Co-operatives Bill; Mineral and Energy Laws Amendment Bill: adoption

Meeting report

ECONOMIC AND FOREIGN AFFAIRS SELECT COMMITTEE
14 June 2005
CO-OPERATIVES BILL; MINERAL AND ENERGY LAWS AMENDMENT BILL: ADOPTION

Chairperson: Ms N Ntwanambi (ANC, Western Cape)

Documents handed out:
Co-operatives Amendment Bill [B4B-2005]
Portfolio Committee of Trade and Industry proposed amendments to Co-operatives Bill [B4A-2005]
Minerals and Energy Laws Amendment Bill [B1-2005]

SUMMARY
Having been briefed on the Mineral and Energy Laws Amendment Bill by the Department of Minerals and Energy (DME) the previous week, Members unanimously adopted the Bill after clarity had been obtained on the exact manner in which the Bill would correct earlier mistakes, and its practical implications.

The Committee also unanimously adopted the Co-operatives Bill after the Department of Trade and Industry (DTI) addressed concerns about the definition of directors of a co-operative and the restructuring of existing co-operatives in order to comply with the new legislation. The Bill would be debated in the NCOP on 22 June.

MINUTES
Ms Ntwanambi announced that the visit to the Koeberg Nuclear Power Station would be on 23 June 2005, and she would like all Members to be present. It was noted that the DA would not be able to attend due to a caucus meeting.

Mineral and Energy Laws Amendment Bill
Mr A Mononela, Chief Director, recapped that the objectives of the Bill were to amend the previously amended Mining Titles Registration Act and the Deeds Registry Act. These were to correct the amendments that were done to the Deeds Registry Act by the Mining Titles Registration Act, 2003, and the Mineral and Petroleum Resources Development Act, 2002, by repealing certain sections which were still referring to mineral rights. These amendments were accepted and were adopted.

Ms Raboshakga gave a brief summary dealing with land issues and mineral rights in the past. With the Mineral and Petroleum Resources Development Act a one-stop shop had been created. In order to achieve the objectives of that Act, the existing Mining Titles Act and some of the provisions of the Deeds Registry Act had to be amended. Anything dealing with mineral rights had been shifted to the Mining Titles Office within the Department, hence these amendments. The Mineral and Petroleum Resources Development Act and the Mining Titles Registration Amendment Act, which came into effect in 2004, tried to correct those mistakes. The first mistake was that the first part of Schedule 1 relating to the registration of servitudes had been mistakenly repealed. That function still lay with the Department of Land Affairs and that had to be corrected. Secondly, in the Mining Titles Registration Amendment Act a few things had been left out of the schedule that dealt with the repeal of the laws. The Department was substituting the existing schedule of the Mining Titles Registration Act with this new one.

When the new paradigm shift came into existence in 2004, Government felt it should be a one-stop shop. Those registering mineral rights should not need to go to both departments to obtain permits but should now be able to do everything in-house in the Department.

This Act was called the Mineral and Energy Laws Amendment Act, 2005 and was deemed to have come into operation on 30 April 2004. The operation of those two Acts replaced Section 1(3)(10) as if it had never happened.

Mr Mononela stated that when the Mineral and Petroleum Resources Development Act came into effect in 2004, the effect was that those parts of the Deeds Registry Act that had been amended meant that people could not register their servitudes. The Departments of Land Affairs and of Minerals and Energy had agreed to amend the relative sections to restore the status quo.

Ms X Mdludlu, State Law Advisor clarified that the Department sought to correct amendments by these two Acts, the Mineral and Petroleum Resources Development Act and the Mining Titles Registration Amendment Act. There was just an error made relating to the Section 3(1)(10) function of the Deeds Registry Office registering servitudes, as well as Section 90(2)(b), where a proviso had been left out.

Discussion
Mr P Sinclaire (ANC Northern Province) asked whether there had been ongoing consultation and interaction with the Departments. In terms of legal principles, how could a Bill be applied retrospectively? He also felt it was unnecessary to repeat the briefing of the previous week.

Ms P Themba (ANC Mpumalanga) responded that as the Acting Chairperson she had asked the Department to brief the Committee and appreciated their doing so. She called Mr Sinclaire to order.

Ms M Raboshakga responded to the question of ongoing consultations between the Department of Minerals and Energy and the Department of Land Affairs in the positive. The principle was still the same; the Bill could be passed retrospectively as the intention was that nothing would be changed at a later stage.

Mr Mononela further responded that laws could not apply retrospectively where any party could suffer prejudice. Understanding that the responsible Department would effect the changes to restore the status quo, consequently no one would suffer prejudice. In fact, they would have, had the amendment not taken place.

The Committee agreed to the Motion of Desirability and unanimoulsy adopted the Bill:

Amendments to Co-operatives Bill
Ms Ntwanambi welcomed the Department of Trade and Industry, who had also briefed the Committee the previous week.

The Chairperson had replied to COSATU concerns that as Chairperson, she agreed with the Bill. The Bill could not satisfy one specific co-operative but had to accommodate everyone. Although she did disagree with two lines in it, that should not mean that the Bill should not be adopted. The Bill had been drafted in the spirit of fairness and creating independence that would be achieved through State assistance. The COSATU letter referred to a Bill that had been amended by the National Assembly.

Mr J Strydom (Department Legal Advisor) responded that another two letters had been received from NCT Forestry dated 10 June, and from the Agricultural Business Chamber, dated 9 June. He had reflected properly on those and at the Committee’s request, had responded briefly in a technical form on the merits and demerits of the submissions. Both the NCT and the Agricultural Business Chamber had made fairly extensive submissions to the Portfolio Committee and had also provided oral testimony at public hearings. He was convinced that the submissions had been accommodated, specifically that of COSATU.

Mr Strydom continued that there had been specific sentiments regarding the clause dealing with directors and it had been suggested that a definition of a director be inserted. He would like to respond to that and also in fairness to NCT respond to that and the submission of the Agricultural Business Chamber.

Mrs Terblanche (DA North West) maintained that the letter from COSATU and NCT had only been circulated to Members of the ANC. She had not been aware of it and was thus not able to read through the documentation beforehand. She was concerned about the AgriSA presentation. She had asked whether there had been any submissions from them and it now appeared that they had in fact made very substantial submissions.

Ms Ntwanambi responded that the letter had not only been circulated to Members of the ANC, and if that were the case, then she apologised.

Ms Maluleke (Department Chief Director) responded to the question indicated in the previous week’s meeting that with regard to the Agricultural Business Chamber, AgriSA had been well received in the debate. The Agricultural Business Chamber (ABC) and NCT were similar co-operatives. ABC represented NCT and because they were so similar, when invited only one of them would attend.

Mr Sinclaire’s concerns remained with the issue of NCT. After the explanation the previous week he fully understood the different levels of co-operatives and linkages but did not know if the NCT was dealing with a different Bill.

The Department’s Legal Advisor referred to the letter from NCT Forestry dated 10 June. The manner in which NCT had been structured as a secondary co-operative was inconsistent with the provisions of the Bill. If the NCT said they were not being accommodated by the definitions, be it a primary, secondary or tertiary co-operative, then they were correct. The reason was simply the history surrounding the structure of the NCT. The NCT was a secondary co-operative and Mr Strydom referred to the provisions of the Bill as per the definition: "a secondary co-operative means a co-operative formed by two or more primary co-operatives to provide sectoral services to its members, and may include juristic persons".

This definition created a dilemma for NCT because it was structured as a secondary co-operative and has been so since 1949. They had natural persons, other co-operatives and juristic persons as members, so clearly the way they were currently structured fell outside the definition. Parliament would legislate and the legal implications would be that they would not be accommodated in either of these. So why were we now providing for legislation that would not accommodate a co-operative that has been in existence since 1949?

Mr Strydom referred to page 34 of the Bill ‘Transitional provisions’; paragraph (2): "A co-operative referred to in subsection (1) must, within three years of this Act coming into effect a) amend its constitution to the extent necessary in order to comply with the requirements of this Act." That provision would apply to NCT. They would have a grace period of three years in which they would need to restructure. The choice would be theirs, should it be a primary, secondary or tertiary co-operative, and in the process they should accommodate their members. As for their concerns; they were satisfied that this had been properly taken care of in the Bill and the only thing outstanding was for them to comply.

The Chairperson emphasised that it was only a matter of restructuring that would allow NCT to comply with the law.

Mr Sinclaire asked for an explanation as to the use of ‘natural’ and ‘juristic’ persons. Mr Strydom responded that natural persons were ‘humble human beings’ whereas a juristic person could be a close corporation, a company, a trust or even a primary or secondary co-operative – all bodies of persons acting collectively and in law entitled to act and to conclude contracts, with legal rights and obligations. In the case of NCT, it would not operate as a natural person, but would be a juristic person comprising collectively of a number of natural persons.

Mr Strydom then referred to the submission by the Agricultural Business Chamber to the Portfolio Committee and said that the Chamber had also testified at length at the public hearings. Their submission dated 9 June was exactly the same as the NCT’s. They also asked ‘to expand the definition of a secondary co-operative to include natural persons’. The letter dealt at length with proportionality and confusion on the principle of ‘one person, one vote’ and the weighting of votes. The Bill did not provide properly for proportionality. The Bill said specifically in the case of a secondary or tertiary co-operatives, one person one vote did not apply. They could go about and in their own constituencies provide for voting for their members. If ABC was creating the impression that the Bill did not provide for proportionality that was not the case. He quoted Clause 3(3) "the constitution of a secondary or tertiary co-operative may provide that the members had more than one vote: provided that in the case of a secondary co-operative no member shall have more than fifteen percent of the vote of all the members of the co-operative". He further quoted Clause 14(1) "The constitution of a co-operative must include; (e) a provision stipulating that each member has one vote in all meetings of the co-operative except in the case of secondary or tertiary co-operatives" – the operative word in Clause 14(1) being must.

A primary co-operative could only be constituted by natural persons; there was no room for juristic persons. Even when there was a one person one vote system, there was proportionality. If one member brought 50 carrots to a co-operative and the other member brought only 10, they both had only one vote. He referred to Clause 44 of the Bill – patronage proportion. Although the business brought to the co-operative was not equal, that was taken care of by Clause 44 which simply said that R10 of the surplus at the end of the financial year would be transferred to the reserve fund. The remaining R90 would be divided between the members based on the amount of business brought to the co-operative. Thus the one who brought more, would get proportionately more.

Ms Maluleke explained that the language of bills was very legalistic. It was very easy to say that everything had been accommodated, that it had to do with voting rights and the issue of one member one vote. It was about empowerment and collective decision-making. There were different forms of ownership in a co-operative. In order to promote a co-operative, the core base would be collective ownership, collective control and collective decision-making, which made it more democratic.

Ms Ntwanambi asked whether the support to a co-operative would include financial support. Ms Maluleke responded with reference to Clause 8 (registration) by replying positively. The Bill targeted intervention and focused on developing co-operatives. For this reason, they would receive financial support similar to Small, Micro and Medium Enterprises.

Ms Ntwanambi referred to Clause 45 – Prohibited and permitted loans and security. Her experience was that women who had loans had very little funding and were unable to pay back these loans. She queried whether there was an area for recovery of such loans. Ms Maluleke responded that one should look at finance and how co-operatives were categorised into housing, into financial co-operatives and worker co-operatives, and the moral of encouraging savings. She firstly recommended working together and making smaller loans to each other by trusting each other. Based on the co-operative constitution, guidelines would be given in all languages. They would agree to rules and would assist each other.

At the second level where an institution was involved, for instance the National Empowerment Fund, co-operatives would not receive funding without due diligence and the provision of security. The DTI would provide an incentive or grant. It was aware that assistance from government would need an asset base. If they did not have an asset base they could get a grant, but would be analysed and assisted to ensure that it was a viable economical activity.

Mr Strydom referred to Clause 42 and the issue of certificates in respect of shares or member loans. If there was a loan from a member of a co-operative, or the other way around, a certificate had to be issued to that effect. That certificate would reflect the amount of the loan, the person to whom the loan was made and clearly what the base for recovery of the loan was.

Mr Sinclaire said there was still the outstanding question of the definition of a director. He also referred to Clause 10(2)(a) and the word ‘limited’ in the last part of a co-operative’s name. He asked for an explanation of the word "limited".

Mr Strydom responded to the outstanding issue of directors and referred to Clauses 32 and 33. These were specific provisions dealing with the issue of directors and their appointment had to be in accordance with such conditions as were provided for in its constitution. The only area that was prescriptive was Clause 33 where Parliament would be excluding certain persons from becoming directors. This was the kind of provision found in many Acts of Parliament, but clearly those persons would not be eligible for appointment. But for the rest it was up to the constitution of the co-operatives.

Clauses 14(1)(h) and (i) stressed that the constitution of a co-operative must include the minimum and maximum number of directors; and the term of office of directors, which might not be more than four years, and whether a director could be re-appointed for a second or further term of office.

If one asked a person in the street what patronage proportion meant, the ordinary person would not understand and there was therefore a definition for that. But the same person would likely have had a very good impression of what a director was; therefore it was not considered necessary to put in a definition. It was felt that given the provisions, it was not necessary to put in a definition of a director and it was preferable to have substantive provisions in the Bill dealing with directors. He therefore suggested that there was no need for a definition of a director.

Ms B Lufundo (State Law Advisor) declared that it was not necessary to define a director because this had already been referred to clearly in Clause 33 of the Bill.

Mr Sinclaire still needed clarification of a director. Clause 33 gave the prerequisites. He asked whether there was an age limitation linked to becoming a director.

Mr Mkono felt that there ought to be a prescribed period for those who had been convicted for dishonesty.

Mr Strydom referred to Clause 10(2)(b): ‘a co-operative must have the word "limited" or the abbreviation "Ltd" as the last word of its name, unless the constitution of a co-operative does not limit the liability of its members." Ltd reflected the legal limited liability within that co-operative, which was the very nature of it being a juristic person. If a co-operative had three members, those three members would not be liable in law for the liabilities of the co-operative. Juristic persons would be liable in law for those liabilities. Therefore in a co-operative with limited liabilities, everybody doing business with it should be aware of that.

In reply to the question of age, Mr Strydom responded if a person did not have legal capacity then that person could not enter into a contract, and could not have rights and liabilities. The age of majority was usually 21, but orphaned persons of 18 years old could become directors if they were earning a living independently.

Clause 33 (c) was a very relevant provision in terms of the history of our country and for that reason had been very severely qualified. Paragraph (c) mentioned crimes with an element of dishonesty in connection with the formation or management of the co-operative or other corporate entity. If the crime had not been committed in connection with the formation or management of the co-operative or other corporate entity, then that person would be eligible for appointment as a director.

If one read all those provisions pertaining to a director collectively, they indicated what the directors of a co-operative would be like, but more importantly, it was for the members of the co-operatives in terms of their constitution to determine their type of directors.

The Chairperson put the Motion of Desirability to Members, and the Bill was unanimously adopted. The Bill would be debated in the NCOP on 22 June.

The meeting was adjourned.