National Ports Authority Bill: formal consideration

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27 August 2003
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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

27 August 2003

Chairperson: Mr J Cronin (ANC)

Documents handed out:
National Ports Authority Bill 27July 2003 Working document # 2
National Ports Authority Bill (B5-2003), Working Document #3

The Transport Portfolio Committee and representatives from the National Department of Transport, National Ports Authority and Transnet formally considered and voted on the NPA Bill. The parties conducted final debates on the issues of corporate governance (especially the divisional board's relation to the Transnet board), asset transfer and tax exemption. The use of the word "rules" instead of "regulations" was also discussed. Finally, they stated more clearly that the Bill was primarily concerned with economic growth, not inter-port competition. At the end of the meeting, the Chair said the Bill was ready to be presented to the National Assembly.

Transnet was represented by Mr Bax Nomvete, Group Executive: NPA, and Mr Gasant Orrie, Attorney. The NPA was represented by Mr Glenn Penfold, Attorney. The National Department of Transport (NDOT) was represented by Adv Maribolla, S Mphahlele, Manager: Legal Services.

Formal consideration of NPA Bill
The Chair announced that the meeting would be a formal consideration of the NPA Bill, based on two documents distributed: "NPA Bill Working Document #2" (prepared by the Departments of Transport and Public Enterprises) and "NPA Bill Working Document #3 (prepared by the State Legal Advisor, Mr H Swart). Both documents incorporated the most recent changes to the draft Bill. The Chair said there could be differences of view between Transnet and Government. He suggested that the meeting first cover the clauses that dealt with and described the evolution of the NPA, as set out in "Working Document #2. The Chair asked Adv Mphahlele to take the meeting through the document.

Adv Mphahlele referred to section 3.1(a) and (b) and said Government accepted that the divisional board would take on the role of the Authority during the transitional phase. Once the Act had been promulgated, appointments to board would be made in terms of the new legislation. In section 3.2(a) it would suffice to not make a reference to share capital. In section 3.4, Government would like to have seen a transfer of assets to the NPA Limited.

The Chair said that 3.1(a) now accommodated the concern about referring to a "private company". The issue of the divisional board also came across better. Section 4 reaffirmed Government's position that there was a need to specify assets, liabilities, rights and obligations. Adv Mphahlele agreed and said the focus was on the transitional phase.

Mr Ainslie (ANC) enquired about the flexibility of the asset transfer. He wanted to know if it was not being tied down to a specific mechanism.

Adv Mphahlele replied that the use of the word "vest" was used because Government did not want an extra mechanism. The Bill was an instrument of transferring ownership and obligations to the new entity. The issue of which assets would be determined in another forum.

The Chair commented that 5(a) made it clear that the Minister had an overriding power to directly move to stage three of the process if there had been no progress after three years.

Mr Ainslie (ANC) asked whether 5(a) now implied that one would not have to wait for three years and that it could be done within a year.

Adv Mphahlele said that was correct. He then moved to the section on Conversion. Section 4.1(a) made it very clear that there was going to be a process of consultation between the shareholding Minister and the Transnet board to ensure that the conversion occurred after consultation and with correct timing. In (b) it had become clear that, once incorporated, it would be for the company to decide how it would deal with shareholding.

Mr B Nomvete of Transnet asked whether the section 4.1(a) could be amended to read "Transnet board" for clarity.

The Chair wanted to know if the clause referred to the divisional board or Transnet board. Adv Mphahlele said it referred to the board of the PTY LTD. There was an existing PTY LTD with its own board. When the latter was being converted to LTD, the board needed to be consulted. He then moved on to section 27, regarding the transfer of ports, land and other rights and obligations. Adv Mphahlele said that wording was inserted in 27.1 to replace "in concurrence" with "after consultation". Due to possible financial implications, the concurrency of the Minister of Finance was needed. He pointed out that 27.2(a) and (b) tried to cater for transfer of land and moveable property from the NPA to the PTY LTD. Section 5 covered properties that might be included in the generality of the property transfer. He said there had been serious division about section 7. Government's position was to have all those clauses deleted. In clause 9, the word "private" also had to be deleted.

Mr Swart said that clause 9 was not necessary. It only appeared in Working Document #2 and was covered by section 27. The latter governed a situation where the PTY LTD became the successor of the division. Previously it referred to the point at which the Authority became the successor of the PTY LTD.

The Chair said that had already been clarified and suggested the meeting look at section 10 regarding exemptions.

Mr Ainslie (ANC) wanted to know who would pay the fees and charges that were not related to the transfer of assets.

Adv Mphahlele replied that the question would be dealt with in the next section. He said no other charges or fees were being anticipated.

Mr Ainslie (ANC) pointed out that the draft still referred to a transfer of assets. If there were unrelated fees, there would be an obligation to pay them.

Adv Mphahlele said Government was not aware of any other fees that would be payable.

The Chair referred to the use of the word "conversion" and said an entity was being converted from having one character to another. He wanted to know if there would be fees payable for a conversion of that type.

Adv Mphahlele replied that he would have to consult with his treasury department in order to get clarity on the matter. After consultation, Adv Mphahlele suggested that the meeting first deal with section 27 (page 42) - found on page 41 in Working Document #3 - and that the phrase "subject to section 10 of the Income Tax Act" should be added.

The Chair said this meant that in the Department of Transport's draft (Working Document #2), the exemption was specifically related to the process that was being discussed, while it was just implied in Working Document #3. He wanted to know if a reference could be added to provide more clarity.

Mr Swart replied that one could change the paragraph to say exemption expired on the date after the Authority had been established as a company. He added that it was very difficult to fix a date, because all the transfers might not have been completed by the time the Authority became the final successor.

The Chair wanted to know if it had to be a date route or whether it could rather be a process route, for instance by saying "exemptions refer to processes referred to..." This could ensure that Transnet was not being exempted in any business processes apart from those pertaining to the processes set out in the Bill. There were still questions about the divisional board's authority versus the Transnet board's authority while the process was being completed.

Mr G Orrie said Transnet raised corporate governance concerns, particularly in the initial phase and interim/subsidiary phase (PTY LTD). The questions were about where the Transnet board stood in relation to the divisional board. He suggested additional wording for section 14 of Working Document #2. Adding "the right to appoint members" would confirm Transnet's role as proprietor of NPA business at that phase and its right to appoint directors to the divisional board (done in concurrence with the shareholding Minister).

The Chair wanted to know if there was a divisional board currently and who appointed it. Adv Mphahlele replied that there was such a board and that Transnet appointed it.

The Chair said this seemed to mean that the divisional board would become the board without a separate process of appointing. He said it seemed like Transnet was concerned that when the current divisional board's term expired, a new board could be appointed that did not recognise the transitional nature of the board. Mr Orrie's argument was that the current practice should just be reaffirmed. That would make the divisional board also the board of the incorporated entity. The Chair wanted to know how the board could be formulated when it was no longer the divisional board. Adv Mphahlele noted that any appointments would have to be done in terms of the Act.

Mr Orrie once more raised corporate governance issues. Referring to powers and functions during the divisional phase, he said the concern was that Transnet was the only legal entity during the divisional phase. It was not clear where this would leave the Transnet board. He said Transnet made some suggestions for clarity in this regard.

Adv Mphahlele said section 3.1(b) was intended to make it clear to which board was being referred. The phrase "any appointment" in 4(d) was a provision to ensure appointments would be made in terms of the new legislation after the commencement of the Act.

The Chair asked Adv Mphahlele to take the Committee through the draft prepared by the Department of Transport and to point out changes clause by clause.

Adv Mphahlele paused at section 10.3 and said the phrase "in concurrence" was replaced with "after consultation". Section 11(e) made the functions of the Authority more specific and 11(j) was inserted to ensure inter-port competitiveness. Section 15.3 had to make it clear that it was referring to the "shareholding Minister", not just the Minister. Section 16.1(c) established that land within ports would not be subject to sale. Insertions were made in 30.1 to clarify the Regulator's functions. It would function in terms of complaints and appeals. Pro-active actions by the Regulator had to be prevented.

The Chair asked the State Legal Advisor to lead the meeting through the chapter on the Ports Regulator (Chapter 5) as it appeared in Working Document #3.

Adv Mphahlele stated that his department accepted the formulation of Chapter 5.

Mr Swart (State Legal Advisor) briefly took the meeting through the applicable sections.

Mr Penfold commented on section 77 of Working Document #2, saying the NPA suggested that training should stay with the NPA, instead of being done by the South African Maritime Safety Authority. He said the words "trained and" could be moved to the next line.

Adv Mphahlele then moved on to section 82 of Working Document #2, but was interrupted by the Chair who said 82.1(a) should not refer to "seven members" because the number could change. He thought it would be better to say "at least one representative".

Mr Penfold raised the semantic issue of the Bill giving preference to the word "rules" over "regulations". He said the latter was a term that international operators could understand, while the word "rules" could cause confusion. He said Transnet would prefer "regulations".

Mr Swart said it could be changed, although he personally preferred "rules".

Mr Penfold said it was necessary to change "rules" to "regulations" in Chapter 1 (Definitions) of Working Document #2.

Adv Mphahlele thought it could create some confusion because the Bill was saying that the function of making regulations would pertain to the Minister and Authority. The word "rules" helped to differentiate between the two.

Mr Swart referred to section 80, subclause 4 (Port regulations) in Working Document #2. He said it currently only referred to "regulations", while it could refer to both "rules and regulations". The Minister made "regulations" in respect to certain matters and the Authority made "rules" in respect to other matters. He wanted to know if the word really mattered.

Adv Mphahlele pointed out that the Minister normally makes regulations in an Act of Parliament. The impression could be created that the Authority was being given legislative powers.

Mr Swart suggested that the word "rules" should be retained.

Penfold said the NPA's bigger concern was around subclause 4. The rules had to be enforceable and there had to be a sanction for not complying. The NPA would be happy with "regulations and rules".

The Chair suggested keeping the wording as it was, except under subclause 4.

Adv Mphahlele said the Department could accept such an amendment but was concerned about how the rules would be enforced. Clarity was needed on the issue of imprisonment.

Mr Swart mentioned that a further option would be to authorise the Minister to prescribe a penalty in respect of the rules.

The Chair replied that an Authority setting out prison terms had to be avoided.

Penfold reminded the meeting that such rules could only be made in conjunction with the Minister. It would be simpler to provide for circumstances in which the Minister had to approve the rules.

Mr Swart said that the Minister usually had to create offences.

The Chair asked for wording to clear up the issue.

Mr Swart proposed that clause 27.1 in Working Document #2 should be numbered 27.1(a) and that it should read "the date contemplated in paragraph (a) must be determined after consultation with the shareholding Minister and in concurrence with the Minister of Finance".

The Chair referred to the section 2 (Objects of Act) of Working Document #3 and said the object was not to create ports that could compete with Hong Kong. The prime objective was that the ports system should contribute effectively to the growth and development of the country's economy. He said this was not stated clearly enough and suggested "capable of competing in international markets" should be changed to bring across the primary objective more clearly. Regarding section 11 (Functions of the Authority), the Chair said that he did not think the Authority's performance should be judged in terms of how the different harbours performed in relation to one another.

Mr Swart had qualms about section 3.5(a) of Working Document #2. He said it gave the Minister wide discretion to determine the period, even within a day or two. If this was the case, guidelines where needed about dates and methods of the process. He said the current formulation might even be unconstitutional. He also wanted to know if it would be possible to make consequential amendments (mostly pertaining to numbering and grammar) before the meeting formally adopted the Bill.

The Chair called for a motion of desirability and then went through the Bill again, page by page (using Working Document #2), indicating where amendments have been agreed. He said the Bill was ready to be presented to the National Assembly. The Committee would motivate strongly to have the Bill debated in the House on 18 September, but the date was subject to change.

The meeting was adjourned.


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