Sentech Amendment Bill: discussion

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Communications and Digital Technologies

26 October 1999
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COMMUNICATIONS PORTFOLIO COMMITTEE
26 October 1999
SENTECH AMENDMENT BILL (B52-99): DISCUSSION
 


Documents distributed:

Independent Broadcasting Authority (IBA) submission on the Sentech Bill
COSATU submission on the Sentech Bill

SUMMARY
Sentech indicated that their primary objection to the Bill was that the names of titles were included in the requirement that there be three executive directors and at least three non-executive directors. It was suggested that the titles be left out as this was an operational matter that should be left to the discretion of the board and not dictated by legislation. Leaving the titles out would result in the flexibility needed in the running of the company as the structure of the company may need to change from time to time to ensure its success as a company.

MINUTES
Mr Neel Smuts, Managing Director of Sentech was there as spokesperson for that organisation and Andile Ngcaba, Director-General: Department of Communications, for the Department.

The chairperson, Mr N Kekana (ANC), welcomed the Sentech delegation who were there to shed light on the Bill which was introduced on 13 October 1999. He noted that they hoped to conduct public hearings over two days for comments on the Bill which was scheduled for debate in the house on 11 November.

The Sentech delegation
Mr Smuts noted that the bill was part of their development into the future and that Sentech was being restructured in terms of the National Framework Agreement (NFA) on the Restructuring of State Assets. He stated that global markets were opening up and that they could not stand still or they would be marginalised. The aim was to move into the new world of electronic media and to become a successful player. He continued that markets are opening up; that governments are privatising state enterprises to some degree, and, accordingly Sentech needs to form alliances. Further, they must look at international alliances where an opportunity for them to benefit presents itself. Shareholding by private entities is a key element which the present Act does not allow for.

He noted that their primary objection to the Bill was the requirement that there be three executive directors and at least three non-executive directors on the Board.
Smuts recommended that the titles referred to in the bill rather be left out as the board needs flexibility to appoint executive directors. He went on to comment that Sentech is a small organisation with fewer than 500 people and its structures were quite small. He continued that the designation of officers is something better determined by the Board.

He also stated that an executive committee of three persons including the executive director was too small and that they preferred a mix of this plus other members of top management. He noted that in accordance with the present Sentech Act there is a CEO in addition to group executives; thus, there is a total of seven people who handle Sentech's affairs on a daily basis.

Questions and comments by the members
Ms S C Vos (IFP) asked, in the light of Mr Smuts' comments, if there was a specific reason why the bill was drafted in this way?
Mr Ngcaba (DG) responded that their thinking was in anticipation of the fact that they will not be the only shareholder.

Mr Smuts agreed with the DG that the structure cannot be written in law as what the company needs must be determined from time to time. He continued that they may want to rotate people; it depends on the requirements of the company to develop itself strategically.

Mr C M Morkel (NNP) asked how much decision-making power shareholders will have over operational issues? Here the chairperson interjected to state that they will have to define the future of Sentech in a multimedia environment. It is a key factor that they ensure the attraction of strategic equity partners. He noted that Sentech must be positioned for greater things to come.
In response to this, Mr Smuts indicated that there is ranking in companies. He illustrated this point by explaining that the director is responsible for co-operation and the chief finance officer is responsible for finance. He stated that you cannot compare them to other employees, such as people involved in marketing for example.

Smuts continued that in the law you put principles and policy in place and not operations and specifics. He noted that structure follows strategy and that the structure must be dynamic and be able to adjust to the market. If, however, the structure has been determined in law then such adjustment is difficult to make. The positions in question are important but to ensure the necessary flexibility for the company they should not be fixed in law.

A committee member commented that it is not necessary to legislate the members of the board and that this should be left as an operational issue.

The chairperson asked whether there was some flexibility as far as S2(a) is concerned?
Smuts responded that the balance between executive and non-executive directors was excellent. The problem which they had was with S2(b). In this regard it was recommended that the designations be left out and that it be stated that the board shall be persons determined by shareholders from time to time.

In response to other questions it was stated that people must work and participate in a team fashion in running the business. At the moment there are seven people in the executive committee, and, although that was noted as working very well, it was stated that it is likely to change as they develop and reposition themselves.

Mr Ngcaba indicated that this was a difficult issue to debate as you were trying to create a more modern enterprise with a unitary board.

The chairperson noted that when it came to putting something down or not in law the question of flexibility was key but he wanted to know whether they were talking about extending the board to accommodate other interests. He asked for a specific identification of the problem - does it only relate to the naming of the specific designations or did it also relate to the size of the body?
Smuts replied that it was not the size and only the naming. The issue was only whether they should have those designations in S2(b) or not.

Here it was noted by a member that flexibility was important to prevent Sentech from coming back time after time to ask for an amendment, but at the same time they could not grant too much flexibility as they had to prevent manipulation.

Morkel indicated that they should think of the equity partner; they may want flexibility and accordingly flexibility is better.

It was noted by a committee member that everyone agrees that a CEO and a finance officer is needed. Reference was made to the wording of the section, namely that there should be 'at least' 4 non-executive directors. This meant that if more were needed then there could be more. Further, S2(e) uses the wording 'as the board determines' - this is flexibility as it includes the three executive directors who are part of the board.

Conclusion by Sentech delegation
Mr Smuts stated that Sentech had a high level of functioning and the State was looking at diluting its interest. He noted that a public/private mix was good for the future. He further noted that the articles of association of a company spelt out the procedures and responsibilities of directors. Also, the legal responsibility of companies are spelt out in the IBA Act, the Broadcasting Act, and the Telecommunications Act. He noted that when private partners become involved it culminates in the shareholders agreement and their policy and philosophy will have to comply with the Sentech Act.

Mr Ngcaba noted that Sentech is no different from the other companies that have been privatised and it must be recognised that the power of the CEO will not be the same. The decision-making system will change. It is true that top management finds this difficult to accept.

Chairperson's conclusion

He noted that any company wants a clear legal framework and that the job now is to determine what that is and then to include it. The ultimate question was whether you would be putting the company in a better position by restructuring it.

Here the chairperson raised the issue of Cosatu which will be dealt with tomorrow. He noted that they had complained that they were not consulted and want the Bill to be held back until consultation with the National Framework Agreement (NFA) on the Restructuring of State Assets. The chairperson referred this issue to the Director General for an immediate response.

The Director General explained that the NFA process will start once the process of privatisation starts. The NFA process kicks in once they determine the percentage and development data, something they have not started yet. He explained that labour would be consulted after the Bill was passed.

In response to a question by Mr Morkel the chairperson noted that various organisations, inter alia, Telkom, had been notified in writing of the meeting but they had declined the offer to attend.

The meeting was adjourned.

Appendix 1

Independent Broadcasting Authority22 October 1999

SENTECH AMENDMENT BILL
It has come to my attention that the Memorandum on the Objects of the Sentech Amendment Bill states that the Independent Broadcasting Authority (IBA) was one of the 'bodies consulted' when legislation was first drafted.

While the Authority may have been informed about the Bill's existence, it was never formally and properly consulted about the Bill's contents.

Adv. Luthando Mkumatela and our legal officer, Mr Stanley Mamaregane, will be making a presentation to the Portfolio Committee on 27 October 1999. However, we request that the committee urgently take note of the following important points:

The relevant sections of the Amendment Bill do not refer to the Authority's regulatory oversight with regard to issues such as the ownership and control of broadcasting signal distribution in South Africa.

Sentech has been licenced as the common carrier for broadcasting signal distribution in South Africa and, as such, has statutory and regulatory obligations in this regard.

The Authority must have regulatory oversight of any transfer of shares in Sentech in order to ensure that these obligations are upheld. Section 5 of the Sentech Act, 1996 recognises that Sentech is licensed in terms of the Independent Broadcasting Authority Act, 1993.

The Bill is therefor incorrect by only referring to the objects of the Broadcasting Act, 1999 (Act No 4 of 1999) and seems to contradict section 5 of the Sentech Act, 1996.

The Authority's delegation will be expanding on these issues on the 27 October 1999. If you have any queries, please do not hesitate to contact my office.

MANDLA LANGA
CHAIRPERSON

Cc: Dr Ivy Matsepe-Casaburri, Minister of Posts, Telecoms and Broadcasting
Andile Ncgaba, Director-General, Department of Communications
Mr Neel Smuts, Managing Director, Sentech

Appendix 2

COSATU20 October 1999

Sentech Amendment Bill
We would like to raise a concern with you around the processing of the Sentech Amendment Bill. Our view is that this Bill falls under the ambit of the National Framework Agreement (NFA) on the Restructuring of State Assets, which remains in effect until renewed or terminated. Unfortunately, it does not appear the Sentech A/B complies with the objectives outlined in the NFA. Our submission last year on the Broadcasting Bill [B94-98] also proposed that there should be proper consultation and discussion on the restructuring of Sentech. The Sentech Amendment Bill indicates that the only bodies consulted were Sentech (Pty) Ltd and the Independent Broadcasting Authority.

COSATU thus proposes that the Bill be put on hold pending consultation with stakeholders in accordance with the NFA. We would be available for further discussions in this regard.

Tony Ehrenreich
Deputy General Secretary

 

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