a smoother process.

Mr Orrie stated that this would involve moving back to Chapter 4. The Shareholding Minister would appoint the board. This was consistent with Transnet's earlier position, that during the divisional phase it would be Transnet that appointed the directors. If this principle were accepted, it could be included under subparagraph 7. He added that when leaving behind the National Ports Authority Pty Ltd, the complicated process of dealing with registration, names etc. could be avoided if the transaction took place in terms of shares.

The Chair called for other South African examples of such a situation.

Mr Orrie drew his attention to ACSA (the Airport Company of South Africa). This related to a provision in the VAT act, where if it wanted to benefit from the zero rating of a transfer, the transferor and transferee must be in agreement.

Mr Penfold said it was usually parastatals and agencies that were created. Never before had a parastatal or an agency been created and then a new state-owned company been created out of such an agency. He suggested that some experts needed to come together on this matter, in order to formulate a sound process.

Adv. Mphahlele stated that they were anticipated converting a Pty Ltd into a Ltd Company only. If this happened the problems relating to shares would easily dissolve. Such a conversion was adequately dealt with in terms of the Companies Act.

Mr Ntuli stated that there would be no transfers during the divisional phase, excluding that of employees.

Mr Ainslie (ANC) said he thought it was their proposal that the transfer of shares also be legislated.

Mr Ntuli said that the Shareholding Minister had issued a mandate that the manner of share-transfer not be legislated.

Mr Penfold said that this was to some degree mandating that there was some transfer of business and shares.

Mr Orrie stated that Mr Ntuli was referring to the compensation issue, but that actually they had been talking about the mechanism of the transfer. This did not necessarily have to include a sale as such, but if it did not it would be difficult to define the 'business' of the company.

Mr Ntuli stated that if one were to regard the value of the shares in relation to the value of the assets of the National Ports Authority, one would not find much value in the shares. He had been talking about a transfer of business when the company moves from the government into a public company.

Mr Penfold noted that this would have practical implications regarding matters as fixed property. He felt that the transference of fixed property could become difficult. He stated that the issuing of shares would be a technical and legal way of getting around this difficulty.

Adv Mphahlele mentioned that there had been a similar problem with regards the business of the National Road Agency and they had not experienced any problems in that instance. The transfer in that case had also been exempt from certain duties.

Mr Ntuli stated that the transfer of business must happen. The Shareholding Minister was the only shareholder. He said that business was different from shares, and this difference was expressed in terms of value.

The Chair enquired as to whether they were worried about value. He felt that they were more concerned with ownership and control. To leave the process open would be one route.

Mr Swart stated that he hadn't thought through the implications of the different matters. From a drafting point of view he felt that they should give the minister discretionary powers, and that this would serve to delay the process.

The Regulator

Mr Ntuli pointed out that issues that had already been discussed regarding the functions of a Regulator still needed to be qualified.

The Chair agreed that the phrasing would be reformulated.

Mr Ntuli felt that they should not impose functions that would be difficult for the Regulator to exercise.

Mr Farrow commented on the oversight role of the Regulator. This was only generated by complaints to the Regulator. He stated that he would be loath to see such a function disappear. He feared that a scenario might arise in which the Regulator was powerless. He felt that checks and balances should be in place. He wondered who would deal with a legitimate complaint.

The Chair stated that a variety of checks and balances were already in place. He felt that ensuring good governance was not the Regulator's job, and that the Regulator was not the only avenue for this.

Mr Penfold stated that he had problems with 30.1. The words 'prevent', 'monitor' and 'ensure' were all problematic, as he wondered how exactly the Regulator would exercise all these powers. He felt that if it heard appeals and complaints there would be no need of the above phrasing. The legislation needed to be more specific.

The Chair admitted that he was persuaded on this general point. He envisaged a danger of creating a second National Ports Authority. He felt that the Regulator should have proactive obligations and act as an adjudicator.

Mr Ntuli thought that they should be careful about widening the scope of the Regulator.

Mr Penfold stated that if it was to be complaints/appeals driven then this function needed to be conceptualised in Chapter 5. Exactly which complaints or appeals would be dealt with.

The Chair emphasised that he felt the Regulator should be more than an adjudicator. It should proactively review matters, whether complaints were received or not.

Mr Penfold wanted to know whether leaving aside the issue of tariffs the Regulator would be empowered to act of its own accord. He felt that this created difficulties in itself and was not exactly sure how this could be achieved. He felt that the Regulator should be more limited than had been proposed. If the Committee wanted to institute a fundamental policy change this was something that they needed to be very certain of.

Mr Farrow (DA) agreed, as he felt that in the White Paper a very clear distinction had been made, but that the Committee was deviating from that. The White Paper managed the issue in terms of the Competition Act. He felt that they needed to obtain clarity and consensus.

Mr Penfold stated that Section 30(1) could be simplified greatly by providing that the Regulator may hear appeals (46) or complaints (47) against the authority. He thought that they could negotiate and conclude an agreement in terms of the Competition Act, but that they should be able to receive advice from any other Ports Authorities.

Mr Ntuli said the formulation made was one that the government agreed with. He admitted that the functions of the Regulator went beyond the anticipated functions in terms of the White Paper. He did not view the legislation regarding the Regulator as stifling.

Mr Ainslie (ANC) commented that it was important to look at the matter with regard to technical, environmental and economic oversight, from this perspective the Regulator could be very proactive.

Mr Orrie stated that not only was this formulation different to international standards, but it was different to South African standards. The envisaged regulator was a company specific Regulator. In such a case it should perform the functions outlined by Mr Penfold. If substantive obligations were concerned this could create the need for someone else to Regulate the Regulator. He said that Transnet supported the NPA on the matter.

The Chair suggested that the Committee reconvene the following morning (13 August), when they would also hear the input from the fishing industry.

The Chair adjourned the meeting.