Companies Amendment Bills: public hearings

Meeting report

The Chairperson opened the meeting by warmly welcoming all the guests and attendees. He then proceeded to introduce the agenda, explaining that the first presentation would be delivered by representatives from the Johannesburg Stock Exchange (JSE) who had a joint submission with Banking Association South Africa (BASA). He indicated that the floor would be handed over to the designated speaker, who would have 20 minutes for their presentation. He suggested that the hosting rights for the presentation be allocated to the Committee Secretary.

Companies Amendment Bills Submission: Johannesburg Stock Exchange & Banking Association SA

Ms Nellia Musamba, Senior Specialist: Legislation and Regulatory Oversight, Banking Association SA (BASA), introduced herself along with her colleagues. She emphasised their full support for initiatives promoting transparency in executive remuneration. She mentioned consulting Prof Michael Katz, Chairman, Edward Nathan Sonnenbergs (ENSAfrica), who concurred with their proposed edits to the Bill.

She clarified that their proposals focused solely on Section 30(B), aiming to enhance clarity in interpretation and application without altering the Bill's principles or spirit. She assured the Committee that their suggestions were intended to streamline understanding and implementation and not to impede the Bill's progress.

She then passed the floor to her colleague Mr Visser to provide further explanation.

Mr Andre Visser, Director: Issuer Regulation, Johannesburg Stock Exchange (JSE), thanked the opportunity to present their joint submission on the Companies Amendment Bill. He echoed that their proposed amendments were primarily editorial, aimed at addressing ambiguity and uncertainty in the Bill's language, which they believed could pose interpretation risks for listed companies.

Mr Visser emphasised the JSE's interest, as a listing’s authority, in ensuring listed companies' compliance not only with listing requirements but also with relevant legislation. He expressed support for the requirement that effective companies prepare a remuneration report for the previous financial year, to be presented at the annual general meeting. However, he noted that their proposed edits sought to clarify that only the implementation report, not the entire remuneration report, should be subject to shareholder vote.

He explained the rationale behind their proposed edits to Subsection 50 (B2), aimed at providing legal certainty and ensuring that shareholders have the opportunity to vote on both the remuneration policy and its implementation. Mr Visser highlighted the importance of transparency in disclosing matters such as the remuneration of highest and lowest paid employees and the pay gap ratio, which are significant to labour and other stakeholders.

Mr Visser then handed over to his colleague, Ms Elsabe Heystek.

Ms Elsabe Heystek, Head: Corporate and Commercial Law, Nedbank, delved into the discussion on the recommendation proposed by Mr Visser regarding the implementation report and its voting process outlined in draft Section 50B, subsection two. Ms Heystek's focus shifted towards addressing the consequences of a failed vote on such implementation, as detailed in draft Sections 50B, subsection four and five.

She outlined their proposed drafting, based on the joint submission of BASA and the JSE dated January 2024, which aimed to clarify the intended principles of the legislation regarding these consequences. Ms Heystek elaborated on the proposed changes to Sections 50B, subsections four and five, emphasising the need for consistent application by companies and alignment with the overall goals of the legislature.

Ms Heystek summarised their proposals, including edits to clarify terminology and remove ambiguity, particularly in subsections four and five. Further, she addressed potential unintended consequences, such as the requirement for “re-election of Remco members at the AGM”, which they proposed to delete for clarity and alignment with current practice and legislative intention. She concluded by referring the Committee to their written submission for detailed proposed edits, aiming to achieve clarity and legal certainty.

Ms Heystek then handed over to her colleague, Mr Visser, for the final recommendations.

Mr Visser highlighted the requirements outlined in Sections 30A, and B, of the Companies Amendment Bill, emphasising that companies would need to adjust their processes leading up to AGMs to comply with these new provisions. He mentioned the need for exchanges like the JSE to amend their listing requirements to align with the amended Companies Act. He indicated that these changes typically take four to six months on average to implement. He recommended amending the Bill to specify that the amendments to Section 30A and Section 30B would only apply to financial years commencing after 1 January, 2025. Mr Visser assured the Members that their proposed edits to the Bill were editorial and aimed at ensuring consistency in interpretation and implementation without altering the policy intentions negotiated by the ministry. He emphasised the importance of these minor tweaks to prevent inconsistent and disruptive implementation, which could lead to confusion and multiple requests for guidance from regulatory bodies. He noted that regulatory bodies like the JSE could not interpret legislation, further highlighting the need for clarity in the Bill's language.

A BASA representative then reiterated their threefold proposal, which is suspending the operational application and effectiveness of the amendments, providing clarity, and removing legal uncertainty. She stated that she was in support of the idea that the Bill should not be delayed and suggested that public consultation might not be necessary when the Bill is returned to the Portfolio Committee. Finally, she concluded the joint presentation and welcomed any questions from the Committee.

(See attached document for further details)

Discussion

The Chairperson requested that any off-topic discussions be set aside and opened the floor for questions aimed at clarifying the submissions rather than engaging in debate over their proposals. He explained the process going forward, indicating that the Department would have an opportunity to respond on a later date scheduled for such interactions.

The Chairperson then acknowledged the presence of representatives from the Department of Trade, Industry, and Competition, welcoming the Deputy Director-General and other officials. He raised a question regarding the effective date of the legislation, noting that typically, the President's proclamation follows parliamentary approval and the Department's readiness with regulations.

He highlighted the importance of stakeholder consultation during the regulation process to address concerns and ensure readiness for implementation. Additionally, he questioned the stakeholders' stance on shareholder involvement, suggesting that the Bill aimed to bridge the gap between shareholders and company directors, as evidenced by issues raised during the Zondo Commission.

The Chairperson invited any further questions before indicating that the Committee would engage further once the Department had responded.

Responses

Mr Visser began his response by expressing support for the objectives of the Bill. He highlighted the significant rights granted to shareholders, particularly in voting on both the remuneration policy and its implementation report. He noted that these provisions addressed the gap mentioned. He emphasised that with the minor changes proposed by their team, the Bill would effectively empower shareholders to exercise their rights. Mr Visser reiterated their strong support for these principles and expressed confidence that the proposed adjustments would enhance clarity for listed companies and other stakeholders.

Ms Heystek responded to the question about a transition period. She acknowledged that the Bill currently only specifies that the amendments will take effect on the date proclaimed by the President. She explained that they advocate for amending this provision to allow for staggered implementation of the new Sections 30A and B, to give listed companies time to prepare for these changes in their processes. For example, if a company's financial year ends after 1 January, 2025, the company would need sufficient time to adjust. She emphasised the importance of providing a reasonable grace period, not too far in the future, to enable companies to adequately prepare, ensure all processes are in place, make the required disclosures to shareholders, and establish correct voting procedures. Thanking the Chairperson again for the opportunity to respond.

The Chairperson expressed gratitude for the submissions received and addressed the point about specifying a date in the legislation still under process. He cautioned against setting a specific date in the Bill, noting the uncertainty of when it might be concluded. He suggested leaving the date unspecified for the moment as amendments might be proposed in the National Council of Provinces (NCOP) and the finalisation of the Bill could extend beyond January. He emphasised the need to deliberate further on this matter at a later stage.

The Chairperson thanked the delegation for their presentation and clarified that the Committee was neither agreeing nor disagreeing with their proposals at the current stage. He indicated that the Department would have an opportunity to respond to the proposals. He welcomed any final remarks from the leader of the delegation, welcoming their continued participation in the process until the end. He encouraged them to join the virtual proceedings throughout the process, acknowledging their busy schedules but expressing the hope that they could contribute whenever possible.

Congress of South African Trade Unions (COSATU) submission on the Companies Amendment Bill

Mr Matthew Parks, Parliamentary Coordinator, COSATU, thanked the opportunity to share the views on behalf of COSATU and their affiliate, the Southern African Clothing and Textile Workers' Union (SACTWU). He emphasised their support for the Bill and urged for its passage, despite the challenges posed by the late stage of the parliamentary calendar. He highlighted the critical issues addressed by the Bill such as corporate governance and executive pay disparities, which have significant implications for investments and job creation, particularly in the context of South Africa's high unemployment rate. He noted the historical legacies of apartheid and the persistent inequality in South Africa, which the Bill aims to address by promoting transparency and accountability in corporate practices. Mr Parks emphasised the importance of aligning with international best practices in corporate governance and executive remuneration to attract global investors and enhance transparency. He acknowledged that while labour may not have gotten everything they wanted, they accepted the Bill as a product of social dialogue and compromise. He refuted criticisms from some sectors of the business community, arguing that the proposed measures are necessary to combat corruption, address inequality, and improve labour market stability. Mr Parks expressed support for provisions in the Bill related to executive remuneration disclosure, shareholder oversight, and access to company information. He emphasised the need for stronger shareholder activism and accountability mechanisms to ensure fair pay policies and address widening income disparities.

Mr Parks concluded his remarks by expressing support for the Bill while also highlighting areas for potential improvement in the future. He stressed on the need for clarity in certain clauses, particularly regarding the handling of information and publication requirements. He also addressed technical issues related to beneficial ownership and money laundering regulations, suggesting alignment with international standards to mitigate the impact on job creation and investment. He reiterated the importance of passing the Bill as a progressive step towards addressing longstanding issues in corporate governance and executive remuneration. While acknowledging the constraints of time, Mr Parks urged for further consideration of proposed amendments in the 7th Parliament if necessary.

 (See attached documents for further details)

Discussion

The Chairperson expressed gratitude to Mr Parks for the presentation on behalf of COSATU and SACTWU. He then opened the floor to Members for any questions regarding COSATU's submission.

Mr T Brauteseth (DA, KZN) raised concerns regarding the costs and regulatory implications of establishing bodies like social and ethics Committees, particularly for smaller companies. He highlighted the potential impact on competition and the possibility of ministerial regulation of companies for compliance. Mr Brauteseth sought insights from the COSATU representatives on how these provisions might affect emerging and smaller companies with limited infrastructure. He also raised concerns about the disclosure of executive pay packages and its potential security risks for top executives, while also mentioning the importance of considering the implications for Protection of Personal Information Act (POPIA).

The Chairperson reiterated the protocol for the Committee, stating that it was intended for Members of Parliament to engage with the presentations made by stakeholders. However, he allowed Prof Katz to speak but clarified that the intention was not for him to respond to questions, as they were directed at COSATU.

Prof Katz acknowledged the ruling and apologised for his interruption, expressing his acceptance of the Chairperson's decision and indicating his involvement in advising the Minister and the Department on company law matters. He confirmed that he would refrain from answering the questions posed by the Members.

Further discussion

The Chairperson directed a series of questions to COSATU. He first inquired about examples of unsustainable pay discrepancies between the highest and lowest paid individuals in South Africa and requested elaboration on how executive pay often lacks linkage to company performance, affecting labour market stability. Additionally, the Chairperson sought clarification on areas of disagreement within the National Economic Development and Labour Council (NEDLAC), negotiations regarding the proposed legislation and how the legislation balances shareholder and stakeholder interests.

Further questions focused on how the enumeration report provision aims to address excessive executive pay and provide transparency as well as examples of successful implementation of mandatory pay gap disclosures in other countries. He also asked for clarification on how the proposed amendments to Section 30A align with international best practices in corporate governance and how the legislation empowers shareholders to hold directors accountable for excessive pay.

Additionally, the Chairperson raised concerns about the proposed extension of the legislation to privately owned companies and asked for Mr Parks opinion on this matter. He also asked about the implications of the legislation if the remuneration policy is rejected at the annual general meeting and how the transition between meetings is addressed in the legislation.

Further Responses

Mr Parks noted the presence of Prof Katz, noting the value of hearing from experts in addition to government and union perspectives. He emphasised the importance of learning from international best practices and avoiding the consequences of falling behind in global standards, particularly concerning issues like great listing.

Regarding concerns about burdening small businesses with administrative issues, he clarified that the Bill primarily addresses listed companies and larger unlisted companies, aiming to avoid imposing unnecessary regulations on smaller enterprises such as small sheep farms or taxi owners. However, he acknowledged the need to ensure a level playing field and suggested considering financial thresholds to capture larger unlisted companies that might attempt to avoid transparency measures by delisting.

Ms N Tafeni (EFF, Eastern Cape) interjected, pointing out that Mr Parks had ANC regalia in the background, which should not be visible.

The Chairperson clarified that Mr Parks is not a Member of Parliament, so the rules regarding the display of political regalia do not apply to him as they do to MPs.

Mr Parks continued and addressed several key points raised during the discussion. He emphasised the importance of finding the right balance in legislative measures to ensure fairness and transparency in both large and small companies. He noted that competition could drive positive outcomes, citing examples where companies exceeded minimum wage requirements to attract and retain staff.

Regarding concerns about security risks associated with disclosing executive pay, he argued that criminals are already sophisticated and motivated by various factors, so the law should not abandon its objectives out of fear. He stressed the need to address inequality and poverty, pointing out that unsustainable wage gaps are detrimental to society as a whole. He highlighted the role of shareholders, particularly pension funds, in holding executives accountable for unjustifiable pay differentials.

Mr Parks acknowledged disagreements during the negotiation process but expressed satisfaction with the overall outcome, which he believes can lead to positive cultural changes within companies. He cited international examples of successful legislative measures and emphasised the importance of aligning the proposed amendments with existing laws, particularly those related to beneficial ownership and financial disclosure.

In conclusion, he reiterated his support for the Bill, emphasising its potential to promote transparency, fairness, and market stability while empowering workers through improved access to financial information. He thanked the Chairperson for the opportunity to address the questions raised.

The Chairperson thanked COSATU and SACTWU for their presentation, noting that there were no follow-up questions. He thanked them for their contribution to the legislative process and gave them the option to stay or leave the platform as they wished.

He then introduced the next stakeholder, the South African Reward Association (SARA) and the Institute of Directors South Africa Regulation Committee, represented by Dr Ronel Nienaber an EXCO Member and Chairperson of the SARA and Ms Lindiwe Sebesho. They were welcomed to the platform to make their presentation.

SARA Submission on the Companies Amendment Act Bill

Ms Lindiwe Sebesho, Master Reward Specialist and Committee Member, South African Reward Association (SARA), acknowledged the opportunity to present their inputs and commended the Committee's work, noting the incorporation of previous feedback into the latest version of the Bill. The association, along with the IoDSA's Remuneration Committee Forum (REMCO Forum) expressed support for efforts to establish a well-governed remuneration system that promotes fair, responsible, and performance-based pay in South Africa. They also endorsed the concept of a living wage, emphasising its importance in supporting vulnerable employees and fostering job creation, economic growth, and a sustainable economy.

Ms Sebesho highlighted specific comments and proposals related to Sections 26, 30A, and 30B of the Bill, expressing readiness to present them succinctly. She introduced Dr Nienaber, who would provide high-level summaries of their submissions, particularly regarding Sections 30A and 30B. She noted the presence of other members from the combined group who would be available to collectively address any questions after Dr Nienaber's presentation. She then handed over to Dr Nienaber to summarise their comments and inputs with their support.

The Chairperson clarified that the Committee present was separate from the one that considered the submissions made by the South African Reward Association. He explained that the previous committee was the National Assembly Portfolio Committee, which finalised the legislation based on public submissions and then presented it in a plenary session for adoption and transmission to the NCOP. The current Committee had the freedom to consider proposals separately and make their own decisions.

Ms Sebesho thanked the Chairperson for the clarification and noted that they would share it with the members of the association. Then, she handed over to her colleague to continue with the presentation.

Dr Ronel Nienaber, Chairperson, South African Reward Association (SARA), thanked the opportunity to provide feedback to the Committee regarding Sections 30A and B of the Companies Amendment Bill. She began by discussing the definition of "employee" as it relates to pay gap disclosure. She emphasised the importance of tracking trends in pay gaps over time rather than focusing solely on absolute pay gap statistics. She proposed excluding part-time or temporary employees from the definition to ensure meaningful disclosure.

Moving on, Dr Nienaber addressed concerns regarding the wording of Section 30B (4) of the Bill, suggesting that "remuneration report" should be replaced with "implementation report" to accurately reflect the content of the document. She also raised concerns about the practicality of requiring a shareholder vote on the implementation report, highlighting the lack of precedent for such a vote in other countries and the potential difficulties in implementing it effectively.

She further discussed the proposed consequences for non-approval of the implementation report, including the requirement for committee members to stand for re-election. She suggested alternative wording to address these concerns and emphasised the importance of maintaining skilled directors on remuneration committees.

In conclusion, Dr Nienaber reiterated the association's proposals.

(See attached document for further details)

Discussion

The Chairperson appreciated the structured presentation and raised a concern regarding the definition of "employee" within the Bill. He highlighted the potential issue of having multiple definitions of an employee across different legislations, suggesting that any amendments regarding this definition should ideally be made in the Labour Relations Act. However, acknowledging that the discussion fell outside the scope of the current Bill, he indicated that the matter would need to be addressed by relevant departments and legal offices.

Regarding the stakeholders' proposal to change the "remuneration report" to an "implementation report," the Chairperson noted that this issue seems to be the focus of stakeholders' concerns, leading to fewer questions from members. He suggested that further deliberation and clarification would be necessary after receiving responses from the Department and legal offices.

In conclusion, the he thanked the stakeholders for their presentation and appreciated the clear format of their submission. He indicated that stakeholders were free to stay for further presentations or could leave as desired.

JustShare and Aeon Investment Management: Submission on the Companies Amendment Bill

Ms Temlandvo Mathebula, Investment Analyst, Aeon Investment Management, provided a brief overview of the organisation's collaboration with JustShare and the Association of Black Securities and Investment Professionals (ABSIP).

She described Aeon Investment Management as an organisation in Cape Town with a sustainable investment process that incorporates ESG (Environmental, Social, and Governance) factors. JustShare is a non-profit shareholder activism organisation focusing on climate change and inequality.

Ms Mathebula highlighted several key points regarding the comments on the Bill:

• They support the incorporation of a Social Ethics Committee but emphasise the need for a standardised process for the content of the committee's reports.
• They advocate for the disclosure of a five-year historical pay ratio to track progress in addressing inequality, including gender pay gaps.
• They suggest defining a "prescribed officer" and making it mandatory for companies to disclose pay ratio and gender pay gap information.
• They stress the importance of transparency and accountability in justifying pay ratios and gender pay gaps, urging companies to disclose this information.

Ms Mathebula emphasised the urgency of including these provisions in the Bill to address inequality and ensure transparency and accountability in corporate practices.

Mr Kwanele Ngogela, Senior Inequality Analys, Just Share SA, expressed gratitude for the opportunity to provide input on the Bill, emphasising his advocacy for a living wage and reduction of vertical and gender wage gaps to address inequality in South Africa. He highlighted the country's status as one of the most unequal globally, with the labour market playing a significant role in perpetuating this inequality.

He welcomed the inclusion of Sections 30A and 30B in the Bill, which require companies to prepare and present remuneration policies and reports. However, he expressed concern about the potential outsourcing of low-paid employees to improve company ratios under Section 30B. Mr Ngogela echoed the proposal to disclose the salaries of subcontracted workers, emphasising that this inclusion enhances transparency and accurately represents the company's compensation structure.

He argued that specifying the job position eligible for minimum remuneration is crucial for stakeholders to verify reported numbers and benchmark within industries. He referenced the Australian report from 1998, which stated the role of business in building a fair society and urged for the inclusion of subcontracted workers and explicit specification of low-paying positions.

Mr Ngogela reiterated the importance of including subcontracted workers in disclosures and specifying the lowest-paying positions within companies to address inequality effectively.

Ms Mathebula concluded by highlighting the significant role that businesses play in perpetuating or alleviating inequality. She reiterated the importance of striving for a South Africa that is fair and inclusive for all its citizens. She expressed hope that their comments would be taken into consideration and thanked the Committee for the opportunity to voice their concerns.

Discussion

The Chairperson thanked Ms Mathebula and Mr Ngogela for their presentation and opened the floor for Members to ask questions for clarity. He mentioned that all stakeholder inputs would be considered, with responses provided for each area raised. He assured that while not all proposals may be agreed upon, they would be deliberated by the Committee.

Ms Mathebula sought confirmation on the Minister's response timing and participation, to which the Chairperson confirmed that public attendance and listening during the process was welcome.

He clarified that public involvement was for observation only.

The Chairperson invited participation in various committee meetings and confirmed the Department's response on 5 March 5 2024.

Mr Asief Mohamed, Chief Investment Officer, Aeon Investment Management, thanked the presentation made by Ms Mathebula. He wanted to address the issue of resolutions, particularly regarding remuneration. He acknowledged a fair comment made by a representative from the Institute of Directors South Africa but also highlighted their institution's experience. He mentioned that despite reaching out to companies twice regarding remuneration, disclosure, and governance issues, they received no response. Mr Mohamed emphasised the importance of putting this on record and thanked the Chairperson for the opportunity to present.

The Chairperson thanked Mr Mohammed for his input and assured him that it would be considered as part of the proposal. He then excused Mr Mohammed, noting that he was free to remain and listen to input from other stakeholders.

Submission by Centre for Environmental Rights on Companies Amendment Bill

Ms Tabitha Paine, Attorney, Centre for Environmental Rights, presented the organisation's submissions focused on the beneficial ownership aspects of the amendments. The presentation included general comments and specific comments on three thematic areas. The general comments expressed appreciation for some amendments but raised concerns about potential implementation challenges and the need for effective enforcement mechanisms.

Regarding specific comments, Ms Paine highlighted that the Bill narrows the types of documents subject to transparency, excluding certain financial instruments and imposing high company thresholds that could exclude companies with a public interest score of 350 or less. The presentation also addressed potential implementation issues related to referrals by the Broad-Based Black Economic Empowerment (B-BBEE) Commission to the tribunal and a conflict between the Companies Act and the Financial Reporting Council's Rules of Procedure.

The Centre for Environmental Rights emphasised the importance of greater corporate transparency and disclosures, particularly in relation to beneficial ownership information for companies with significant environmental impacts. They urged the committee to consider these issues for the realisation of constitutional and other rights.

(See attached document for further details)

Discussion

The Chairperson sought clarification from Ms Paine regarding her concerns about the narrow and limited definition of securities. He referenced the proposed definition in the amendment, which includes shares and debentures issued by a profit company. He stated that Ms Paine may need to explain further, why she perceives the definition as narrow and limited despite its inclusion of shares and debentures. He said that she could elaborate on any specific types of financial instruments or transactions that she believes should be covered but are not explicitly mentioned in the definition. This would help provide a clearer understanding of her concerns and inform the Committee's deliberation on the matter.

Response

Ms Paine clarified that their concern stems from the removal of the phrase "or other instruments" from the definition of securities in the proposed amendment. She explained that this broader phrase encompassed various financial instruments beyond shares and debentures, such as funds, loans, and other financial products. Therefore, she advocated for a more inclusive definition of securities to ensure that the Act applies comprehensively to a wider range of financial instruments.

The Chairperson thanked Ms Paine for her responses and reiterated that the Committee would consider their proposal. He also extended an invitation for them to attend future meetings, including the next one on 5 March 2024, where they could observe the deliberations on their submissions.

The South African Institute of Chartered Accounts on the Companies Amendment Bill

Mr Walter Bhengu, Project Director: Legislation and Governance, South African Institute of Chartered Accountants,  outlined SAICA's role as an accountancy professional body with over 55 000 members, including chartered accountants, accountants, and accounting technicians. He mentioned that SAICA engages its members to address practical issues related to business operations and compliance. He stressed the importance of balancing ease of doing business with regulatory imperatives such as transparency and accountability. He highlighted the need to review the compliance burden, particularly for small businesses, to ensure it is not overly onerous. Mr Bhengu discussed SAICA's submission, focusing on the concept of the public interest score (PIS), which measures the public interest in a company based on its social impact and potential public impact.

He explained that the PIS has remained unchanged for 13 years, despite inflationary considerations, and called for its adjustment to reflect current economic realities. He discussed the implications of the PIS on regulatory requirements for companies, including the obligation to submit audited financial statements and the potential impact on small businesses seeking investment. Mr Bhengu also addressed anomalies in annual return requirements, particularly concerning the submission of financial statements for consecutive years. He called for clarity on which PIS limits apply to different categories of companies to avoid ambiguity in the law.

In conclusion, Mr Bhengu reiterated SAICA's submission, emphasising the importance of amending the PIS to promote ease of doing business, clarity in regulatory requirements, and fairness for companies of all sizes.

(See attached document for further details)

Discussion

The Chairperson clarified the timeline for receiving responses from the Minister. He noted that there were no questions from the Members and assured stakeholders that the Minister's responses would be provided on 27 February 2024, as initially stated. He emphasised the importance of checking the parliamentary programme for specific dates and times of committee sittings and subjects to be discussed.

He asked if there were any questions, and when there were none, he remarked that clarity often arises during responses. He planned to revisit the original submissions by stakeholders and compare them with the responses from the Department and the Constitutional and Legal Services Office.

Consumer Goods Council South Africa on Companies Amendment Bill

Mr Sudeshan Pillay, Chief Financial Officer, Consumer Goods Council South Africa (formerly CCSA), provided an overview of the organisation and its activities. He introduced the team members present for the presentation and outlined the structure of their submission, which was divided into two parts, namely; an introduction to GS1 South Africa and the industry it serves followed by a discussion of the legal aspects of their submission.

GS1 South Africa was established in 1981 as a non-profit organisation representing nearly 9,000 members primarily in the retail and manufacturing sectors. The organisation contributes significantly to South Africa's GDP, employing around 2.5 million people and distributing grants to various sectors, including transformation, job creation, and skills development.

The organisation operates based on principles of integrity, accountability, excellence, humility, independence, vulnerability, and commitment. The focus is on advisory, advocacy, and supportive initiatives, engaging with government, businesses, and regulatory bodies to promote industry best practices and consumer welfare.

The board of GS1 South Africa includes top-tier representatives from retail and manufacturing companies, accounting for a significant portion of the country's GDP. It also collaborates with various stakeholders, including government agencies, regulatory bodies, and industry associations, to serve the interests of members and consumers.

Mr Pillay highlighted the organisation's internal departments, including crime and risk initiatives, food safety and sustainability, transformation, training and development, legal and regulatory stakeholder engagement, and global standards compliance.

In addition to their internal operations, GS1 South Africa focuses on supporting government initiatives, addressing energy challenges (Eskom), collaborating with municipalities for service delivery, investing in communities, eliminating red tape in regulatory processes, supporting localisation efforts, and promoting skill development and training for small and medium-sized enterprises (SMEs).

Finally, Mr Pillay introduced the key focus areas of the submission, which include supporting government programs, addressing regulatory challenges, promoting sustainability, investing in communities, eliminating red tape, supporting localisation efforts, and promoting skill development and training for SMEs.

Mr Sizwe Gcayi, Founding Director, SGA Law Africa, began by expressing gratitude for the opportunity to address the Committee and make submissions. He disclosed their previous appearance before the Portfolio Committee and their concerns regarding the acceptance of the issues raised during that session. He underlined that their appearance before the current committee represents their last opportunity to convince them of their submissions' validity.

Their submissions focused on three proposed amendments: Section 45, Section 30A, and a proposed new Section 30B. He proceeded to discuss each of these amendments in turn.

Section 45

Regarding the proposed amendment of Section 45, Mr Gcayi noted that while it seems to remove the requirement of complying with Section 45 concerning the provision of financial assistance to a subsidiary, it falls short of addressing business concerns about improving the ease of doing business in South Africa. He suggested an amendment to permit the giving of financial assistance by a company to another within the same group of companies, ensuring clear visibility of resource movement.

Section 30A

Moving on to the proposed amendments to Section 30A, Mr Gcayi expressed concerns about introducing binding shareholder approval for certain policies, particularly the remuneration policy. He argued that such a requirement would constrain the board's flexibility to review and amend policies as needed and could be costly and time-consuming. He also highlighted the potential implications for executive employment and the ability of the board to drive company direction.

Section 30B

Regarding the proposed new section, Section 30B, Mr Gcayi raised concerns about the increased threshold for shareholder approval of nomination policies, potentially denying minority shareholders a voice in decision-making.

He concluded by highlighting the importance of considering the legal ownership of remuneration policies and suggested that consequences for non-approval should fall on the entire board rather than just the members of the remuneration committee.

(See attached document for further details)

Discussion

The Chairperson thanked the lengthy presentation, noting that it exceeded the allocated time by more than 20 minutes, but there was flexibility. He then opened the floor to Members for questions seeking clarity on the presentation.

Addressing Mr Gcayi, he revisited the issue of Section 45, highlighting the Department's aim to enhance the ease of doing business and avoid unnecessary burdens of compliance. He sought clarification on how Mr Gcayi's proposal might reintroduce burdensome compliance.

Responses

Mr Gcayi explained that their argument is on the proposal not going far enough. He provided an example using a manufacturing company that produces various products such as cereals and fruits, all under different subsidiaries of the holding entity. He emphasised that the holding company may not always possess the necessary liquid resources, which could be present in one of its subsidiaries. Therefore, their proposal seeks to introduce flexibility within the same group of companies, allowing one company to provide financial assistance to another within the group. This, he argued, would enable better utilisation of resources and ensure that assistance could be provided where it is most needed, even if the holding company lacks sufficient resources directly.

Closing remarks

The Chairperson appreciated everyone's attendance and participation. He mentioned that there would not be any follow-up questions and thanked the panel from the Consumer Goods Council of South Africa. He reminded everyone that responses to all the presentations would be provided the following week on 27 February 2024. He excused the panel but mentioned they could stay if they wished. Additionally, he thanked the Members for their attendance at the public hearings and the stakeholders for their inputs.

The Chairperson expressed optimism about the clarity gained on certain clauses and looked forward to reconvening on 27 February 2024, when the Minister and the Parliamentary Legal Services Office would respond to the inputs. He thanked everyone once again, including the Committee staff and Department officials.

The Chairperson also reminded Members about the next meeting at 2:00 PM, focusing on the ratification of the WTO Agreement on fisheries subsidies. He emphasised the need for Members to use the correct meeting link to avoid confusion.

[The meeting was adjourned.]