South African Airways Bill: adoption

PUBLIC ENTERPRISES PORTFOLIO COMMITTEE
28 February 2007
SOUTH AFRICAN AIRWAYS BILL: ADOPTION

Chairperson: Mr Y Carrim (ANC)

Documents handed out
South African Airways Bill [B35B-2006]
South African Airways Bill [B35A-2006]
South African Airways Bill [B35-2006]
Portfolio Committee Amendments proposal to South African Airways Bill

Audio Recording of the Meeting

SUMMARY
The Chairperson summarized the draft report of the Committee and tabled the amendments which had been made in line with suggestions at previous meetings. Most were of a technical nature. The preamble proposed two options. Each had indicated why the Bill was being passed and stated the State’s intention to retain SAA as a national carrier. Option A referred to the State’s “developmental orientation” but Option B left out this reference. The Department of Public Enterprises had requested that the references to “developmental orientation” should be deleted, as they could be read as putting undue pressure on the airline to meet developmental objectives at the expense of commercial ones. Legal advisors for the Department felt that this term was imprecise and that it might cause unintended consequences. The State Law Advisors felt that the preamble only explained the background information to the Bill and merely clarified and described the State’s views at the time. The Transnet legal advisors tended to agree with the Department that expectations might be read in and suggested that perhaps reference should be made to sustainability orientation. The matter was voted upon. Members voted to include the words “developmental objectives”. The further amendments were incorporated and Members voted, clause by clause, to adopt the Bill as amended. The Committee’s Report on the Bill was debated, amended in line with a Member’s suggestion and adopted.

MINUTES
South African Airways Bill deliberations
The Chairperson stated that the Committee would have to vote on the adoption of the Bill. He tabled a document from Department of Public Enterprises (DPE). The majority of the amendments were grammatical or technical, but two options had been put forward in regard to the preamble. Option A referred to a rapidly developing economy that required reliable and extensive air transport capacity, expressed the State’s desire to promote air links, and stated that since the State had “a developmental orientation” and regarded South African Airways as a national carrier and strategic asset that would enable the State to preserve its ability to contribute to key domestic, intra-regional and international air linkages, the State intended to retain it as a national carrier.

Option B referred to the rapidly developing economy and the need for reliable air transport systems, repeated the State’s desire to promote air links, but left out the reference to the orientation, and changed the order of the words, so that this option referred to SAA as a strategic asset, which the State intended to retain as a national carrier to enable the State to contribute to linkages.

Discussion
The Chairperson noted that all the proposals made last week had been accommodated, including the major ones made by Mr P Hendrickse. He believed it was necessary to retain paragraph 1 in the draft report. SAA was seriously challenged. There were rumours that SAA would be receiving R2.4 billion of the R4 billion so there was no separate allocation for SAA. Paragraph 2 had been amended in accordance with Mr Hendrickse’s proposal in and there were no further objections. Paragraph 8 had also been amended in line with Mr Hendrickse’s proposal. He suggested that a note be made that the government may need to act swiftly. Most of the report had been discussed in the study group.

Mr Hendrickse suggested that instead of stating “We have affected the preamble above” the Report should rather say, “In keeping with the ideas discussed in the Committee and the Minister’s letter we have effected the preamble above”.

Mr Hendrickse commented that he would like the words “ that should ideally take place after the Shareholders Management Bill is passed…” and “…alternatively, if not, that it be brought to Parliament” to be used.

The Chairperson did not like that suggestion personally, but had no objection to this being included.

Mr Hendrickse then said that the Minister Alec Erwin (Public Enterprises) had agreed it should be brought to Parliament, which was the reason for the Shareholders Management Bill being dealt with later this year.

The Chairperson said that he did want to worry about the wording too much as he felt that the spirit of what the Committee was trying to convey in their exchanges with the Minister, and the letters that followed, had been expressed solidly in the report. The report would have to wait for adoption until after the Committee had adopted the Bill. Therefore the Committee was still dealing informally with the Report so that members’ issues were covered.

In regard to the preamble, the Chairperson highlighted the main differences. The new preamble flowed from a discussion the previous week where Mr Hendrickse and the legal advisor were mandated to make the amendments. He read out the two options The last paragraph in Option A stated that “…the state has a developmental orientation”. The DPE did not like this wording and felt it should be removed. Thus Option B was drafted, and this referred to “the state intends to retain it as a national carrier”. The Chairperson said that this was essentially just a change in wording which sounded better and there was no change of content. Paragraph 3 contained the change. He asked whether the words “developmental orientation” should be retained and asked the DPE to comment why it was averse to this wording. .

Ms Ursula Fikilepi, Chief Director, Legal Counsel, DPE responded that it was felt that the term was too imprecise and did not really convey what the state intended to do.

The Chairperson then asked what the State intended to do.

Ms Fikilepi responded that if the State had a developmental orientation it would only speak to a specific context and not say this in broad terms. If the State’s orientation were subsequently to change, it would introduce a constraint.

Mr L Marabeni, DPE, stated that, in the context of the deal, the words could be open to interpretation and different implications. Specifically it was queried whether DPE would want to include developmental objectives in an airline, and what might be the implications of that. One interpretation might be that if an airline operated in a commercial environment it might be expected to fulfill developmental objectives at the expense of commercial objectives. That would then have implications be for the viability of the balance sheet of the airline. It was possible to assume that developmental objectives were being imposed on the airline and this would be not be appropriate at this time. He posed the question as to what the precise implications were of a “developmental orientation” in the context of the airline. It could be assumed that these objectives were imposed over and above the defined economic objectives stated in sentence 1 of the preamble. He stated that the concept of development related to purely human development and would be outside of economic growth. He realised that it was a preamble in a Bill, but the Department remained concerned that the implications could contradict the commercial objectives of the airline.

The Chairperson then asked what were the legal implications of the words “developmental orientation”.

Adv Gideon Hoon, State Law Advisor, gave a brief overview of a preamble, which was essentially intended to give important background information including the reason for enacting the Bill. The first line of the third paragraph meant that it was the State that had a “developmental orientation, and the State’s attitude towards development was being described. He said that it was clear that the State “regards SAA as a national carrier and strategic asset”, because it could assist the State with certain things, which was why the State intended to retain it as a national carrier, and therefore the reason why the Bill had been drawn. He reiterated that a preamble was intended to explain the reason and background for the Bill.

Mr Vuyo Kahla, Group Executive, Legal Services and Risk, Transnet gave his opinion of a preamble, stating that it was to provide a guide and a context to legislation being introduced. The Courts, in interpreting the legislation, did not focus on the preamble but they would not ignore it. Mr Kahla agreed with Mr Marabeni that the term “developmental orientation” could result in expectations that would not be prudent for any commercial enterprise. He suggested that there could be some other wording that would satisfy everyone.

That Chairperson then asked what wording Mr Kahla would suggest.

Mr Kahla said that he had thought of using “sustainability orientation”. He felt the word “sustainable” covered both the commercial and the social or developmental type of orientation. He pointed out that businesses were required to have a “triple bottom line” which included economic, social and environmental aspects. He felt that the word “sustainable” would not create an impression that there would be any interference with the duty to carry out a commercial enterprise.

Mr Hendrickse responded that this legislation was aimed at the government and legislated how it must make decisions. It was not directed at SAA. It showed what the duty and role of the State should be. He referred to Ms Fikilepi’s point that “developmental orientation” referred only to the current context and was a limiting factor. He said that a new government could amend this Act, and thus the current exercise was based on the current situation and the policies of the current government. He said there was a reason the State wanted to keep SAA as a national carrier and a strategic asset, that being for it to dovetail with the programmes of government. He gave a hypothetical example that if government created an economic hub in De Aar, an airline service could be needed. Government might then say that SAA must do this, despite whatever other commitments SAA might have. The question was whether Government must then provide the airline with funding in order for it to meet its mandate.

Mr J Bekker (IFP) added that his party would rather have had the third paragraph from both Option A and B removed. Failing that, he suggested that the reference to “the State” in the last line of Option B should be clarified by referring to “the State at this stage”. He did not feel too strongly on the issue.

Another Member read the wording as defining the State and not the airline. The airline was therefore operating under a particular State that was developmental in character. She did not anticipate that there would be so much debate as her party had always had the vision of running a developmental government.

Mr Kahla felt that ultimately the major question was whether the key fundamental objectives that the legislature sought to convey through the preamble would not be communicated if the term “developmental orientation” were to be left out. He aligned himself with the DPE view as he was worried that the inclusion of the term could have an unintended consequence.

Mr Marabeni added that the whole preamble now defined the specific developmental objectives of SAA, which were not expressed in the past. He reminded the Committee that the Bill on SA Express would be dealing in detail with some of the domestic development objectives the State wished to see being taken forward. He asked Mr Hendrickse if the developmental objectives were not already sufficiently spelled out in the preamble.

Mr Hendrickse understood Mr Marabeni’s point, but if Mr Marabeni felt that these objectives were already spelled out, he asked why there was an objection to stating them again.

The Chairperson gave his personal view that this was not a major issue, and that perhaps both viewpoints were being too passionate on the topic. He believed stronger arguments came from those who wanted to retain the term “developmental objectives”. He would be happy if the parties could reach a compromise wording. Given the fact that the preamble was only an aid to interpreting legislation and not a part to be interpreted by itself, he believed that the DPE should not push their point too hard. He suggested that perhaps a definition could be given of “developmental”.

Members indicated that they wished to finalise the matter and put it to the vote whether the words “developmental objectives” should be included in their present form. The majority voted to do so, and therefore to follow the preamble suggested under Option A.

In regard to the other amendments, the Committee voted to accept all the changes as outlined on the tabled document, and each clause of the Bill, as amended, were approved.

The adoption of the Committee Report was proposed and seconded .

The meeting was adjourned.