Eskom Conversion Bill: finalisation

This premium content has been made freely available

Public Enterprises

30 May 2001
Share this page:

Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

PUBLIC ENTERPRISE PORTFOLIO COMMITTEE

PUBLIC ENTERPRISE PORTFOLIO COMMITTEE
30 May 2001
ESKOM CONVERSION BILL: FINALISATION

Chairperson: Mr ST Belot (ANC)

Documents handed out:
Draft Proposed Amendments to Eskom Conversion Bill (Appendix 1)
Letter dated 30/5/01 from the Department of Public Enterprises (Appendix 2)
Final Proposed Amendments to Eskom Conversion Bill (Appendix 3)
Eskom Conversion Bill [B16B - 2001] as adopted by this Committee (Appendix 4)

Relevant document:
Cosatu Press Releases of 31 May, 1 June and 7 June 2001 (Appendix 5)

SUMMARY
Last minute proposals were tabled by the Department of Public Enterprise after a meeting with Cosatu in Pretoria the night before. These proposals focussed on the developmental role of Eskom that should be noted by the Minister when entering the shareholders' compact and the need for Parliament to be consulted if government should dispose of any Eskom shares.

The developmental role clause was debated extensively, with some saying that it would lead to legal challenges in the future, while others felt that it showed the good intentions of government in keeping to government policy. Eventually the clause was included but softened with the use of 'may' instead of 'must'. The proposal on the monitoring of the disposal shares by Parliament was rejected.

The Committee adjourned while the State Law Advisors added those new proposals that had been accepted by the Committee. The Committee reconvened late afternoon and adopted the Bill unanimously with the amendments freshly inserted.

MINUTES
Announcements
Public hearings on Alexkor Amendment Bill will be on 21 and 22 August and that advertisements will go out now to give stakeholders enough time to make submissions. Public hearings will be held at Alexander Bay on 27 to 29 August to get submissions from affected parties. Deliberations will be on 5 September and finalisation of the Alexkor Limited Amendment Bill on 12 September.

Eskom Conversion Bill
Discussion on proposed amendments approved by State Law Advisors
The Chair welcomed the Eskom team, the Department of Public Enterprise officials and the State Law Advisers.

The State Law Adviser, Adv S Selokela, informed the committee that they have a document which sets out the proposed amendments by the Department [See Proposed Amendments to Eskom Conversion Bill]. He pointed out:
- Clause 4 (2): Section 65 is to continue to apply to Eskom
- Clause 5 has been totally rejected and substituted with a new clause which he read out. He noted that nothing has changed in this clause except for the opening sentence.
- In Clause 6 there is a new sub-clause 6(3).
- Clause 8 has technical amendments made to it.
- In Clause 11 there is a new sub-clause 11(5).

The Chair noted the letter he had received that very day from the Department on further discussions with stakeholders and the proposals that had been raised. He asked the department officials to expand on them.

Mr Montana (Departmental Director: Parliamentary Services) said that they had met with Cosatu the previous evening in Pretoria to address those concerns of Cosatu which the Department had not taken on board in previous consultations. He asked if Mr Matsila (Department's Director of Legal Services) could elaborate on the new proposals.

When the Chair asked the Committee whether the Department's request was in order, Mr Msomi (IFP) said it was a pity these new proposals had not been vetted by the State Law Advisers.

Mr Montana gave the Department's apologies attributing the lack of communication between the Department and the State Law Advisers to the fact that they had met with Cosatu only the night before. He said he would be happy for the State Law Advisers to look at the document.

The Chair asked the State Law Advisers to "think on their feet" to see how best they could deal with these new proposals. Before the State Law Advisers could respond, the Committee indicated that they continue looking at the original proposed amendments.

Mr R Mohlala (ANC) said he was worried about the consistency between Clause 2 and Clause 3(2). He said one does away with the date while on the other goes back to the date. He wanted to know the reason for including the new subclause 3(2).

Adv S Selokela replied that their understanding as explained by the Department was that Section 44(1) of the Companies Act does not apply for the period of conversion, only after the conversion it would apply.

At this point Mr Montana drew the attention of the Chair to the letter from the Department in connection with this issue. However the Chair told him it was best to deal with the matter at hand before paying attention to the Department's letter.

Mr Msomi wanted the wording of the proposed amendment for Clause 4 (2) to reflect the omission of Section 65 of the Companies Act from it.

Adv Selokela said their suggestion would read "on page 2 in line 22 to omit 65".

Inkosi M Nonkonyana (ANC) asked the State Law Adviser to clarify this.

Adv T Mbangeni (State Law Adviser) explained that the almost all of the sections of the Companies Act mentioned in Clause 3(2) have now been transferred to Clause 4 except section 65 which is now omitted.

Mr Msomi was satisfied that what had been intended has been expressed.

The Chair asked for comments on Clauses 5, 6, 8, and 11 but the Committee had no queries about these changes.

Discussion on new proposals
The Chairperson then addressed the Department's letter and asked the State Law Advisers to examine the new proposals to see whether they can pick up any substantial contradictions with the work they had just covered.

Adv Mbangeni responded that they have been caught unaware and would not be able to bring something to the Committee without applying their minds to it.

Mr Matsila reminded the Committee of their previous meeting where the words 'may' and 'must' were extensively discussed. The Committee's view was that 'must' was tying the Minister too much but the new proposal had 'must' back again. He referred them to the Department's letter which had Clause 6(3) stating "The Minister must …". He said there could be a problem with this.

Mr Mohlala suggested that they stick to what the State Law Advisers had advised them.

Adv Mbangeni explained that the 'may' gives discretion and suggested they could be comfortable with that.

Mr Matsila read through the proposed Clause 6(3) and suggested that 'may' be inserted instead of 'must'. The committee supported that.

Mr Msomi asked for clarification of Clause 6(4) of the new proposals which stated:
The Minister must in the shareholder compact, as well as in the determination of the memorandum and articles of association, take into account amongst others:
i) the developmental role of Eskom, and
ii) promotion of universal access to, and provision of, affordable electricity, taking into account the cost of electricity, financial sustainability and competitiveness of Eskom.

Mr Montana replied that it was the policy of the government to provide affordable prices and universal access and that was why it was reflected here. The purpose of this is that if anyone goes to court on these issues it should not be Eskom but Government that has to account.

He explained that part of the shareholders compact is that the price of electricity should be kept low but the Department does not want to phrase it in that way in the Bill. If it were drafted as such in the Bill, it would create problems.

Adv Mbangeni asked why this expression should be included here since it is embodied in the shareholder compact.

Mr Msomi felt that by putting in this expression here they are opening themselves to huge constitutional challenges which they cannot sustain over time.

Inkosi Nonkonyana said he was not sure whether this should be captured in the shareholder compact

Ms P Mnadi (ANC) observed that what is important for people like her on the ground is to see something written down to ensure that electricity does not become a luxury.

The Chair asked how this was captured in the shareholder compact.

Mr M Adam (Eskom) said the shareholder compact is informed by government policy and in terms of the legislation the Articles and Memorandum are subject to public comment and the shareholder compact is part of that.

From a legal perspective, he said there were a number of problems that could arise from that. He said the White Paper on Energy Policy expressed the view how some of these objectives were going to be achieved and made references to the National Electricity Fund and the National Electrification Coordinating Committee. He wondered whether by inserting this in the Bill "we are encroaching on certain policy decisions that have been made in the past?"

Mr M Maphalala (ANC) said if this section does not appear in the Bill how would he carry out his oversight role?

Mr Msomi felt that when one includes details like these in the legislation, one was likely to be exposed to possible challenges.

Mr Mohlala felt that it was a good intention of the State to include this in the Bill

The Chair said such clauses would direct the Minister to consider them under the shareholder compact

Mr Msomi said it is unusual for the legislation to direct the Minister to the shareholder compact. He said what the Chair has just said demonstrates what they fear most - that that interpretation whilst it sounds good and honourable invites other interpretations. He said it is a well-known maxim that the road to hell is full of good intentions. Where it is clear that good intentions may land the committee in an undesirable situation, they should prevent that.

Mr Mohlala proposed that these amendments be passed and if they come to haunt them they would engage with them then. Inkosi Nonkonyana supported him.

Mr Maphalala concurred with them and said what is in the Bill is a benchmark and the devil was in the shareholder compact. He suggested that the amendments be retained and the State Law Advisers look at the wording.

Adv Mbangeni said the amendments would be meant to guide the Minister as to what he must consider when he prepares these documents and the clause should be phrased in a way of empowering the Minister to consider these factors and not necessarily to oblige him. For example the word 'must' would be substituted with the word 'may'.

Mr Matsila informed the Committee there were some concerns expressed by some stakeholders around the disposal of shares. The concerns are that there should be accountability by the Executive if they have to dispose of Eskom shares. While there was merit in this concern, the Department felt that the duties of the Executive should not be confused with those of Parliament. Based on that, the agreement was that there should be some transparency when the shares of Eskom are disposed of to allow public input.

Mr RJ Heine (DP) said he would not have any objections if this clause stands but 'will table in Parliament' must be changed to 'may table in Parliament'.

Mr Mohlala pointed out that that was not what he wanted to see as a parliamentarian because it says he, as a parliamentarian, has no trust in the Executive. He proposed that the discussion be closed.

Inkosi Nonkonyana called for the clause to be withdrawn.

Mr Heine said he seconded the proposal to close the discussion

Mr Maphalala said he shared the sentiment that the clause be withdrawn. He advised the Committee to look at the different functions of the Executive and the Legislature. He said the functions of the Committee were centred around oversight and monitoring. If they were to be part of disposing shares, he doubted they would be playing their functions properly.

He continued that if in the process of the disposal of shares something goes wrong, they may not be able to call themselves to account. This is what was meant by the separation of powers, to ensure that government delivers and parliament is able to call them to account.

Ms Mnadi said to have a clause like this was tantamount to a vote of no confidence in the Cabinet and would reflect badly on the Committee.

The meeting was adjourned for the State Law Advisers to work on the amendments.

Meeting resumed at 16.30 hours:
The State Law Advisers presented the revised proposed amendments (See Appendix 3). A definition for Shareholder's Compact was also included in Clause 1. These revised proposed amendments were adopted. There was much discussion around Clause 3(2) regarding the reason for omitting section 65 of the Companies Act and explaining what this meant.

Inkosi Nonkonyana stated that he supported the Bill with reservations for not understanding the reason for omitting section 65.

The Bill was adopted.

Appendix 1:
MORNING SESSION: PROPOSED AMENDMENTS TO ESKOM CONVERSION BILL

Clause 2
1. On page 2, in line 17, to omit "with effect from the date of such conversion".

Clause 3
1 On page 2, in line 20, to omit "regarded" and to substitute "deemed".

2. On page 2, from line 22 to 24, to omit subclause (2) and to substitute:

"(2) The provisions of section 44(1) of the Companies Act do not apply to Eskom for the purposes of such conversion only".

Clause 4
1. On page 2, from line 28 to 29, to omit subclause (2) and to substitute:

"(2) For as long as the State is the sole or majority shareholder in Eskom, sections
32, 54(2), 59(2)(a), 60, 63(2), 64, 66, l72(1), 172(3)(a), 172(5), 190, 344(b), and 344(d) of the Companies Act do not apply to Eskom".
2. On page 2, in line 35, to omit paragraph (c) and to substitute:
"(c) affect the terms and conditions of service of its employees."

Clause 5
Clause rejected.

New clause
1. That the following be a new clause:

Powers and duties of Eskom

5 In addition to the powers and duties of Eskom contained in the memorandum and the articles of association and the Shareholders' compact as incorporated in the articles of association, Eskom

(a) may enter upon any land for the purpose of making plans and surveys thereof, but must give the owner at least seven days' notice of such entry;
(b) must pay compensation for any damage caused by its officers or employees in the performance of their duties upon the land;
(c) (i) may, irrespective of whether or not the owner of the land agrees, transfer to its subsidiary companies any servitude or other similar right in terms of which Eskom may effect improvements on or over such land, by way of a deed of cession attested by a notary.
(ii) The relevant registrar of deeds must make such entries or endorsements in or on any relevant register, title deed or other document in the registrar's office or submitted to the registrar as the registrar considers necessary to give effect to the provisions of this paragraph.
(iii) No office fees or other levies are payable in respect of such entry or endorsement.
(iv) The provisions of section 13 of the Electricity Act, 1987(Act No 41 of 1987), do not apply to a transfer referred to in subparagraph (i).

Clause 6
1. On page 3, after line 25, to insert subclause(3):

"(3) The Minister may publish such articles of association in the Gazette for public comment".

Clause 8
1 On page 4, in line 4, after Finance," to insert "must".
2 On page 4, in line 5, after "Energy," to omit "must"
3 On page 4, in line 9, to omit "subsection(2)" and to substitute "paragraph"
4. On page 4, in line 11 to omit "subsection(2)" and to substitute "paragraph"

Clause 11
1. On page 4, after line 40, to insert subclause (5):

"(5) The termination of the terms of office of members of the Electricity Council and the Management Board does not affect their rights in their capacity as employees of Eskom".

Appendix 2:
30 May 2001

From: Ministry of Public Enterprises
To: Mr S Belot, Chairperson of the Portfolio Committee on Public Enterprises, Parliament

Dear Mr Belot

Re: ENGAGEMENT WITH STAKEHOLDERS ON THE ESKOM CONVERSION BILL
Further to our engagement with various stakeholders, we wish to recommend the following amendments for incorporation to the Bill:

Section 3
The following section should be added to section 3 (2):

Section 32, 54,59,63,64,172 and 344 of the companies act.

The words "for the purposes of such conversion only" should be deleted.

Section 4
This section should only include sections 60, 66,344 (d), and 190.

Section 6(3)
In so determining such articles of association in terms of subsection(2), the
Minister must gazette for public comments such articles before tabling to
Parliament.

Section 6(4)
The Minister must in the shareholder compact, as well as in the determination of the memorandum and articles of association, take into account amongst others:
i) the developmental role of Eskom, and
ii) promotion of universal access to, and provision of, affordable electricity, taking into account the cost of electricity, financial sustainability and competitiveness of Eskom.

Section 9 (2)
The Minister will follow the same procedure as in section 6 (3) in the
determination and promulgation of regulations in terms of section 9 (1)

12. Disposal of shares
Should Cabinet decide to dispose any shareholding in Eskom, the Minister will table in Parliament the intention of the Cabinet to that effect which may be preceded by:

(i) Public hearings by Parliament as well as,
(ii) A recommendation by Parliament to the executive flowing from such
hearings.

Kind Regards

LUCKY MONTANA
DIRECTOR: PARLIAMENTARY SERVICES

Appendix 3:
AFTERNOON SESSION: PROPOSED AMENDMENTS TO ESKOM CONVERSION BILL

Clause 1
1 On page 2 after line 13 to insert:

"Shareholder's compact" means the performance agreement entered into between Eskom and the government of the Republic of South Africa including annexures thereto as amended from time to time."

Clause 2
I.
On page 2 in line I 7 to omit "with effect from the date of such conversion".

Clause 3
I. On page 2 in line 20 to omit "regarded" and to substitute "deemed".

2. On page 2. from line 22 to 24. to omit subclause (2) and to substitute:

'(2) The provisions of sections 32. 44(l), 54, 59, 63, 64, 172 and 344(b) of the Companies Act do not apply to Eskom".
3. On page 2 in line 22 to omit "54(2), 59(2)(a), 63(2), 65,172(1), 172(3),(a), 172(5)".

Clause 4

I. On page 2 in line 35 to omit paragraph (c) and to substitute:

"(c) affect the terms and conditions of service of its employees."

Clause 5
Clause rejected.

New clause
1. That the following be a new clause:

Powers and duties of Eskom

5 In addition to the powers and duties of Eskom contained in the memorandum and the articles of association and the Shareholders' compact Eskom

(a) may enter upon any land for the purpose of making plans and surveys thereof. but must give the owner at least seven days' notice of such entry;
(b) must pay compensation for any damage caused by its officers or employees in the performance of their duties upon the land;
© (i) may, irrespective of whether or not the owner of the land
its subsidiary companies any servitude or other similar right in terms of which Eskom may effect improvements on or over such land, by way of a deed of cession attested by a notary.
(ii) The relevant registrar of deeds must make such entries or endorsements in or on any relevant register. title deed or other document in the registrar's office or submitted to the registrar as the registrar considers necessary to give effect to the provisions of this paragraph.
(iii) No fees or other levies are payable in respect of such entry or endorsement.
(iv) The provisions of section 13 of the Electricity Act. l 987(Act No.41 of 1987), do not apply to a transfer referred to in subparagraph (i).

Clause 6
6. On page 3' after line 25, to insert subclauses (3) and (4):

"(3) The Minister may publish such articles of association in the Gazette for public comment and must table them before Parliament."
(4) When entering into the Shareholder's compact as well as in determining the articles of association the Minister may take into account the following:
(a) The developmental role of Eskom; and
(b) the promotion of universal access to and the provision of affordable. electric ity taking into account the cost of electricity, financial sustainability and the competitiveness of Eskom."

Clause 8
On page 4, in line 4' after "Finance," to insert "must".
On page 4, in line 5, after "Energy," to omit "must".
On page 4, in line 9' to omit "subsection(2)" and to substitute "paragraph".
On page 4, in line 11, to omit "subsection(2)" and to substitute "paragraph".

Clause 11
1. On page 4, after line 40. to insert subclause (5):

"(5) The termination of the terms of office of members of the Electricity Council and the Management Board does not affect their rights in their capacity as employees of Eskom".
2. On page 4 between lines 33 and 34 to insert:
"(3) The relevant registrar must make such entries or endorsements in or on any relevant register. title deed or other document in the registrar's office or submitted to the registrar as the registrar considers necessary to give effect to the provisions of this paragraph.
(5) No fees or other levies are payable in respect of such entry or endorsement.

Appendix 4:
REPUBLIC OF SOUTH AFRICA

ESKOM CONVERSION BILL

(As introduced in the National Assembly as a section 75 Bill; explanatory summary of Bill published in Government Gazette No.22116 dated 2 March 2001)(The English text
is the official text of the Bill)

(MINISTER OF PUBLIC ENTERPRISES)

[B - 2001]


BILL
To provide for the conversion of Eskom into a public company having a share capital incorporated in terms of the Companies Act; and to provide for matters connected therewith.

BE IT ENACTED
by the Parliament of the Republic of South Africa, as follows:-

Definitions
1. In this Act, unless the context indicates otherwise-"Companies Act" means the Companies Act, 1973 (Act No.61 of 1973); "date of conversion" means the date determined in terms of section 3(1);

"Eskom" means the juristic person referred to in section 2 of the Eskom Act and upon conversion means Eskom Limited;

"Eskom Act" means the Eskom Act, 1987 (Act No.40 of 1987); "Income Tax Act" means the Income Tax Act. 1962 (Act No.58 of 1962); "Minister" means the Minister of Public Enterprises:

"security" means any bill of exchange promissory note or instrument issued by Eskom as security for any loan negotiated by it.

"'Shareholder's compact" means the performance agreement entered into between Eskom
and the government of the Republic of South Africa including annexures thereto as amended from time to time."


Object of Act
2. The object of this Act is to convert Eskom into a public company having a share capital as contemplated in section 19(1)(a) of the Companies Act, with its entire share capital held by the State.

Conversion of Eskom
3. (1) Eskom is, with effect from a date determined by the Minister by notice in the Gazette, regarded to be a public company incorporated in terms of the Companies Act and is to be known as Eskom Limited from such date.
(2) The provisions of sections 32,44(1) 54 59 63,64,172 and 344(b) of the Companies Act do not apply to Eskom.

Effect of conversion
4. (1) Subject to the provisions of this Act, the provisions of the Companies Act apply to Eskom with effect from the date of conversion.

(2) For as long as the State is the sole or majority shareholder in Eskom
sections 60, 66,190 and 344(d) of the Companies Act do not apply to Eskom.

(3) The conversion of Eskom does not-

(a) affect the continued corporate existence of Eskom as from the date of its first establishment;

(b) affect any of the rights, liabilities or obligations acquired or incurred by Eskom, or on Eskom's behalf, at any time before its conversion; and

(c) affect the terms and conditions of service of its employees.

Powers and duties of Eskom
5. In addition to the powers and duties of Eskom contained in the memorandum and the articles of association and the Shareholders compact Eskom-

(a) may enter upon any land for the purpose of making plans and surveys thereof, but must give the owner at least seven days' notice of such entry:

(b') must pay compensation for any damage caused by its officers or employees in the performance of' their duties upon the land:

(c) may, irrespective or' whether or not the owner of the land agrees, transfer to its subsidiary companies any servitude or other similar right in terms of which Eskom may effect improvements on or over such land. by way of a deed of cession attested by a notary.

(i) The relevant registrar of deeds must make such entries or endorsements in or on any relevant register, title deed or other document in the registrar's office or submitted to the registrar as the registrar considers necessary to give effect to the provisions of this
paragraph.

(ii) No fees or other levies are payable in respect of such entry or endorsement

(iii) The provisions of section 13 of the Electricity Act, 1987(Act No. 41 of 1987), do not apply to a transfer referred to in subparagraph (i).

Memorandum and articles of association of Eskom
6. (1) The Registrar of Companies appointed in terms of section 7 of the Companies Act, must, on the date of conversion, register the memorandum and the articles of association of Eskom in terms of section 63(1) of the Companies Act, but no fee is payable in respect of such registration.

(2) The articles of association of Eskom must be as determined by the Minister

(3) The Minister may publish such articles of association in the Gazette for
public comment and must table them before Parliament.

(4) When entering into the Shareholder's compact as well as in determining the
articles of association the Minister may take into account the following:

(a) The developmental role of Eskom: and

(b) The promotion of universal access to and the provision of affordable, electricity taking into account the cost of electricity. financial sustainabilitv and the competitiveness of Fskom."

Borrowings secured by Eskom's revenue and assets
7. (1) All borrowings effected by Eskom and any interest or other costs due or to become due in respect thereof must, unless otherwise agreed between Eskom and the lender, be a first charge against all revenues and assets of Eskom and on all moneys recovered or to be recovered by it.
(2) (a) If any interest due in respect of any securities remains unpaid
for three months after demand therefore in writing has been lodged with Eskom, the holder thereof may apply to a high court having jurisdiction for the appointment of a receiver of the revenues and assets referred to in subsection (1).
(b) The court may-

(I) make such order and give such directions as in the circumstances it may deem necessary for the raising and payment of the moneys due; and

(ii) in particular, order that any prices for electricity supplied or to be supplied be increased to meet the deficit, and for that purpose the receiver referred to in paragraph (a) must exercise all such powers as Eskom might have exercised under the Eskom Act in respect of amending its prices for electricity. and the exercise of such powers does not require the sanction of any authority.

(3) If such default in payment of interest in whole or in part continues for a further period of three months, the holder of the securities may apply to a high court having jurisdiction for a declaration that the outstanding principal sum for the time being
has become due. and the court may make such declaration, together with any consequential order or declaration.

(4) In the event of default in payment of the principal sum of any security for one month after the date on which it is repayable, the provisions of subsections (2) and (3) apply with the necessary changes.

Taxation of receipts and accruals of Eskom and subsidiaries
8. (1) The provisions of section 10(1)(cA) of the Income Tax Act do not

in respect of the receipts and accruals of-

(a) Eskom, and

(b) any association, corporation or company contemplated in paragraph (a) of the definition of "company' in section 1 of the Income Tax Act, the shares of which are held by Eskom, if the operations of such association, corporation or company are ancillary or complementary to the objects of Eskom contained in its Memorandum and Articles of Association referred to in section 6.

(2) (a) The Minister of Finance must, after consultation with the Minister and the Minister of Minerals and Energy, determine the tax values of the capital assets owned by Eskom and any company contemplated in subsection (1 )(b) on 1 January 2000 for the purpose of calculating any wear and tear or depreciation allowance as contemplated in the Income Tax Act.

(b) The assets contemplated in paragraph (a) are, for the purposes of sections 11(e), 12C, and 13 of the Income Tax Act, regarded to have been brought into use for the first time at a cost equal to the value determined in terms of paragraph(a).

(3) For the purposes of the Income Tax Act-

(a) Eskom;

(b) any subsidiary company of Eskom to which Eskom may transfer any asset, liability, right or obligation or any business of Eskom; and

(c) Eskom Limited,

are subject to such adjustments as may be necessary regarded as one and the same entity

(4) No tax duty, or levy is payable in respect of the transfer of any asset from Eskom to any subsidiary company contemplated in subsection (3).

Regulations
9. The Minister may by notice in the Gazette, make regulations which are necessary for the achievement of the objects of this Act.

Repeal of laws
10. The laws mentioned in the Schedule are repealed with effect from the date
of conversion.

Savings and transitional provisions
11. (1) Despite the repeal of the Eskom Act by section 10, anything done in terms of that Act which may be done under or in terms of this Act, continues to be valid and of force and effect.

(2) Any reference to Eskom in the patents register trade marks register, designs register, deeds register or any other register is with effect from the date of conversion regarded as a reference to Eskom Limited.

(3) The relevant registrar must make such entries or endorsements in or on anv relevant register. title deed or other document in the registrar's office or submitted to the registrar as the registrar considers necessary to give effect to the provisions of' this paragraph.

(4) No fees or other levies are payable in respect of such entry endorsement.

(5) Any legal proceedings that were pending or could have been instituted against Eskom prior to the conversion, may, despite such conversion, be continued or instituted against Eskom Limited, subject to any law governing prescription of debts.

(6) Despite the provisions of subsection (1) the Electricity Council and the Management Board defined in section 1 of the Eskom Act cease to exist, and the terms of office of each of the members thereof terminate, with effect from the date of conversion.

(7) The termination of the terms of office of members of the Management Board does not affect their rights in their capacity as employees of Eskom.

Short title and commencement
12. (1) This Act is called the Eskom Conversion Act, 2001, and comes into operation on a date determined by the President by proclamation in the Gazette.

(2) Section 8 is regarded to have come into operation on 1 January 2000.

Schedule

No. and year of law

Short title

Extent of repeal

Act No.10 of 1985

Transkei. Corporations Act, 1985

The whole

Act No.34 of 1985

Bophuthatswana Electricity Act, 1985

The Whole

Act No.40 of 1987

Eskom Act, 1987

The whole

Act No.15 of 1991

Eskom Amendment Act, 1991

The whole

Act No.29 of 1991

Bophuthatswana Electricity
Amendment Act,1991

The whole

Act No.69 of 1995

Eskom Amendment Act, 1995

The whole

Act No.126 of 1998

Eskom Amendment Act, 1998

The whole


Appendix 5:
COSATU press statement: Eskom Conversion Bill - 31 May 2001

COSATU intends to launch the strongest possible protest at the manner in which the Eskom Conversion Bill was passed by Parliament's Public Enterprises Portfolio Committee last night, and the highly problematic content of the Bill. This is the culmination of a history of interaction with the Department of Public Enterprises on the Bill characterise by bad faith negotiations, duplicitous conduct, and broken agreements on the part of the Department.

The Bill essentially seeks to corporatise Eskom, and lays the basis for future privatisation. COSATU believes that this will have negative effects on the delivery of affordable electricity to all our people. For example, government's own consultants have projected electricity price increases of up to 50% as an outcome of the entire restructuring process. We have opposed the corporatisation of Eskom and called for the repeal of the 1998 Eskom Amendment Act, which laid the basis for the current Bill, and the withdrawal of the Bill itself. If government insisted on pushing ahead with corporatisation, COSATU also proposed various amendments to the Bill which would have ensured that at least the most negative effects would have been mitigated.

In particular, COSATU had proposed amendments aimed at ensuring the approval of elected representatives in parliament for any future selling of Eskom shares or assets; the inclusion in the powers and duties of Eskom of a developmental role; a more participatory process including approval by parliament of the memoranda and articles of association of Eskom and Regulations to be issued in terms of the Act; removal/amendment of the clause giving courts the power to increase electricity prices; continuation of exemption from taxation for Eskom to allow it to perform its developmental role; and protection of Eskom workers who may be adversely affected by corporatisation.

The Department of Public Enterprises most recently in a meeting in Pretoria on Tuesday 29 May had agreed to incorporate amendments to the Bill which, while not fully meeting our concerns, at least improved the legislation, especially in terms of public oversight over restructuring. In yesterday's parliamentary deliberations, however, the Department failed to motivate these amendments as agreed, and these improvements were not carried through into the legislation.

To the extent that the final Bill involves Parliament in any future decisions, it will be entirely at the discretion of the Minister. It is disappointing that MPs in the Public Enterprises Portfolio Committee saw fit not to exercise their oversight role, as has happened in other cases such as the Water Service Act where the Minister is obliged to table regulations for Parliament's approval. The role of MPs has thus also not been helpful in improving the legislation to deal with the negative effects of corporatisation. Furthermore, the Bill as passed by the Portfolio Committee violates the letter and spirit of a letter written to COSATU on 11 November 1998, in which then-Deputy President Thabo Mbeki assured us inter alia that the concurrence of parliament would be necessary to change the shareholding structure of Eskom.

As COSATU has already announced we will shortly be tabling a Section 77 Notice on Privatisation which, if our concerns are not timeously addressed, will lead to a strike. Given the outcome of this legislation, the corporatisation of Eskom will certainly feature prominently in this Notice. We will be demanding the reversal of the corporatisation of Eskom and the retention of a vertically integrated electricity sector with all major production in state hands. The COSATU Executive Committee, which is meeting next week, will consider further action to be taken on the issue.

Given the impossibility of dealing with the officials of the Department of Public Enterprises given their untrustworthy conduct, as well as the fact that the Minister himself has been absolutely unhelpful on the issue, COSATU is at this point severing relations with the Department. We will be referring the matter to senior political leadership in the ANC and Alliance and requesting their intervention to resolve the impasse.

COSATU response to Department of Public Enterprises Statement on Eskom Conversion Bill - 1 June 2001

COSATU rejects the statement issued by the Department of Public Enterprises on the interaction with COSATU on the Eskom Conversion Bill. In this statement the Department, while admitting that they did "develop a joint position with COSATU" the night before the Portfolio Committee meeting, tries to pass the buck to the Committee for not accepting all the amendments.

More seriously, the Department claims that COSATU does not respect the authority of Parliament as the highest constitutional authority in South Africa. By hiding behind the guise of respect for the sovereignty of Parliament, the Department has continued the dishonest way in which they have conducted negotiations with COSATU by misleading the South African public around the processing of the Bill.

The following points should be noted in this regard:1. The Department of Public Enterprises has consistently resisted Parliament's role in determining restructuring of state enterprises. For example, legislation which was on the Parliamentary schedule last year to provide a framework for restructuring was never tabled by the Department, apparently as they did not wish to be bound by a legislated framework. In engagement around the Eskom Conversion Bill, the Department has resisted amendments proposed by COSATU to enhance the role of elected representatives in relation to possible future selling of Eskom shares or assets, the determination of memorandum and articles of association of Eskom, and t the determination of Regulations in terms of the legislation. In fact it is the Department which has argued that Parliament should not have a strong role on these important issues.

2. In processing the Eskom Conversion Bill on Wednesday, the Portfolio Committee was not given the benefit of a motivation by the Department of amendments that had been agreed with COSATU, hence could not make a fully informed decision. This despite an explicit commitment to the contrary by the Director-General of Public Enterprises the previous evening. The Department's failure to honour this agreement and to properly advance the amendments in the Portfolio Committee constitutes both a holding of Parliament in contempt and bad faith negotiating with COSATU.

3. The Head of COSATU's Parliamentary Office, who has been closely involved in discussions around this issue, was refused the opportunity to address the Portfolio Committee when it became apparent that the Department's officials were going against their commitment to motivate the agreed changes.

4. It is ludicrous to suggest that COSATU has in any way questioned the role of Parliament. COSATU has, both in the process around the Eskom Conversion Bill and in general, consistently advanced proposals to maximise Parliament's role and in particular that elected representative are involved in key decisions around the restructuring of state assets. The final version of the Bill, as adopted by the Portfolio Committee, in fact makes the role of Parliament at best symbolic, at worst a mockery of their role as elected representatives. More broadly we have always actively supported a stronger role for the legislature, for example we have consistently pushed for the passing of constitutionally required legislation to empower Parliament to amend Money Bills, despite the failure of the Department of Finance to meet its obligations in this regard.

In the light of the above and what COSATU views as repeated misconduct by officials of the Department, we reiterate our decision to suspend all formal relations and interaction with the Department, until a political intervention by ANC leadership has created the basis for a meaningful and genuine process of engagement.

The dishonest manner in which the Department has rammed through the Bill has seriously damaged relations of trust at a time when crucial issues need to be resolved to avoid a general strike on privatisation. This constitutes reckless and short-sighted behaviour on behalf of the Department in dealing with issues of national importance.

COSATU Programme of Action: Anti-privatisation campaign and actions to stop corporatisation of Eskom June 7, 2001

At its regular meeting on June 5 and 6, 2001, COSATU's Executive Committee - comprising Presidents and General Secretaries from all affiliate unions, as well as regional COSATU officials - agreed on a programme of action for the anti-privatisation campaign and specific actions to protest the corporatisation of Eskom.

The programme includes marches, pickets and other labour actions, culminating if conciliation fails in a two-day general strike in August.

Privatisation cannot serve the poorSouth Africa has just emerged from apartheid, which left massive inequalities in income and devastating backlogs in infrastructure and social services in black and working class communities. Compared to other middle-income developing countries, we have much worse distribution of income and basic infrastructure.

Private providers cannot address this legacy. They must necessarily seek first to maximise their profits, not to ensure adequate services to those who cannot pay.

COSATU has consistently argued that instead of siphoning our national resources to private hands, the State must be strengthened so that it can lead development and "crowd in" private investment on that basis. We elected government at the national, provincial and local level with a mandate to extend quality services to the majority of our people. Only government can systematically expand infrastructure and social services, taking into account more than immediate returns.

Government argues that it will ensure that private providers meet the needs of the poor through regulation under "managed liberalisation." That argument ignores the history of most of our regulatory agencies to date. Regulation of private providers has worked reasonably well in countries where infrastructure is well established, most of the population is relatively well off, and government has great skills and resources. It has not worked well in South Africa or indeed in virtually any developing country faced with the challenge of substantially improving infrastructure in very poor communities.

Recent history has underscored the risks of privatisation, ranging from the recent fiasco with the outsourcing of Post Office management contracts to the privatisation of welfare payment systems. The proposal to introduce competition into telecommunications will likely improve services for business and the rich, but will slow down progress toward universal service.

Given these experiences, South Africa cannot afford to adopt an ideologically driven policy of wholesale privatisation.

The privatisation of electricityCurrent proposals on electricity exemplify the dangers of privatisation and corporatisation.

The corporatisation of Eskom, which started in 1998 with the Eskom Amendment Act, has already had a negative impact on electrification. Historically, Eskom did not pay taxes, but used its surpluses - around R1 billion a year - for electrification. Starting this year, however, Eskom is a company and has to pay taxes instead. That means electrification will depend on what the government can provide through the budget. Instead of a stable system of cross subsidisation, it will be left up to the vagaries of fiscal policy and annual budget decisions.

We have already experienced problems in this regard. In the event, the amount provided for 2001 was initially only R600 million - half the amount Eskom provided in 1999. The amount was increased only after COSATU's protests.

A particular concern is the way in which corporatisation was pushed through in violation of a series of agreements between Government and COSATU. The Department of Public Enterprises (DPE) assured us that the Eskom Conversion Bill, which completes the corporatisation process, would not be tabled until discussions between labour and the DPE had taken place. The Minister of Public Enterprises made this commitment to the General Secretary of COSATU on March 26, 2001, at a meeting of the National Framework Agreement on State-Owned Enterprises.

Despite this, the DPE tabled the Conversion Bill in Parliament without any serious attempt to reach agreement. Only after our objections did DPE officials assure us that the bill would be amended when agreement was reached. Finally, on May 29, officials of COSATU and the DPE negotiated specific wording for amendments. The DPE then failed to ensure that the relevant Parliamentary committee accepted the amendments, and indeed itself proposed weaker wording.

Beyond corporatisation, current proposals on restructuring the electricity sector seem likely to raise prices and reduce the scope for electrification. These proposals foresee privatisation of 30 per cent of electricity generation. That would reduce the cross-subsidisation of households by industry, which in turn would cause - according to Government's own analysis - increases of between 20 and 50 per cent in household electricity costs. The proposals would also entrench regional systems for electricity distribution, which will maintain the oppressive inequalities inherited from apartheid.

The insistence that Eskom pay more attention to its bottom line, like a private company, has emerged in the difficulties around electricity provision in Soweto in the past week. Eskom has insisted on recovering huge and probably mistaken sums from destitute people. It has refused to support the shift to a progressive block tariff system, which ensures a free basic amount for all, cross-subsidised by higher tariffs for larger users. Union members in Eskom argue that the insistence on cutting costs has also led to cutting corners on safety, and a rise in accidents.

The programme of actionIn light of these developments, COSATU's Exco agreed:· To file a Section 77 notice at NEDLAC demanding that Government adopt a policy of avoiding privatisation in all spheres of the state - local, national and provincial. In that context, Government must maintain a vertically integrated electricity industry, with Eskom continuing as a statutory body dedicated to developmental aims.· The Section 77 will give notice of a two-day general strike if government fails to meet our demands that it reverse its privatisation policy. In the months preceding the action, COSATU will hold regional and sectoral actions demanding an end to privatisation. As part of the campaign, we will be working with organisations of civil society and at the regional level, conduct educational work as well as holding demonstrations.· Specifically to protest the Eskom Conversion Bill, COSATU will lead demonstrations at Parliament. ISSUED BY COSATU EXECUTIVE COMMITTEE

Briefing Document: Electricity Restructuring and EskomThe Government is considering proposals that would effectively privatise much of electricity production. As explained below, the result could be increases of 20 to 50 per cent in tariffs. The proposals seem likely to undermine the extension of electricity to poor people, especially in the rural areas.

As part of the move to privatise electricity, the Minister of Public Enterprises has decided to incorporate Eskom under the Companies Act. COSATU has protested this action on three grounds: it makes it easier to privatise Eskom, it undermines the special role Eskom has started to play in bringing electricity to people, and it jeopardises the funding of electrification. In developing legislation to corporatise Eskom, the Ministry of Public Enterprises violated a range of agreements with COSATU and the Alliance.

Proposals for the Electricity SectorThe proposals to restructure the electricity industry aim first and foremost, not to ensure that all our people have electricity, but rather to develop a market. That means they aim above all to set up several suppliers to compete with each other.

Electricity supply is not a problem - South Africa has close to the cheapest electricity in the world, and enough capacity at least until 2007. But distribution faces big difficulties. In poor regions, the income from electricity distribution is too low to maintain the system. COSATU argues that these regions need a subsidy. But the tight fiscal policy that started with GEAR doesn't allow that.

The proposals before government seek, instead, to fund electricity expansion by privatising a large share of supply and the rationalisation of distribution, which is now the responsibility of individual municipalities. But where COSATU called for a single national distributor, the proposals call for six regional distributors ("REDs"), phased in over five years.Separate regional distributors will maintain existing inequalities.

The REDs for the poorest and most rural provinces - the Northern Province and the Eastern Cape - will barely maintain electricity distribution. They will not have enough income or human resources and information systems. In contrast, a national distributor could allocate resources equitably between regions.

The proposals also demand privatisation of 30 per cent of electricity generation. The new producers would compete with Eskom for the REDs and large industrial producers.

This proposal will have very negative effects on working people.

First, it seems likely to undermine the cross-subsidisation of households by industry. Today, only the very biggest industries - mostly the mines and big refineries - buy electricity straight from Eskom at very low rates. Most of the profit in distribution comes from supplying the rest of industry, and historically the returns have been used to hold down household costs. In the proposed system, the new producers and Eskom could sell directly to any big electricity user (using over 100 GwH a year). That could lead to huge rate hikes.

Second, Eskom will have to compete with private producers for the better-paying customers - big business and relatively rich regions. That means it will find it more difficult to serve poor regions.

Apparently, Cabinet has agreed that it cannot support a system that will increase tariffs as much as the proposals suggest. But the privatisation of supply drives the tariff hikes - and it seems that Government is insisting on privatisation.

The restructuring of EskomThe corporatisation of Eskom points to the lack of thought in the current push for privatisation. The corporatisation process was, apparently, largely driven by Treasury's demand that Eskom pay taxes like a private company. Historically, Eskom did not pay taxes, but instead used its surpluses for electrification. In the 1990s, it ploughed about R1 billion a year into bringing electricity to historically disadvantaged communities.

So what happened with corporatisation? On the one hand, Government promised COSATU that the taxes from Eskom would support a National Electrification Fund. On the other hand, SARS agreed with Eskom management that, in order to prepare for competition, Eskom would not pay taxes until 2004. Result: Treasury has to fund electrification off the budget, with no tax revenues coming through for another few years. Initially it threatened to cut funding for electrification by close to half; it now says it will pay the full amount - but what else will suffer?

In the longer run, it is naïve to think that Eskom will continue to report surpluses at the same level as before it had to pay taxes. Officials of the Department of Public Enterprises (DPE) already stress that corporatisation means commercialisation - so Eskom must now put much more emphasis on turning a profit. Union members from Eskom say the price may be high, as managers cut corners on safety and dangerous accidents become more common.

The Eskom Conversion BillIn 1998m, the Eskom Amendment Act laid the basis for the Eskom Conversion Bill. The DPE did not table the Act at the NFA six-a-side, but took it straight to Parliament in April 1998. The Amendment Act clarified ownership of Eskom, which COSATU supported. But COSATU also protested the Act for several reasons. The Act provided for the registration of Eskom under the Companies Act and laid the basis for Eskom to start paying taxes in 2000, which squeezed the resources for electrification.

Furthermore, corporatisation was initiated before the government's energy policy had been finalised, and pre-empted some policy options.

High-level meetings involving the alliance leadership were convened to resolve the impasse. Ultimately, as a compromise, the alliance agreed that any restructuring proposal would have to be approved by parliament. It also agreed to suspend the Act in the NCOP pending negotiations, but this agreement was not implemented.

At this time, then Deputy President Mbeki wrote a letter to reassure COSATU leadership that government did not intend to privatise Eskom. The letter stated that "the envisaged changes do not give the Minister the power to change the shareholding structure, for which the concurrence of parliament would be necessary" and further that "the proposed changes contained in the Bill will not adversely affect the commitment of Eskom to provide electricity at affordable prices."

The DPE published the Eskom Conversion Bill towards the end of last year. At a meeting on electricity under the NFA on November 16, 2000, COSATU and the DPE and the Department of Minerals and Energy (DME) discussed it. COSATU raised concerns about corporatisation in general, and specially about the failure to live up to the commitment, reaching in discussions on the Amendment Act, that the DPE would engage more intensively with COSATU before taking the Conversion Bill forward. The Minister of Public Enterprises apologised for failing to live up to this commitment, and promised meaningful consultation before tabling the bill in parliament.

COSATU subsequently made a detailed submission with proposals for amendments. The key issues were that the funding for electrification must be guaranteed, and that any change in Eskom's shareholding should require parliamentary approval.

COSATU proposed an engagement with government for December 2000. In the event, the meeting was only convened in February. At that meeting, it was agreed that government and COSATU would attempt to reach consensus through bilateral meetings.

At the next meeting, on March 9, DPE officials argued that they would not amend the draft bill to meet COSATU's concerns, and planned to take it directly to Parliament. They suggested that if further bilateral meetings led to agreement, the Bill could be amended or even withdrawn from parliament. They also suggested that COSATU voice our concerns in the portfolio committee hearings. They admitted that this did not live up to the Minister's commitment made in November.

At a meeting of the NFA six-a-side on March 26, the Minister agreed that the Conversion Bill would not progress until agreement had been reached. Despite this, the DPE took the Bill forward in parliament.

COSATU made it clear that the process around the Bill, as well as its substance, had become a source of difficulties. In an attempt to resolve the situation, the General Secretary of COSATU met the Minister twice. On May 29, with the final meeting of the portfolio committee scheduled for the next day, officials of COSATU and the DPE met and, in a six-hour meeting, crafted specific amendments that would, to some degree, address COSATU's concerns. The DPE sent a final version of the amendments to COSATU that night, and promised to motivate them, as agreed, to the portfolio committee the next day.

In the event, at the portfolio committee meeting, the DPE officials failed to honour their commitment. Not only did they fail to motivate the amendments, they actually raised reservations with them to the Portfolio Committee. As a result, most of the improvements reached with the Department have not been incorporated into the version of the Conversion Bill passed by the committee on May 30, 2001. The following table details the modifications to the amendments that occurred in the portfolio committee.

Proposed amendment_Amendment as passed by the portfolio committee__Owner-ship_If the executive contemplates selling Eskom shares, it shall table the matter with Parliament which shall hold public hearings and provide a recommendation._Not included at all.__Duties _In Eskom's shareholders compact and Articles of Association, the Minister shall take into account Eskom's developmental role and financial sustainability, and affordable, universal access to electricity _"Shall" changed to "may," so that the entire clause becomes discretionary, undermining the commitment to a developmental role for Eskom._Consultation_The DPE shall table Eskom's Articles of Association and regulations to parliament and gazette them for public comment._"Shall" changed to "may" in the case of the Articles, and the amendment entirely dropped on the regulations.__

In light of the blatant bad faith on the part of DPE officials, COSATU subsequently severed relations with DPE. The present version of the Bill is entirely unacceptable. We will therefore embark on a programme of action to oppose the Bill and, if it is passed, win its reversal (see statement above).

Audio

No related

Documents

No related documents

Present

  • We don't have attendance info for this committee meeting

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: