Black Economic Empowerment Bill; Liquor Bill: voting; Gambling Bill: briefing

Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
20 August 2003
BLACK ECONOMIC EMPOWERMENT BILL; LIQUOR BILL: DELIBERATIONS; GAMBLING BILL: BRIEFING

Chairperson:

Presentation on proposed amendments to Black Economic Empowerment Bill
Black Economic Empowerment Bill as amended after last meeting with Committee on 5/8
Final Draft of Broad-based BEE Bill as voted on (as above but with amendment to Clause 10)
Draft Code of Good Practice issued in terms of section 9 of the BBE Bill
Presentation on National Gambling Bill
National Gambling Bill [B48—2003]
National Gambling Act No 33 of 1996
Presentation on Liquor Bill
Liquor Bill [Draft as of 12 August] (not available)
Liquor Bill [B23B-2003] as voted on by the National Assembly 20 August 2003
Liquor Bill [B23-2003]
Liquor Bill [Draft as of 6/8]

SUMMARY
The Committee adopted the BEE Bill with amendments. The Committee was then briefed on the National Gambling Bill - its background and its format as well as an overview of the gambling industry. Members were concerned that there was nothing in the Bill compelling casinos to invest in the institutions involved in the rehabilitation of problem gamblers. In the afternoon, the Committee considered Clauses 1, 2, 4, 5, 10 and 24 of the Liquor Bill. The contentious issue was whether a methylated substance could be regulated through the proposed legislation or if it was a matter that fell within the provincial competence.

MINUTES
Proposed Amendments to BEE Bill
Mr L October (Chief Director: Black Economic Empowerment), accompanied by Ms P Buthelezi (Director: Black Economic Empowerment), took the Committee through the changes that had been effected as a result of the last meeting on 5 August 2003 (see document). These changes included:

- Objectives of the Bill redrafted to specify the broadening of ownership, skills and participation management
- Minister's discretion redefined
- Reporting of State-owned Entities now dealt with through shareholder compacts
- Role of the advisory committee redefined to include facilitating partnership between organs of states and private sector.
- Strengthening of application of Codes so that state organs and public entities must not only "take account of" the Codes but apply them "as far as is practically possible".

Discussion
Mr Lockey (ANC) referred to Clause 10 and said that the clause as now amended was more apologetic to organs of state and state-owned enterprises, in that it failed to fully commit them to black economic empowerment. He proposed that the clause be amended to the effect that the phrase "give due consideration" be omitted.

Mr October (DTI) pointed out that this proposal would have fundamental bearing on the enabling framework of the Bill. He explained that it was an accepted practice that Parliament accords some powers to the Executive. However, once one transforms a code of practice into something that would be binding on state organs, that would fall foul of the doctrine of separation of powers. Requiring that a state enterprise be absolutely bound could affect the rights of third parties, in an environment which was highly contested, and litigation could be highly misused. There were other methods of compulsion other than the one proposed by Mr Lockey. Moreover the phrase "take into account" has been used in other pieces of legislation such as the Labour Relations Act.

Mr Lockey (ANC) was of the view that use of the phrases "taking into account" and "give due consideration" was a repetition and was a weak administrative process because it was only requiring state-owned enterprises "to dilute shareholding" on the basis of due consideration. Hence there was a need to fully commit them to Black Economic Empowerment.

The Chair said that perhaps there was a need for the state law advisors to advise the Committee whether there would be any constitutional intrusion if the clause was to be too binding.

Mr October held that if Clause 10 was going to be binding on state-owned enterprises, it would amount to imposing a strong legal burden to implement on the part of state-owned enterprises. A constitutional problem would arise once a code becomes converted into a law.

Mr Lockey said in order to find a binding arrangement for the public sector, perhaps there was a need to transform the codes into regulations.

The Chair proposed that Clause 10 could be drafted to the effect that "all decisions by any organ of state and state-owned enterprises ……… must be based on due consideration of any relevant code of good practice issued in terms of this Act".

Mr Lockey was still of the view that this proposition was not compelling enough on public enterprises.

The Chair proposed that Clause 10 be flagged and the Committee would return to it later.

Clause 11 Strategy for broad-based black economic empowerment
Mr Lockey proposed that only Clause 11(3)(b) be deleted and the rest of the clause which dealt with compilation of plans had to be kept because it was necessary for the success of BEE in state-owned enterprises.

Mr October explained that the existing reporting systems were sufficient to monitor reporting on the BEE. He pointed out that the PFMA Bill already set out the reporting line for state-owned enterprises. Furthermore a task team comprised of the Department of Trade and Industry and representatives from the state-owned enterprises had been established to come up with guidelines on the way in which public enterprises could report through a shareholder compact.

He noted that members had to take into account that public enterprises were in the market competing with private enterprises hence the Committee had to caution against burdening them with too many requirements because that would put them at a competitive disadvantage. Alternatively, the Strategy document had to specify how the state could exercise control over state-owned enterprises.

The Chair agreed with this.

Returning to Clause 10, Mr October proposed the insertion of following phrase "must take into account and as far as reasonably possible apply" so that the clause would read: "every organ of state must take into account and as far as reasonably possible apply any relevant code of good practice issued in terms of this Act".

Mr Lockey (ANC) concurred with the proposal.

The Chairperson read the motion of desirability for the adoption of the Bill with these proposed amendments and the Committee's Report on the BEE Strategy document. The Committee unanimously agreed except Mr Lowe (DA) who abstained as he still needed to get his party's approval of the amended Bill.

National Gambling Bill: briefing
The panel comprised of (Deputy Director General: Consumer & Corporate Regulation), Mr C Fismer (Chairperson of the National Gambling Board) and Mr T Majake (Chief Executive Director of the National Gambling Board).

Ms Ludin (DDG) outlined the background to the Bill, gave an overview of the gambling industry as well as the format of the Bill (see document).

She pointed out that the initial intention was to make amendments to the Gambling Act of 1996. However due to the volume of amendments it was necessary to repeal the Act in its entirety and a number of regulations that had been created through the old Act had been incorporated into the Bill. The Bill's main objective was to clarify the exercise of the concurrent national and provincial jurisdiction. Furthermore to exercise tighter control over gambling and to give effect to co-operative governance as well as recognise the negative socio-economic impact of gambling and to put in mechanisms to deal with this. In terms of the proposed Bill the gambling industry was now required to satisfy certain public objectives and these include:Clause 10 Status of codes of good practice
 

- Black Economic Empowerment
- Employment creation
- Creation of new fixed investment and infrastructure
- Generate revenue

Outlining the size of the gambling industry, Ms Ludin pointed out that it was generating R68 billion of gross revenue every year and that the total revenue for government from the industry was just under R500 million. However recent research reflected that the number of problem gamblers proportional to regular gamblers was higher in South Africa than in developed countries.

She then outlined the scheme of the Bill chapter by chapter.

Discussion
Ms Ntuli (ANC) was of the view that there was nothing in the Bill compelling casinos to contribute financially to the institutions rehabilitating problem gamblers.

Mr Lockey (ANC) was concerned with the prevalence of illegal gambling and the problem of illegal gamblers in the North West province. Also the National Gambling Board had very limited powers because there was no prohibition through the provincial Act against anyone being in possession of an illegal gambling machine. This dis-empowered law enforcement officers. He was concerned about the sustainability of the empowerment groups in the industry as most of these empowerment groups were given cumbersome financial arrangements. Hence there was a need to re-assess the issuing of licences. He pointed out that the total revenue for the government generated through the gambling industry was mostly spent on monitoring the gambling system.

Ms September (ANC) pointed out that the big issue was whether the Bill took into account socio-economic factors. As Members of Parliament, they were not interested in a Bill that focus only on the provincial and national competences and fails to deal with the social realities existing out there. Had the department conducted any comparative research so as to draw on international experience? She also asked who would fall within the category of excluded persons in terms of the Bill.

Mr Majake (National Gambling Board) pointed out that there were certain behaviours that could not be controlled. He said that Ms Ntuli's concerns and sentiments had been noted.

Mr Fismer (NGB) shared Mr Lockey's concern that there had been a lack of progress in closing down illegal casinos in the North West. However, he disagreed that there were deficiencies in the existing legal framework in order for law enforcement officers to close down the illegal casinos.

Ms Ludin (DDG) explained that the Bill only prohibited a person from using an illegal gambling machine but did not prohibit one from owning an illegal machine. Hence the Committee would need to look at that.

On the issue of excluded persons, she pointed out that all people had a constitutional right to make their own choices. However the Bill seeks to deal with people with gambling problem, by allowing them to exclude themselves voluntarily or through a court of law. Hence an object of the Bill was to deal with the broader social impact of gambling on poor people.

Mr Lowe (DA) pointed out that there was a need to capture the issue of social responsibility clearly and also the mechanisms to measure the success of BEE in the industry.

Mr Majake (NGB) pointed out that there were mechanism in place to help rehabilitate people addicted to gambling but the Department had to take a more pro-active role in monitoring the industry.

Mr Fismer (NGB) said that there was a need to revisit the assessment of the BEE success in the industry because there were conflicting reports about the success of BEE companies in the industry.

The Chair thanked the panel and pointed out that a notice for the public hearings would be published in due course.

Proposed Amendments to Liquor Bill
Ms Astrid Ludin (Deputy Director General) and Mr Jeremiah Mela (Director: Licensing and Inspections Consumer and Corporate Regulation Division) took the Committee through the revised Bill. Mr Jeremiah briefly outlined the issues raised at the previous committee meeting as well as changes that had been effected thereafter. The changes as contained in the revised final draft of the Bill include:

-the definition of a person has been changed to include a "trust" and the definition of a firm has been deleted.
- the notion of public participation has been included in the objectives
- a definition of an impotable substance has been has been included in the definitions
- the issue of parents or guardian supplying liquor to a minor has been deleted as it would cause confusion
- reference to financial interest in Clause 13 has been deleted
- the rights of retailers has been rephrased.

He then outlined additional changes made as a result of inputs from the industry which include:
-amendment to Clause 4(3) and (5) of the Bill
-an 'intention' test for the distribution of liquor has been included in Clause 4(8) of the Bill

The committee went through the Bill clause by clause.

Clause 1 DefinitionsThe Chair noted that there was a need to include a definition of Council under definitions.

Mr Lockey (ANC) was concerned that the definition of "impotable substance" was not clear because there were lots of substances such as brandy, which were unsafe but were not necessarily impotable.

Ms Ludin explained that brandy was not unsafe rather it was the level of alcohol in someone's body that kills a person.

The Chair proposed that Clause 1 be flagged and Committee would come back to it later.

Clause 2 Objects
Mr Lockey was concerned that the way Clause 4(3) had been formulated was blurring the distinction between manufacturers and distributors.

The Chair concurred with Mr Lockey in that Clause 4(3) seem to create an automatic right for a manufacturer to import. Hence there was a need to put a limitation within that provision.

Adv Madasa (ANC) pointed out that Clause 4(3) as to stood seemed to create a presumption that there would always be a link between a manufacturer and a distributor.

Ms Ludin referred to Clause 11 of the Bill and noted that it recognised manufacturers and distributors as different categories.

The Chair pointed out that there was a need to set out categorically clearly that the manufacturer had to comply with additional conditions for distribution, if it wanted to distribute for the purposes of importing.

He proposed that this clause be flagged.

Clause 4 Regulation of manufacture and distribution of liquor
Ms Ludin highlighted that Clause 4(9) was not aimed at creating a right but was pointing out that the Bill would not take away any rights from persons who might apply through the provincial laws.

Clause 5 Regulation of methylated spiritMs Ludin explained that Clause 5 had been carried over from the 1989 Act. The Act treated methylated spirist as a controlled substance. There was a need to control such substance because in any event people were consuming it. However, the only sections that have been imported were those that dealt with the retailing of methylated spirits.

Mr Rhoda (NNP) asked if that would mean that hardware stores would continue selling methylated spirits. believed that there was a need for much stricter control of this substance.

The Chair pointed out that to allow the Bill to regulate substances like methylated spirit would be stretching the framework of the Bill too far - as that was an area that could be regulated through provincial laws.

Mr Lowe concurred and pointed out that such exercise would fall within the provincial competence or alternatively fall within the Department of Health because the consumption of methylated spirit was more of a health issue.

Mr Lockey added that government could not place an absolute ban on methylated spirits because it had so many other uses.

Ms Ludin pointed out that until methylated spirits was regulated elsewhere, there was a need to capture it in the Bill and the retail part of it had to be enforced at the provincial level.

Clause 8 Prohibitions regarding employment in liquor industry
The Chair referred to Clause 8(2)(c)(ii) and pointed out that it was not clear. He proposed the following amendment be effected: "you may not provide liquor to employees as a form of remuneration" as well as to delete the reference to the Income Tax Act.

Ms Ludin explained that the department was trying to address a potential conflict between two pieces of legislation. She then concurred with his proposal

Clause 10 Prohibition of supply of liquor or methylated spirit to minor
The Chair pointed out that Clause 10(1) and (2) was repetitive and proposed that "sell" or "supply" be captured in one clause.

Clause 24 Review or appeal of Minister's decision
Ms Ludin explained that in terms of this clause, they could not preclude one from reviewing a Minister's decision if s/he has fallen foul her/his administrative powers.

Before adjourning the meeting was adjourned, the Chair suggested that the Committee return to the flagged clauses on the following day.