Small Business Amendment Bill: deliberations

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Trade and Industry

02 November 2004
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Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
3 November 2004
SMALL BUSINESS AMENDMENT BILL: DELIBERATIONS

Chairperson

: Mr B Martens (ANC)

Documents handed out:

Department PowerPoint presentation on National Small Business Amendment Bill
National Small Business Amendment Bill [B23-2004]

SUMMARY
The Department of Trade and Industry (DTI) briefed the Committee on the National Small Business Amendment Bill [B23 - 2004]. The Committee supported the aims of the Bill, but had some suggested amendments. The main points of discussion were around the composition of the Board of the Small Enterprise Development Agency (SEDA), the Minister's right to draw up regulations, and the provisions dealing with the limitation of liability.

MINUTES

Ms N Lupuwana, DTI Chief Operating Officer: Enterprise and Industry Development presented a summary of the Bill. She explained that the Department was reviewing the mandate of Ntsika and proposed that Ntsika merge with the National Manufacturing Advisory Centre Trust (NAMAC). The new body would be called the Small Enterprise Development Agency (SEDA).

Discussion
Professor B Turok (ANC) said that it was a good idea to merge the agencies as Ntsika had failed. He noted that the amendments that had been proposed the previous week had not been included in the Bill. He repeated that he had suggested that in Clause 10(1)(a) the word "any" be removed. He also felt that Clause 11(6)(a) had to be amended. It was important that Members of the Board of SEDA should be people who had business experience as well. He asked that the Committee be given a report on the staff transfers that would take place from Ntsika to SEDA. This was important so that staff from Ntsika who had been a problem and had not worked were not transferred to SEDA. The Committee should also be informed every three months on the progress of SEDA.

The Chairperson said that previously these points had been made and he hoped that it would be noted and included. It was also important that Members of the Board had a balance of skills and experience.

Dr M Sefularo (ANC) said that there was a concern that the Bill did not make provision for the structure and governance at provincial and local government level.

Mr L October, Deputy Director-General, apologised that the changes had not yet been included. He said that he understood that the previous week's briefing was informal and therefore they did not request the State Law Advisors to include them. It had however been noted and would receive attention. The amendment in Clause 10(1)(a) would be affected. Referring to Clause 11, he said that a mix of skills was needed on the Board. He felt that members had to have business experience. It should be noted that it could not be exclusively people with business experience as this would exclude a number of people who did not have opportunities in the past. The Department was open to specific suggestions regarding the structure and governance of the SEDA institutions. They were in discussions with the provinces but no consensus had been reached as yet. NAMAC had had separate trusts in each province. It was felt that this kind of structure was needed with a strong unitary system through which Government's policy could be implemented.

Dr Sefularo (ANC) said that he felt that some structures had to be legislated for as there seemed to be an imbalance of power and some people would not be held accountable. Referring to Clause 13C, he asked whether consumers would have the power to have a Board member dismissed. It was important that the people who SEDA served had to be empowered.

Professor Turok said that he supported Dr Sefularo. The current ethos internationally was one of transparency and accountability. This should be built into the legislation. He suggested that a clause be built into the Bill that dealt with accountability. He suggested that the Board should have bi-annual meetings with its beneficiaries. This should be put into the Bill. He had also suggested that Members of Parliament could possibly be members of the Board. He asked for Mr October's acceptance of conditional approval of the Bill.

Mr S Njikelana (ANC) said that he felt that Clause 16 should be linked to the monitoring and evaluation of performance. He also asked what kind of regulations was envisaged.

Ms F Mahomed (ANC) referred to the presentation and asked what agencies, designated by the Minister, were referred to and which financial services the Minister would extend. She also felt that a regulatory framework should be included.

Dr E Nkem-Abonta (DA) said that the establishment of SEDA was a very good idea. The problem however was that the regulatory framework for small businesses was not good. He suggested that the Bill should state that any social or economic bill should be sent to the SEDA so that its impact on small businesses could be assessed. This would ensure that laws would not be passed that would impede small business development.

Mr October said that the suggestions about governance, accountability and transparency had been noted and they would see how they could be included in the Bill. The Bill provided that the Minister could incorporate other agencies into the SEDA. The problem at the moment was that there were many Government initiatives which had led to quite a few agencies. These agencies were not co-ordinated. The aim now was to create one agency with integrated support for small businesses. The starting point was Ntsika and NAMAC because they were similar in the services offered. The important debate at the moment was whether financial and non-financial support should be separated as it was at the moment. This arrangement was being reviewed. The inclusion of Members of Parliament as Board Members would be examined. This could however make oversight difficult. On the issue of conditional approval, he said that the merger could not be used to dismiss staff from Ntsika. Poor performance would not be tolerated in the new institution. He agreed that the macro-environment impacted on the Bill. Regulations were also important. The President had asked that an impact assessment be done. This issue would need debate. The amendment however aimed at creating a new agency. He agreed that they would look at amending Clause 16 to deal with monitoring and evaluation.

Ms B Ntuli (ANC) asked for clarity concerning the loans which the agency was allowed to make in terms of Clause 15(3)(c). She wanted to know why the agency would make loans and how it would be paid back.

Mr L Labuschagne (DA) suggested that the performance contracts for senior management be for a period of three months and that it be written into the Bill. He also suggested that the Committee should be allowed input in the regulations.

Professor Turok (ANC) suggested that Khula should also move closer to SEDA as there were too many agencies. Referring to the Board, he said that Clause 9(3) stated that the agency would act through the Board. These were very strong words. The Board was therefore very critical. He asked who would appoint the Board and whether the Committee would have any input in the composition of the Board. He agreed that if there were Members of Parliament, it would diminish the separation of powers. He felt though that oversight would be better if someone from the Committee was on the Board as they would be informed directly of the progress of the Board.

Dr Nkem-Abonta (DA) suggested that the Minister consult the Committee on the regulations. He also asked if the functions of the agency in Clause 10(1)(b)(iv) would be spelt out in the regulations.

Ms Mohamed (ANC) said that Clause 16(b) that referred to limitation of liability appeared very loose since it seemed as if nobody would be responsible for what happened in the agency.

Ms N Khunou (ANC) referred to the three-year term for the CEO and asked if this length of time would be sufficient since there should be some continuity. She also felt that action should be taken should Board members not attend meetings.

The Chair reminded Members that the primary function of the Portfolio Committee was oversight. The Minister and Board members would see that this was done. Having a Member of Parliament on the Board would not make a difference. If the Board was not performing, the Committee could summon them to appear before it and give an account of their performance. Having Members of Parliament on the Board might raise other legal issues that would need to be addressed.

Mr October said that the clauses dealing with loans and limited liability were included on advice of the State Law Advisors. The clause dealing with limitation of liability was a standard clause that was included in most laws that protected an entity against litigation. The loans that the agency had made were short-term loans for operational purpose. This was not to lend to small businesses. The term of office of the CEO could perhaps be amended to be up to five years. He felt that the first term should be three years. An attempt would be made to include a clause that forced members of the Board to attend a minimum number of meetings. The regulations that the Minister would make would be within the ambit of the law. This would not allow the Minster to make regulations that caused problems for SMMEs. Regarding the composition of the Board, he said that the Minster needed to appoint the Board. The Board was critical and therefore there could perhaps be an agreement with the Committee that once the list of names had been decided, consultation would take place with the Committee. He did not think it was necessary to be put in the Act. There was an agreement that the agency would report to the Committee every three months.

Ms Ntuli (ANC) said that she was not satisfied with the answer regarding short-term loans. The agency would have a budget and it should stick to its budget. Her concern was how the loans would be paid back.

Ms Mohamed (ANC) said that it still seemed as if no one would be taking responsibility for the actions of the agency.

Mr J Strydom, the State Law Advisor, remarked that they were working under severe time constraints regarding this Bill. He explained why the suggestions made the previous week had not been included. The Bill had been certified on the same day that the meeting had taken place. No substantive changes could therefore be made to the Bill. He explained further that the numbering in the Bill might seem strange, but this was because it was still to be incorporated in the principal act.

Clause 16B regarding limited liability was a common provision in legislation. He noted the Member's concern was genuine. The key however lay in the phrase "good faith" which was in the clause. This protected officials who performed their duty diligently, and, who, without intent caused problems. If a person was reckless or negligent, the clause would not apply. He said that Clause 13C(1) and (2) dealt with Members who did not attend Board meetings regularly. Clause 3 would be amended in the principal act that would affect the regulatory powers of the Minister. The regulations would be within the strict ambit of the Act. In conclusion, he said that it was intended to change the title of the principal act by replacing the word "business" with "enterprise". This was to bring it in line with the Bill as it referred throughout to enterprises. He asked the Committee to give guidance on the way forward.

Mr Rasmeni (ANC) asked if Clause 16B was not providing for responsibility, who would take responsibility should anything go wrong.

Dr Nkem-Abonta (DA) said that he did not see how Clause 3 addressed the issue around ministerial regulations.

Ms Khunou (ANC) said that she could not understand why the Committee's suggestions could not be included in the Bill.

Ms D Ramodibe (ANC) referred to Clause 16A(2) and asked if the level of fines would be in the regulations. Clause 13E(5)(a) referred to a meeting by telephone. She wanted to know why this had been included.

The Chair remarked that the previous meeting had been informal and therefore the Department had not affected the changes. He explained further that the Deputy President had prioritised the Bill. This meant that it would be processed soon, but would still go through all the necessary processes.

Mr Strydom explained that it was Constitutional principle that legal liability could not be excluded. The question was if the clause infringed on this principle. It would infringe if it allowed for a person to be exempted from legal liability where they had done something with the necessary intent or with recklessness. If the person acted in good faith, but performed something in a negligent manner, the person would be excluded from liability. This clause was needed to protect the person who was doing his /her duty diligently but perhaps caused something to go wrong. Referring to regulations, he said that it was difficult to prescribe to the Minister every detail for consideration. Clause 3 therefore tried to be general but also prescriptive.

He added that the fines would not be prescribed. The Adjustment of Fines Act would address this. The fine would also be linked to the prison term. Telephones had been included because of the technological advances being made. Meetings by telephone would therefore be regarded as if people were present.

The Chair responded to Mr Strydom's request for the way forward and asked if they could have the changes requested two days later.

Mr Labuschagne (DA) said that although the Committee and the Department had an agreement, the Committee could change and officials in the Department could change and then the agreement would not be valid anymore. It would therefore be better if it was in a more substantial form. He also felt that the Bill should specify a certain percentage of Board meetings that had to be attended. He added that the limitation of liability seemed to be protecting stupidity. He asked if it was possible that the Minister could submit the regulations to the Committee.

Ms Ntuli (ANC) said that the Bill did not mention anything about the role of the provinces and local government.

Dr Nkem-Abonta (DA) asked if it would not be better to change Clause 16B so that it covered someone who acted in good faith but negligently. He also felt that the regulations should be submitted to the Committee first.

The Chair asked the State Law Advisors to comment on the limitation of liability clause.

Mr T Mbangeni, a State Law Advisor, said that the liability clause was a standard clause and had not caused any problem in the past. If the Committee were not happy, however, they would look at it again. Good faith however should explain the meaning of the clause. There were certain parameters in which this would be valid.

Ms C Booyse, a State Law Advisor, said that Section 56 of the Constitution allowed the Committee to summons anyone to present documents to it. The Committee would therefore be able to ask for the regulations as stated earlier. If the Committee wanted this written in the legislation they could consider it.

Dr Nkem-Abonta (DA) said he still felt that good faith meant there was no intention to do wrong. This however did not cover the instance of negligence. He also asked if Parliament had the power to change regulations.

The October said that Chapter 4 set guidelines for provincial and local government. They would however look to include a clause under the section covering the functions of the agency which would explain this further. He stressed that the purpose of the Act was simply to create one agency. The aim was not to make major changes to the law. The concerns around liability, however, would be taken into account and a way found to incorporate it. The debate around the term "good faith" was one that had been around for a long time. It would normally mean that somebody was acting with due care in the performance of their duties. This was therefore not 'protecting stupidity'. He appealed to the Committee to keep to the practice that had been used in other legislation and keep the clause as is. He said that they would work on the amendments and then present them to the Committee in two days' time. The aim was to launch SEDA on 13 or 14 December 2004.

Professor Turok (ANC) said that the discussion around regulations and the Committee's role was one that many Committees had had already. The answer always was that the Minister needed flexibility in drawing up regulations. This debate however should not hold up the Bill from being passed. He suggested that the Department draft a paper on policy as far regulations were concerned so that the Committee could discuss it.

Mr Labuschagne (DA) said that that was why he had suggested that the Minister "should" submit the regulations and not "must". This still gave the Minister flexibility.

The Chair said that this was a broad policy issue and not for discussion at this point. The priority was the Bill that was before them. He once again asked the Department to come back in two days' time with the amendments and the name change.

Mr October said that this was in order. He added that there was a move internationally to talk of enterprises.

Professor Turok said that he felt this would be a good change.

The Chair said that it seemed there was consensus about the name change.

The meeting was adjourned.

 

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