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JUSTICE AND CONSTITUTIONAL DEVELOPMENT PORTFOLIO COMMITTEE
21 September 2001
CONSTITUTION OF THE REPUBLIC OF SOUTH AFRICA AMENDMENT BILL AND SECOND AMENDMENT BILL: PUBLIC HEARINGS
Chairperson: Adv J H de Lange
Documents Handed Out:
Constitution of the Republic of South Africa Amendment Bill, 2001 (certified, now B68-2001)
Constitution of the Republic of South Africa Second Amendment Bill, 2001
Banking Council submission
Gauteng MEC for Development Planning and Local Government submission
The Committee heard submissions and proposed alternatives, on a broad range of issues. These included intervention mechanisms and whether there should be a holistic approach to interventions, the reduction of the Financial and Fiscal Commission (FFC) and also the tenure of constitutional court judges. Finally the Committee was briefed by Professor Christina Murray on amendments as they related to the definition of money bills, the issue of municipal borrowing and interventions.
Idasa (Institute for Democracy in South Africa)
Mr Joachim Wehner presented for the Budget Information Service at Idasa.
Mr S N Swart (ACDP) asked Mr Wehner to comment on sections 34 and 35 of the Municipal Structures Act which allowed the MEC to dissolve a Council in the event that an intervention in terms of section 139 of the Constitution fails.
Mr Wehner said that in his opinion the section 139 procedure was quite strong and could thus see no reason to go beyond this provision. However, he had no knowledge of the Structures Act and said he could not effectively answer Mr Swart's question.
Mr L T Landers (ANC) reminded Mr Wehner that in his presentation he had said that the politicization of the Financial and Fiscal Council (FFC), which would result from the amendments, should be avoided. He had suggested that instead of decreasing the size of the FFC the amendments should rather provide for stricter attendance requirements or that a post of the FFC should not be able to be left vacant for a period longer than six months. Mr Landers raised the point that alternatives had been raised but that these suggestions had not been fully fleshed out. Here he asked what would happen in the case of non-attendance and what would happen if a post stayed vacant for a period longer than six months. Mr Landers asked if forfeiture of that province's position of the FFC would be a possible penalty.
Mr Wehner said that the FFC had already been politicized. Despite this, it did not have to be that way because, as he pointed out, some of the commissioners were nationally appointed. The actual concern here was that there might be a battle between provinces to see who will go onto the FFC. His statement that no posts would be left vacant and the suggestion of penalties was just a suggestion as to how the technical problems around the FFC could be dealt with.
Adv de Lange then asked for clarity on whether or not Idasa was opposed to national intervention, at least to a limited extent, and whether they felt that there should be a more holistic approach to interventions. Mr Wehner said that this was correct and added that it should be known that Idasa regarded national intervention as a bad thing. However, if it was going to be allowed and there would then be a concurrency of jurisdiction in this area then it would be wise to expressly provide for how the concurrency issue would be dealt with.
Mr Landers said that the feeling towards the FFC was that it was too large, however on the other hand the FFC is an important body and therefore cannot be done away with. Did Mr Wehner have any suggestions?
Mr Wehner suggested that instead of shrinking the FFC increased incentives or mechanisms geared towards attracting a higher attendance could be used. His second suggestion was that if the FFC would be reduced then it would be ideal to at least have one national appointee, one local government appointee and nine provincial nominees.
Mr Landers said that perhaps this would theoretically be the ideal position but it was precisely those provincial nominees who came to meetings and either stayed for only ten minutes or slept in the meeting.
Mr Wehner said that this was an internal problem that needed to be sorted out by the FFC itself.
Ms S M Camerer (NNP) asked what he thought of the suggestion that national intervention should only come at the request of the Provincial sphere.
Mr Wehner said that this might be one way to deal with the concurrent jurisdiction problem. This would however not be enough because as the Constitution stands the Province ahs the right to intervene, this right cannot be taken away. So once a province asks National Government to come in it will still have the right to intervene. So here the concurrency problem would not be conclusively solved.
COSATU was represented by Ms P Govender and Ms F Tregenna.
COSATU's submission concerned the three amendments that would:
1.Affect the legislative process applicable to money bills and legislation regulating the public finance management system under Chapter 13 of the Constitution.
2.Widen the definition of money bills and consequently increase the legislative powers of the Minister of Finance, and
3.Affect the Finance and Fiscal Commission's composition, structure and the appointment of its members.
COSATU did not support the amendments that related to these areas and reserved specific comment on all the other amendments.
Ms F I Chohan-Kota (ANC) said that COSATU had argued that there were certain types of legislation which currently did not qualify as money bills but would after the amendment. She said that not enough analysis regarding this matter had been submitted by COSATU and asked the COSATU representatives to elaborate on this matter.
Ms Govender explained that indeed all matters would involve some degree of financial concerns and the question was where this line would be drawn. There were however other matters that did not qualify as money bills at present but would after the amendment, that other Departments might need to deal with. After the amendment these Departments will have no competence to introduce legislation that might fall under Chapter 13 but would be purely technical. The proposed amendment would exclude the rest of Parliament from taking certain preliminary steps and actually introducing such legislation. This barrier would in turn be a fettering or constraint on the legislature's discretion to introduce legislation.
Mr Jeffrey (ANC) commented that it should be remembered that the Minister of Finance could not become an all powerful individual introducing money bills as he saw fit. This could not happen because the Cabinet had to approve all legislation before any other steps could be taken.
Here Ms Govender said that the concern was that the Minister of Finance would be able to block money bills that were important, that he felt were unnecessary.
Ms Camerer asked the COSATU representatives whether they felt the FFC should be representative, meaning should Province should be represented on the FFC. COSATU supported this view.
Gauteng MEC for Development and Planning, Local Government
Mr Trevor Fowler came before the Committee to discuss in detail the amendments relating to interventions, those relating to the reduction of the FFC and those relating to Parliamentary procedure. Those amendments, which he did not specifically address, were agreed to without reservation as was stated in the MEC's submission.
In summary Mr Fowler did not agree to the intervention amendments as they stood and in his submission mentioned concerns that would need to be addressed before such amendments should be passed. Secondly, Mr Fowler agreed to the amendments effecting the reduction in size of the FFC, He however added that the Commissioners on the FFC should be selected by the President from a pool of persons nominated by each provincial executive. Thirdly, Mr Fowler did not agree with the amendments relating to Parliamentary Procedure.
Mr Fowler said that in all these matters the concern was the preservation of the separation of powers. The amendments would all impact on the Provinces powers. The key area of concern was that when an intervention occurs the powers of local government would be usurped by that institution effecting the intervention. Mr Fowler said that national intervention could in certain situations be necessary or even desirable, but the assumption of Local Government's legislative powers by the National Government can never be justified and should never be allowed.
Mr Fowler said the Province had the capacity to formulate policy through legislation. It could do this because it was the democratically elected representative of the public. The National Executive arm of Government should never wield this power as it would seriously undermine the principle of the separation of powers.
Adv de Lange said he understood Mr Fowler's argument and concerns but argued that this might be necessary in the situation where the electorate has broken down to such a degree that they could no longer be properly said to be 'representing' the people.
Mr Fowler stood by his position. The adoption of this function by the National sphere could never be justified. Mr Fowler added that democracy came at a price and that this democracy was built in basic principles which could not be compromised.
Ms Chohan-Kota asked Mr Fowler if he had looked at the local government contingent of the FFC and considered it in light of the reduction.
Ms Camerer added to this question, asking whether Mr Fowler felt the FFC should be representative, that each province should be represented at the FFC.
Mr Fowler told the Committee the FFC was indeed an overly large body composed of people nominated by local government. Mr Fowler equated these nominees with something more akin to a delegate on the NCOP. In the case of the FFC no Local Governments are consulted on decisions to be made in the FFC. The body is an independent one consisting of Commissioners who are not strictly speaking representatives of local governments.
Ms Camerer reminded Mr Fowler that he had said he was in favor of co-operative governance and asked him whether consultation had taken place at the provincial level.
He responded that even though the provinces were not usually consulted in these matters, Provincial Government had been consulted in this case.
Adv de Lange asked whether a financial crisis would always only justify the taking over of the executive functions of a local government. He asked this question in light of the fact that even though all executive functions would be taken over, the legislature of that local government could go on operating and continue to incur costs. This would in turn perpetuate the intervention and only worsen problems.
Mr Fowler said that money within a province was not distributed by National Government but by the province. So if the province wanted to pump money into sports stadiums while almost no money went into housing then it will do so. What this in turn means is that when the National arm of Government intervenes the problem will persist. When government broke down it usually came as a result of a lack in institutional or decision-making capacity.
To remedy this the National Government would need a limited power to change even the legislative functioning of a local government. So there would indeed be a limited area within which the National sphere would have legislative power, but it would be limited to those necessary to remedy the problem.
Adv de Lange said this was a sensible approach but the problem with this approach lay in establishing where the line would be drawn. Who would decide which legislative powers the National Government could wield in order to remedy the problem?
Mr Fowler told the Committee that the Constitution was clear and that if an intervention took place it would draw this line.
Adv de Lange said that the problem was that the Constitution as it stood included the word 'executive'. Now the amendments seek to remove the word "executive' making it possible for the National Government to assume even legislative powers as the section is no longer limited. A suggestion forwarded that National Government be allowed to usurp everything besides the legislative power.
Adv de Lange said that Mr Fowler had now suggested another possible position where the power usurped is limited in a different way. Adv de Lange said that this suggestion needed to be crystallized into a Constitutional principle, and who would say what powers could be usurped needed to be decided.
Mr Fowler suggested that section 156(2) of the Constitution would offer some guidance.
Adv de Lange outlined Mr Fowler's position saying that he was not opposed to national interventions but was simply worried about duplication of actions taken because of the concurrency of jurisdiction. He was also concerned that the intervention mechanisms within the Constitution were fragmented and in addition there were intervention mechanisms in other pieces of legislation such as sections 34 and 35 of the Municipal Structures Act.
Mr Fowler said that he was well aware of the objections raised by Local Governments as the matter had been dealt with in a very haphazard way. He said that the intervention mechanisms were considered from, and made sense from, a finance point of view. The intervention amendments thus needed to be looked at from other perspectives and dealt with in a more holistic way.
The Banking Council was represented by Mr Cas Coovadia, who came before the Committee to discuss the amendments so far as they related to the improvement of municipal borrowing. He told the Committee that there was indeed a dire need to improve the municipalities so that they could borrow money cheaper.
Mr Coovadia pointed out that the proposed procedure in section 156, which allowed private individuals to initiate an intervention process, would be a less political process. One that would be favored by banks and would provide banks with a degree of confidence when lending money to banks.
Adv de Lange wanted to know about the practice whereby private individuals could approach the court and attempt to have a state of emergency declared.
Mr Coovadia said that he did not know. Section 156 provided for such a mechanism but also provided for councils to bind future councils when taking out a loan. This was necessary because problems were experienced with the Demarcation Board. When the new provincial borders were demarcated there were problems experienced in attributing costs and allocating obligations. This was because where provinces or municipalities incurred debts but then were either merged with, or fell under new control, these bodies often denied being liable for debts. The amendment to section 156 would instill confidence in the financial sector through providing continuity and making it easier to determine where debts lie.
Mr Coovadia said that there were political concerns to be addressed but the fact remained that these changes were needed to restore stability in municipalities.
Ms Camerer said that from their submission it was quite obvious that the Banking Council had positioned themselves as allies to the National Treasury. She asked Mr Coovadia to explain a comment he had made in his submission that the existing legislation empowering Provincial Governments to intervene to stabilize Municipalities was not sufficient because;
a) There was no legal certainty through interventions.
b) There was insufficient scope for consultation with stakeholders, and
c) There was no clear indication of action to salvage and stabilize the situation.
This was precisely what other institutions argued was expressly provided for. She said the shortcomings enumerated by the Banking Council did not seem to match the facts and asked how they had come to these assertions.
Mr Coovadia responded that the current amendments proposed would add much value to the present provisions relating to intervention. It does this by creating a single intervention interface and by enabling moneylenders to initiate an intervention process if they feel that their investment is under threat. These provisions would instill a confidence in the Banking sector that was currently sorely lacking.
Ms Camerer then said that her husband had been involved in obtaining foreign investors for local governments. She said the standard operating practice in these days was to procure a Government Guarantee or a 'currency transfer guarantee'. In their submission the Council stated that more practical mechanisms to assist in the borrowing of money by municipalities needed to be implemented. She wanted to know what standard operating practice was today and inquired as to whether these old practices no longer helped in the practical sense.
Mr Coovadia told the Committee that the trend was now to move away from the practice of the National Government securing the loans of Local Governments. He said that the present practice was that money lenders were prepared to do business with Municipalities on the basis of their sound financial management and their overall efficiency and track record. The trend was one towards normalisation of business transactions.
Ms Chohan-Kota said that she understood there was a credit rating system whereby all provinces were given a credit rating. It was clear that banks lacked confidence in lending money to municipalities. She said that she would prefer to call it a bias.
She pointed out that the aim of these amendments was to increase confidence in municipalities. The fact of the matter was that there were good municipalities and there were bad municipalities, and that she would dare to say that there were more good than bad. She submitted that the South African lenders did not want to lend money to municipalities on the strength of these credit ratings while overseas money lenders were prepared to do so.
Mr Coovadia said that in this area the key was sound financial management. Despite a range of problems, the financial sector did in fact view municipalities as a lucrative market. It was just that these institutions needed the confidence to do business with municipalities on a normal basis. If municipalities felt they needed to procure money from overseas lenders then that was none of his business. He said he did not intend to paint a bleak future but came to start a process that would make it possible for banks to lend money to municipalities.
Mr Landers (ANC) asked why there was such a fear around demarcation, especially since it seemed unnecessary in the light of these provisions which expressly provide for the ability to bind future municipalities.
Mr Coovadia said that in the past, insufficient consideration had been given to financial arrangements and transactions when the demarcation process was executed. He said that there was not a complete disagreement with the process it was just that the matter had been complicated. When municipalities merged or separated it was hard to establish who owned an asset and where an obligation lay. Establishing these matters and determining where these lay was possible, but it would be difficult. The new position simply provided a greater degree of certainty.
Office of the MEC North West Province Development Local Government and Housing
The Office for the MEC North West Province mentioned no specific clauses. The gist of their submission was that they rejected the proposed amendments in both Bills. Their submission was permeated with an air of suspicion on their part that the local and provincial spheres of government would be completely overrun. Adv de Lange said that while he felt the views in their submission to be strong but that they were nevertheless entitled to have them.
Ms Camerer said that the Committee was indeed sensitive to the view of the MEC, but in his rejection of the proposed amendments he had not suggested any alternative solutions to the problems. Here Ms Camerer asked the question in relation to Mr Africa's concerns around the removal of the word executive from sections 100 and 139.
Mr Africa told the Committee that in addition to his own submission the Premier of the Province would also be making his own views on the matter available to the Committee. He felt Chapter 3 of the Constitution had not been given effect to, and as a result all the necessary people would have to come together and decide what steps would be taken to strengthen local government. Mr Africa said a framework within which intervention would take place needed to be established. This was the spirit in which their submission was written and their suggestions formulated. He said that what was needed was a clear framework that would outline, in any given set of circumstances, what provincial government would do when intervening in local government and what national government would do when intervening in local government.
Ms Camerer said that the submission had been very broad and had rejected all the amendments in a wholesale manner. She was confused as she would have thought that certain of the proposed amendments would have been considered favourable. Adv de Lange interjected saying that he had the same concern. The submission presented by Mr Africa was extremely broad rejecting even clause 10, which would improve the situation around municipal borrowing. Surely the MEC's office would have found the proposed position more favourable?
Mr Africa was of the opinion that the duty to create a better understanding of municipalities and to make them more credit worthy, to improve their overall image, rested on all spheres of government. The problem was that currently only the Provincial and National spheres of government had any say in the matter. Up to now, these spheres has been operating in a way that indicates no intentions of improving the situation around municipal borrowing. What these two spheres of government needed to do was create the circumstances within which the municipalities could develop and improve their own credit worthiness. This would require a degree of co-operation between the Provincial and National spheres, which has remained unseen up to this point. The need for all this flows from the fact that local government needs to be viewed as a separate and autonomous sphere of government that has the power to borrow money.
Mr Africa said that the above concerns all flowed from the fact that it was easy to talk co-operative government but a completely different thing to actually make it happen. What was required was the formulation of a list of prerequisites for the existence of true co-operative government. This co-operative government would have to take place at a multitude of levels.
Adv de Lange then said that he was concerned about the general attitude that had been taken on these amendments. He did not make these comments in reference to Mr Africa or his submission. His concern was simply that there had been a wide spread view that the Minister of Finance, through some of the proposed amendments, would acquire a range of powers that would make him inappropriately powerful. The Minister would not realistically be able to acquire such powers. His concern was that these amendments could possibly make a valuable change to the Constitution, if only they were considered properly and fairly.
South African Local Government Association (SALGA)
SALGA was represented by Mr Thabo Mokwena and Mr Dickson Masemola. Firstly Mr Mokwena told the Committee that since the drawing up of their submission, SALGA had either reconsidered their view or they had discovered evidence which made some of their concerns fall away. To this end Mr Mokwena asked that points 1.7, 4.3 and 4.4 be deleted from their submission.
Ms Chohan-Kota asked SALGA to explain the consultation process that had been used to compile their submission. Mr Mokwena explained that SALGA often initiated the consultation process even before the legislation concerned was published. In respect to these amendments, they sent out a copy to all municipalities and invited comments. To this end, SALGA had received comments directly from various municipalities and even some provinces. The comments are considered and compiled with a view to coming up with a single view, representative of all the provinces' views.
Mr Landers referred to the deleted sections 4.3 and 4.4, which concerned the FFC. In reference to these sections he asked what SALGA thought the role of the FFC was. Mr Landers told SALGA that there had been an earlier suggestion that the FFC be composed of experts and another suggestion that would see Commissioners on the FFC being responsibility to the provinces that appointed them.
Mr Masemola was of the opinion that the appointment of experts to the FFC would bring with it its own problems. If Commissioners were experts in one field then they would not necessarily be able to deal with any of the other wide range of topics considered by the FFC. The term 'experts' was therefore subject to a very broad interpretation. The second problem, namely the issue of representivity, was that Commissioners on the FFC were appointed and given a duty at the National level. It follows from the fact that these Commissioners give a national service, that this, a service based on the same principles upon which the national sphere of government is built on. For this reason, FFC Commissioners are not, strictly speaking, and representatives of any province.
Ms Chohan-Kota said that from their submission it was clear that SALGA was opposed to the intervention amendments as they were opposed to the assumption of legislative function of local government by the National executive. But it was not clear whether their objection was a principled one, in that they were opposed to all forms of National intervention at the local level.
Mr Masemola said that SALGA's opinion was that National Government could intervene where necessary but could never assume legislative function. Their intervention would thus be limited to the exercise of executive functions.
Ms Camerer told SALGA that the apparent motivation for the amendments was partly to strengthen the capacity of local government to borrow money and at a cheaper rate. While the Banking Council has submitted that the present intervention mechanisms offered little security to moneylenders, SALGA had said that the present intervention mechanisms, in addition to sections 34 and 35 of the Structures Act, offer sufficient protection. Ms Camerer's concern was whether the Banking Council's concerns were substantiated or were they just an over-exaggeration.
Adv de Lange commented on Sections 34 and 35 of the Structures Act saying that he found it quite novel that the way to deal with a financial emergency was to dissolve the council and re-elect another one. This could not be a solution to such a problem as often the emergency came as a result of a institutional capacity problem. Adv de Lange said that SALGA's submission of financial emergencies being solved through sections 34 and 35 could not hold water.
Sections 34 and 35 operated on the premise that none of the local government's legislative functions would need to be usurped in order to bring the municipality back under control. For this reason he felt that Mr Fowler's earlier submission might be the best position. Namely, if National Government intervened then they would be able to usurp those functions needed to nurse the municipality back to health. This would include legislative functions, but it would be limited to those legislative functions it would be necessary to usurp in order to remedy the problem. Here Adv de Lange asked SALGA what their position was. Namely whether they felt that the National arm should never be able to intervene, or that they could but only on a limited basis.
Mr Masemola said that the gist of their submission was that in the Constitutional certain principles were provided. One of these was the provision for three separate spheres of government. This sphere was to operate separately but also to co-ordinate their efforts. This was the separation of power doctrine, an extremely important facet of the structure of the South African architecture. The usurping of a function of one sphere by another, such as the legislative function being discussed here, was a fundamental and direct infringement of a constitutionally embodied principle. Mr Masemola submitted that if this was to be the course of action then the Constitution might as well have been amended to do away with the three-tier structure of our government. Mr Masemola submitted that if the National arm of government wanted to intervene it could do so, it could not simply assume a legislative function and would have to remedy the problem without usurping this function.
Adv de Lange asked what if, in the context of a budget, there was a financial emergency. Mr Masemola conceded that the executive function could be usurped, but Adv de Lange's concern was this might not be enough. The example he gave was of where the national executive assumed the executive functions of only the municipality's executive function while their legislature went on incurring costs.
Mr Masemola said the NCOP had documented every intervention that had taken place and none of these interventions required the assumption of a legislative power by the national government.
NADEL (National Association of Democratic Lawyers)
NADEL was represented by Mr Saldhana and Mr Govender.
NADEL came before the Committee to discuss the tenure of Constitutional Court (CC) judges. Their view was that the amendments should not be passed as they were. They cautioned against allowing CC judges to sit on the bench for too long a period. As with other organisations concerned with the tenure of CC judges, NADEL was prepared to compromise, conceding that CC judges could be placed on par with all other superior court judges in all respects other than the length of tenure.
Mr Govender said the concern here was that South Africa was in the process of developing a constitutional jurisprudence. This fledgling body of jurisprudence comes in the wake of apartheid jurisprudence. Today one could still hear judges of superior courts making obiter statements relating to the death penalty and other such institutions of old. It is for this reason that one should tamper with tenure with great caution.
Mr Saldhana said the debate was a difficult one as there were those for the amendments and those against, with both sides making very good points. Checks and balances were always important in the Constitutional context. Consensus on the matter would not be easy to get. NADEL had discussed the matter and had decided that in their opinion the tenure of CC judges could be extended to between fifteen and eighteen years. Ultimately they wished for CC judges to sit for a period a little longer than what it presently was. People on the CC needed to understand where the South Africa had come from and where it was going. Those individuals on the CC were felt to be the champions of the cause at the time, those that best understood our country's past and what was envisaged for its future. For this reason, especially in its infancy, it would be desirable to keep those who had such an understanding on the CC bench.
Mr Saldhana then apologized, saying that NADEL had always come before the Committee with a concrete opinion on any matter, with the view of making a tangible contribution in whatever debate was before the Committee. However in this instance NADEL was unable to assume any concrete position and had instead reconciled itself with the adoption of a compromised position. Mr Saldhana said that in the present context the middle route was the only option they felt comfortable with. The choice was effectively one between life tenure or simply longer tenure. Given the circumstances longer tenure would be the only logical choice.
Mr Saldhana said that ultimately a position that brought with it consistency needed to be adopted. He meant institutional consistency, which would entail consistency, at the very least, on the matter of remuneration.
Lastly, Mr Govender said that it was very hard to come before the Committee and not discuss the matter on a principled basis. The debate was difficult because these were the first members of the CC bench and perhaps they did need to stay a bit longer.
Prof. Christina Murray
Prof. C Murray, from the Law Faculty at the University of Cape Town, discussed the Constitutional Amendments as they related to the definition of money bills, the issue of municipal borrowing and interventions. Only a small number of members remained together with Mr Labuschagne, a drafter for the Department of Justice.
In the course of her presentation, Prof. Murray spoke on the interventions provided for in sections 100 and 139. Here she said that there was often an erroneous assumption that the three spheres of government were equal in some way. This was wrong in that each sphere of Government was a distinct body with its own functions and competencies. Each sphere is a unique body incomparable to any other sphere of government. Each sphere formed part of a line democracy, whose functions would properly be left to it, being the body originally deemed fit and proper to perform those functions.
Adv de Lange raised the concern that there were those who wanted to amend sections 100 and 139 to provide for financial emergencies. This would be improper as these sections were for the assumption of executive powers alone and not to accommodate financial emergencies. This was the function of section 155(8). Those who wished to see a comprehensive approach towards intervention would want to see a pulling together of all intervention mechanisms into one section, with sections 100, 139 and 155(8) being given a closer relationship. In his opinion section 155(8) was overkill.
Prof. Murray said that the separation of sections 100 and 139 from section 155(8) was perhaps a good thing, as section 155(8) offered relief to private individuals through a court initiated process. Meanwhile sections 100 and 139 offered a solution on another level through a politically initiated process. It was thus obvious that these two areas were different enough to ensure their continued separation.
After Prof. Murray's presentation little discussion ensued and the meeting was adjourned.
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