Co-operatives Amendment Bill, Minerals and Energy Laws Amendment Bill: briefings

Meeting report

ECONOMIC AND FOREIGN AFFAIRS SELECT COMMITTEE
7 June 2005
CO-OPERATIVES AMENDMENT BILL, MINERALS AND ENERGY LAWS AMENDMENT BILL: BRIEFINGS

Chairperson: Ms N Ntwanambi (ANC, Western Cape)

Documents handed out:
Department of Trade and Industry PowerPoint presentation on Co-operatives Amendment Bill
Co-operatives Amendment Bill [B4B-2005]
Department of Minerals and Energy PowerPoint presentation on Minerals and Energy Laws Amendment Bill
Minerals and Energy Laws Amendment Bill [B1-2005]

SUMMARY
The Department of Trade and Industry reported that the Co-operatives Act of 1981 had shortcomings. It had focused primarily on agricultural co-operatives and was too prescriptive; there was no adequate definition of a co-operative; and compliance with co-operative principles was not explicitly required. The registration process was complicated and the language too complex for the average co-operative member; provision for protection of members vis a vis the co-operative board of directors was weakly articulated, and there was no provision for an Advisory Board. Therefore the need for the Amendment Bill.

Some of the Bill’s objectives were to simplify the registration process; to define co-operatives in accordance with internationally accepted definitions; to enable co-operatives to conform with co-operative principles; the provision of a legislative framework for all types and forms of co-operatives in all sectors of the economy; and the protection of co-operative members’ interests. Considerable Committee discussion ensued, in particular on the role of directors of a co-operative.

The Department of Minerals and Energy informed the Committee that, after an erroneous amendment to the Mining Titles Registration Amendment Act, certain functions of the Registrar of Deeds had been inadvertedly removed which made it difficult for the former to function. The Department needed to correct the error, so the Bill had been introduced to re-establish the previous status quo. The Committee agreed to discuss the Bill at a future meeting.

MINUTES

Department of Trade and Industry briefing: Co-operatives Amendment Bill
The briefing was conducted by Ms Nweti Maluleki, Department Chief Director. Mr Reuben Mbedzi, Department Deputy Director, and the Department Legal Advisor, Mr Johan Strydom were also present.

Ms Maluleki presented an overview of the Department’s strategy and implementation of plans. In 2001, Cabinet had agreed that the mandate for co-operatives be transferred from the Department of Agriculture to the Department of Trade and Industry. The Department then had to develop a new policy and legislation for the promotion and development of sustainable co-operatives in all sectors, for a simpler registration process and management; and to ensure accessibility to the poor.

The Co-operatives Act of 1981 had shortcomings in that it focused primarily on agricultural co-operatives and was too prescriptive, there was no adequate definition of a co-operative; and compliance with co-operative principles was not explicitly required. The registration process was complicated and the language too complex for the average member; provision for protection of members vis a vis the board of directors was weakly articulated and there was no provision for an Advisory Board.

Some of the Bill objectives were to simplify the registration process; to define co-operatives in accordance with internationally accepted definitions; to enable co-operatives to conform with co-operative principles; the provision of a legislative framework for all forms of co-operatives in all sectors of the economy; and the provision for protection of co-operative members’ interests.

Ms Maluleke detailed the proposed amendments that would address the shortcomings of the Act.

Clause 1 dealt with the definition of a co-operative, which complied with the internationally accepted definition of the International Co-operative Alliance as adopted by the International Labour Organisation (ILO); the identification of primary, secondary and tertiary co-operatives; and also defined internationally accepted principles of co-operation. Ms Maluleki explained the definition, values and principles of a co-operative. The Act would apply to all co-operatives registered in terms of the Act; to financial co-operatives; and to all Schedule 1 co-operatives.

Clause 4 clarified the distinction between the different co-operatives; listed different kinds of co-operatives, but did not prescribe the types of co-operatives that could be formed.

Clause 5 detailed provisions related to the application of the Act.

Clauses 6 to 12 dealt with simplified registration requirements.

Clauses 13 to 19 dealt with the constitution and powers of a co-operative.

Clauses 20 and 21 prescribed the keeping of records to safeguard the interest of members.

Clause 22 dealt with members’ rights of access to information and the election of a supervisory board to oversee the Board of Directors.

Clauses 23 to 26 dealt with membership of a co-operative and the powers of the registrar.

Clauses 27 to 31 provided for the accountability of the Board of Directors to the general meeting where there was no supervisory board.

Clauses 32 to 40 dealt with the structures to manage a co-operative and the decision-making powers of such structures.

Clauses 56 to 65 covered the amalgamation, division, conversion and transfer of co-operatives.

Clauses 66 to 71 simplified the winding-up process to avoid unnecessary and costly litigation and to explain the circumstances under which a co-operative could be wound up. A co-operative could be wound up either by special resolution of its members or by order of the court.

Clause 68 made provision for a co-operative to be wound up or deregistered by the Minister in certain circumstances.

Chapter 11 – Administration of the Act: The Minister would appoint the registrar and deputy registrars to administer the Act; compelled the deputy registrar to keep records in a prescribed manner; allowed a member of a co-operative to examine certain documents sent to the registrar and made provision for the registrar to conduct inspections on suspicious dealings of a co-operative. The registrar could make recommendations on the findings to the co-operatives concerned; the Minister in terms of Clause 83 and to the relevant prosecuting authority. The powers of the registrar in terms of the Bill were massively reduced to avoid constraints.

Chapter 12, Clauses 80 to 85 made provision for the formation of an Advisory Board, the main function being to advise the Minister regarding the co-operatives policy; the provision of targeted support programmes; and guidelines for co-operatives’ audit. The structure was necessary because co-operatives supported by government policy were at an emergent phase and for integration with other relevant structures. Once the movement was established, the structure could be reviewed. Members were appointed by the Minister and would be capable of representing the interests of co-operatives.

Ms Maluleke then explained the implications of the Co-operatives Amendment Bill for the Co-operatives Bank Bill. All National and provincial departments and the social partners in NEDLAC had been consulted, and the draft bill had also been published in the Government Gazette. There were no concerns expressed by these parties.

Discussion
The Chairperson referred to Tertiary Co-operatives and asked whether there had been implementation at Provincial level, whether the SA Local Government Association (SALGA) had been consulted and whether funds had been made available.

She also referred to the letter from the NCP Forest Co-operative and asked Members to think of formulating a reply.
Ms Ntwanambi compared co-operatives to societies of women in the townships, such as burial societies, and asked what the position would be if a member of a co-operative did not pay their contributions.

Mr J Sibiya (ANC, Limpopo) referred to definitions, values and principles such as autonomy and independence. He asked where the independence fit in, as well as whether implementation would be at provincial or local level; how co-operatives would fit in with LPDs and IPDs, and how government would prevent these co-operatives from being ‘run by remote control’.

Ms J Terblanche (DA, Northwest) referred to co-operatives in the agricultural sector and asked whether there had been any response from AgriSA.

Ms M Themba (ANC, Mpumalanga) asked whether national and provincial workshops had been held and whether rural women had been consulted.

Mr D Mkono (ANC, Eastern Cape) asked how the funds through AgriSA were administered and whether they were not running the risk of not seeing the disadvantages, and whether they would have a financial advisor. He also asked how supervisory bodies were constituted amongst members themselves in the event of dissatisfaction or where one was not trustworthy.

Ms M Themba asked why the Bill had been classified as a Section 75 Bill.

Mr J Strydom (Department Legal Advisor) responded that the Department and the State Law Advisors had considered the relevant schedules in the Constitution and had formed a joint opinion as to which area the Bill related to. The Memorandum to the Bill explained stated that the State Law Advisors and the Department felt that the Bill should be dealt with as a Section 75, and not a Section 74 or Section 76 Bill, particularly as it did not contain provisions pertaining to customary law or the customs of traditional communities.

Ms Maluleke referred to the question of clarity on secondary and tertiary co-operatives. The definition of a tertiary co-operative arose out of individual persons coming together to start a co-operative enterprise. Members took decisions as individuals, but a secondary co-operative could include juristic persons. Secondary co-operatives did not consist of individual persons but different legal entities who had agreed to market together, form a trust or close corporation or (Pty) Ltd. A tertiary co-operative was formed to advocate and engage organs of state, the private sector and stakeholders on behalf of its members, and could also be referred to as a co-operative Apex body.

SALGA had participated and had been given a list of participants per province. The Department wanted secondary entrepreneurship to be sustainable and had consulted widely, including at local level.

In terms of funds, Limpopo was the first province to budget for co-operatives and had piloted six major co-operatives, working very closely with the Department. The Department would assist in co-operative design but it would have to have an asset base. The policy targeted the poor and the strategy would include grants. The Department was also looking at providing technical assistance for capacity building. Local municipalities would understand the whole education and training process. The plan had been put in place for local structures.

Ms Maluleke stated that one of the shortcomings of the 1981 Co-operatives Act was that there had been no clear definition of a co-operative. NCT was at primary level; close corporations, companies and trusts banded together for marketing purposes. In terms of the new definition, a secondary co-operative could have those types of legal entities who came together with democratic management and control, transparency and openness. At primary level this was encouraged but not a requirement. At secondary level weighted voting was limited to 15 votes. Any entity had the right to choose whether they wished to be a Closed Corporation (CC), Limited Company (PTY Ltd) or a trust to encourage broader membership, broader ownership and empowerment.

Ms Maluleke dealt with the question of access to information. NCT had said that companies like Sappi and Mondi were able to do business independently, and yet were members of co-operatives. The principle applied to openness, collective decision making, being members by default. So if Mondi and Sappi were members by default because they bought forestry from its members, then something was totally wrong. A co-operative serviced its actively participating members and structures.

Mr R Mbedzi (Department Deputy Director) responded that members of co-operatives were afforded the opportunity to rectify decisions made by the board during or at an annual general meeting. Small members did not have a say when there were complications. Some members of the NCT had become members by virtue of a contract concluded outside a co-operative arrangement and hence defeated the whole principle of co-operatives whereby members were afforded the opportunity to manage their co-operatives irrespective of capital contribution. Those who had invested a lot of money wanted to continuously suppress others who did not have the financial strength.

Ms Ntwanambi agreed that the definitions were very clear; NCT were operating at secondary level.

In reply to the question about various societies, including burial societies, Ms Maluleke responded that if one wanted to register a co-operative, one had to go through the process. In terms of this policy, the Department was trying to formalise the economy, whereby the disadvantaged groups used a simple registration process. In terms of financing the co-operatives, billions and billions of Rands were in circulation. They ended up banking with the same bank that did not service them and the financial co-operatives in terms of this Bill were advocating "learn to make your money work for you". In terms of the discipline of a member, a co-operative burial society provided funeral benefits, including funeral insurance and other services to its members and their dependants. They had to be regulated because they were dealing with public funds.

Ms Maluleke responded to the question on the agricultural sector. The Department had consulted the sector and it had fully participated throughout. The response had been very positive in all areas.

In reply to Mr Sibiya’s question on independence, Ms Maluleke responded that a co-operative was an autonomous independent enterprise of persons who had come together as "friends". In terms of the co-operative constitution, one member would not have more power than another. If the members followed the constitution all would be very peaceful. In terms of management by remote control, before formation co-operatives would have a clear idea of their purpose. There would be a clear understanding that there could be no domination.

In terms of implementation at local level, much had been accomplished. Municipalities, through their integrated development plans, would play an important role. Provincial coordination structures would be put in place once the Bill had been passed into law. On a positive note, 600 different co-operatives from Kwazulu-Natal had registered at the cocktail party. This meant mobilisation and empowerment of the people, and showed that people were willing to act before formation. People saw co-operatives as having failed, but here was an example where 600 co-operatives with access to markets had been mobilised. The challenge was not to set up the co-operative before they understood fully what they would be doing, and that implementation would occur one the Bill had been passed.

With regard to Black Economic Empowerment and Small, Medium and Micro Enterprises and running co-operatives "by remote control", it had to be remembered that it was not a government co-operative but a co-operative for the people. That situation came about where local municipalities started projects but did not create awareness in their communities. There was a clear need to educate and capacitate people.

As far as the rural women were concerned, it had not been possible to consult at provincial level. There was a need to consult more through the right structures.

Ms Maluleke responded to the question of decentralisation. The Department faced a major challenge on how to go about the decentralisation registration process. The legislation should cater for that.

In reply to the question as to who the members of the supervisory board were, Ms Maluleke said members would have certain responsibilities but there was a need for another structure to monitor that. Where one wanted to appoint an internal person, it had to be in terms of the co-operative constitution and members needed to agree on that.

Mr K Sinclaire (NNP, Northern Cape) stated that the Department thought Parliament consisted only of the National Assembly. The Department was wrong. The National Assembly, and not the National Council of Provinces, had passed the Bill, and therefore there was a chance that this process could still be turned around. He welcomed the Bill as a step forward, but thought the challenge lay in its practical implementation.

He said that in Chapter 5 (Management of Co-operatives), there was no definition of a director and the Committee needed to insert such a definition as directors in co-operatives played a very substantial role. In Clause 38 (Acceptance of commission or remunerative reward), it stated that: "A director or manager of a co-operative may not accept any commission, remuneration or reward from any person for, on in connection with, any transaction to which the co-operative was party unless such reward was paid or given in the course of the usual business or profession of the director or employee and the director or employee has disclosed his or her interest to the co-operative". This created confusion and there needed to be a more specific clause. Mr Sinclaire also queried the Section 75 classification as it was a very important Bill for the provinces.

Mr Johan Strydom (Department Legal Adviser) responded on directorship and said that was a very sensitive issue and that it would be properly looked into. He referred to Clause 3 and said these should be read in conjunction with Clause 14(e) that provided for members to have more than one vote. There was the proviso that no single member should have more than 15 percent of the votes.

Mr Strydom continued that in terms of the National Council of Provinces submission there were no voting guidelines and that was not the case. In primary co-operatives, each member would have one vote. The co-operative’s constitution would have to provide how the voting would take place. Regarding the lack of a definition of a director, Clauses 32 and 33 provided the criteria and especially Clause 33 provided the criteria for appointment of directors and who would be disqualified from serving.

Clause 38 stated why a director should not receive any commission or reward. On the other hand, this was then qualified by saying that in certain instances there could be such a reward. The intention of the policy was very clear. If a person was a director of a co-operative and received any reward from anyone else, that reward would be excluded. However, if it were reflected as part remuneration for a specific function in the normal course of business it would not be inappropriate.

Mr K Sinclaire asked the Department to draw up a definition of a director. This was agreed.

Department of Minerals and Energy briefing
Ms M P Themba (ANC, Mpumalanga) took the chair, as Ms Ntwanambi had to leave.

Ms Themba welcomed the team from the Department of Minerals and Energy. The briefing was conducted by Advocate M Mononela; Ms M Raboshakga and Ms Xoliswa Mdludlu, State Law Adviser.

Ms M Raboshakga briefed the Committee. The Mineral and Petroleum Resources Development Act (No. 28 of 2002) had ushered in a new mining dispensation and the State became the custodian of all mineral resources. A one-stop shop was created to enable access to information. It was therefore required that the Deeds Registry Act be amended so that registration of rights would be done in terms of the Mining Titles Registration Act.

After that Act had been amended, it was found that some of the functions relating to the registration of servitudes over land that were exercised by the Registrar of Deeds had erroneously been deleted. This mistake made it impossible for the Deeds Office to carry out its functions and Parliament had to be approached to rectify this mistake. The Amendment Bill simply re-established the status quo as it existed before the mistake had been made.

Discussion
Ms P Themba stated that the Department had apologised for the mistake and that the provided explanation given was clear.

Mr D Mkono (ANC, Eastern Cape) asked for clarity as to whether there were any implications for other parties. The reply was that legally there were none. Mr Mkono also asked whether there were any disputes between the Department of Minerals and Energy and the Department of Land Affairs. Ms Mdludlu responded that there were concerns from the latter and other interested parties but they were nevertheless looking at correcting this.

The acting Chairperson said there was a great deal of information. The National Council of Provinces was still going to go through the documents thoroughly. She asked that the Committee prepare for questions the following week.

Mr Mkono said he did not know what the National Assembly was doing; they sometimes experienced problems but this was uncalled for.

Mr Sinclaire asked whether the Bill affected Parliament. Ms Mdludlu responded in the negative stating that it was a purely technical matter affecting the functions of the Deeds Registry Office.

The meeting was adjourned.