Industrial Development Amendment Bill and the Companies Amendment Bill: briefing

Meeting report

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Taking Parliament to People, and People to Parliament
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The aim of this report is to summarise the main events at the meeting and identify the key role players. This report is not a verbatim transcript of proceedings.

ECONOMIC AFFAIRS SELECT COMMITTEE
26 September 2001
INDUSTRIAL DEVELOPMENT AMENDMENT BILL AND THE COMPANIES AMENDMENT BILL: BRIEFING

Chairperson: Mr V. Moosa

Documents handed out:
Companies Amendment Bill [B35-2001]
Industrial Development Amendment Bill [B32B-2001]
Industrial Development Act [22-1940]

SUMMARY
The Select Committee was briefed by the Department of Trade and Industry on the Companies Amendment Bill. The Committee had a general discussion on certain of the clauses. After deliberating on the wording of some of the clauses it was decided that discussion on the Bill should be stayed while Committee members and the Department thought of ways to reach agreement on the proposed amendments. The Committee was then briefed by the Department on the Industrial Development Amendment Bill. After debating the Bill, the Committee felt that more time was needed to address concerns about the interpretation of certain clauses. Further discussion of the Bills was postponed to the following week.

MINUTES
The Chairperson introduced the representatives from Department of Trade and Industry (DTI) and the Industrial Development Corporation (IDC) who were in attendance to brief the Committee. He invited Mr Dingle, from the Department, to brief the Committee.

Briefing on the Companies Amendment Bill, 2001
Mr Dingle started by providing the background and objects of the Bill. He reported that the South African Companies Registration Office (SACRO), the South African Revenue Service (SARS), state departments, regulators and the private sector had embarked on a project to develop a completely computerised and electronic system for the incorporation of companies and registration of company information. He said that the development phase of the project was now complete and that SACRO was ready to implement the system.

He stated that the object of the Companies Amendment Bill was to amend the Companies Act (1973) so as to make provisions for the lodgement of documents and disclosure of information in respect to companies by means of an electronic process. He said the new matters the Bill aimed to introduce were the phasing in of electronic lodgement of forms and payment of fees, prescribed by the Act, and the electronic disclosure of corporate information. He said the Bill also intended to allow companies to keep registers of their members and indices to such registers in electronic form, to sign certain documents by electronic means, and to send annual financial statements by electronic mail to their members. Lastly he said the Bill intended to remove obsolete provisions and references and to ratify an incorrect cross-reference in the Act. He reported that the electronic system had the support of all the consulted parties on page 9 of the Bill.

The Chairperson thanked Mr Dingle and invited comments and questions from the Committee.

Mr S. Fenyane (ANC) said that the Committee had dealt with the Close Corporation Amendment Bill recently and asked why the Department had not dealt with them together through the Select Committee. He said he felt that the time of the Committee was not being used effectively.

Mr J. Strydom said that they had been dealt with that way because they were two different bills. He said that an attempt had been made by the Department to submit them to the State Law Advisors (SLA) as a package but the SLA had separated them and put them through the parliamentary process separately.

Mr J. Theron (DP) asked how the procedures could be changed to suit members anyway, as it was parliamentary procedures that determined the legislation process and not the Department.

The Chair said that an attempt would be made to structure the legislative work of the Committee so that bills would be grouped where possible. He asked Mr Strydom to assist the Committee to work through the amended clauses in the Bill.

Clause 1
In Clause 1, on page 2, line 20, the words "writing, printing" were omitted and the word "physical" was inserted instead.

The Chairperson asked whether the Department had considered words other than "physical". He said the word "physical" had connotations that may not apply in the context. He suggested that "non-electronic" might be more accurate.

Mr S. Fenyane (ANC) asked whether the dictionary meaning of "physical" allowed for the word to be used in the suggested context. He also warned against using words in the Bill under discussion that would make it out of consonance with other Bills.

Mr Strydom suggested that the wording read…."electronically or in any other manner".

Mr K. Durr (ACDP) suggested the wording "mechanically, manually and electronically".

The Chairperson proposed that the discussion be left to the Department to find the appropriate wording for the clause.

Clause 4
In Clause 4, on page 3, line 49, the words "to their original form" were omitted.

The Chairperson asked if it was possible to change a document back to its original form.

Mr Fenyane suggested that it would be impossible to change a document to its original form and suggested that the wording should be "to their substantial form". The Committee accepted the amendment.

On page 3, line 50, the words "or form" was omitted. The Committee accepted the amendment.

Clause 13
In Clause 13, on page 5, line 33, after "photographic", the word "sustainable" was inserted. The Committee accepted the amendment.

On page 5, line 34, after "durable" the words "and or sustainable" were inserted. The Committee accepted the amendment.

Clause 21
On page 6, in line 51, the words "in a form capable of retrieving therefrom" were inserted after "therein". The Committee accepted the amendment.

Clause 23
On page 7, in line 11, the word "writing " was replaced with "physical". The Committee referred the Clause to the Department to find an appropriate word for "physical".

Clause 24
On page 7, line 21, "writing " was again replaced with "physical". The Committee referred the Clause to the Department to find an appropriate word for "physical".

Clause 26
On page 7, in line 38, "sent by electronic mail" was omitted and "made available in electronic format" was substituted. The Committee accepted the amendment.

The Chairperson asked that discussion on the outstanding clause be left until the Department could find more appropriate wording.

Briefing on the Industrial Development Amendment Bill
Mr B. Sibisi, from the Department of Trade and Industry, presented the Industrial Development Amendment Bill. He stated that the purpose of the Bill was to amend the Industrial Development Act (1940) so as to adjust and add to the objects and powers of the Industrial Development Corporation (IDC). He added that its aim was to extend the activities of the corporation beyond the borders of South Africa to cover the Southern Africa region specifically, and Africa in general, and to empower the Managing Director to delegate his or her powers to other structures of the corporation. He also said that the Bill was intended to repeal obsolete provisions, provide for matters connected therewith, and redress all discriminatory laws.

Mr Sibisi stated that the amendments made to the principal act were in the form of additions and substitutions. They also repealed obsolete provisions and redressed gender insensitive references. He proceeded to deal with the amended clauses.

Clause 1
Section 3, Objects of the Corporation
He stated that subsections b (i) and (ii) were to be substituted. He said the paragraph was to include "industrial, or ancillary or related economic undertakings" instead of only "industrial undertakings".

He said that the Bill also proposed new additional objects to section 3. He said these objects were: (c) economic empowerment of historically disadvantaged communities; (d) fostering entrepreneurship in small-medium enterprises and investing in employment creating activities in under developed areas; (e) leveraging foreign direct investment in South Africa and Africa through international network; (f) encouraging creation of knowledge based industries and new technology based firms; and (g) enhancing corporate governance so as to achieve business excellence.

Clause 2
Section 4, Powers of the Corporation
He said that subsections (a) and (b) were to be substituted. Paragraph (a) of the Bill included "Southern African region and Africa" and paragraph (b) was to substitute "undertakings" with "activities". He informed the committee that the amendment in paragraph (f) was intended to allow the IDC to borrow money and to move gearing from 75% to 100% without the approval of shareholders. He said the amendment proposed that only at 100% and above the issued capital and reserves by shareholders, would approval be sought.

He said the Bill proposed to give additional powers to the corporation to: (j) implement procurement and outsourcing policies aimed at empowering SMEs and Historically Disadvantaged Persons; (k) support investment proposals in large benefication projects; (l) appraise large investment projects and secure foreign partners to co-invest; (m) promote investment in Special Development Initiatives and Industrial Development Zones as part of integrated rural development strategies; (n) provide venture capital finance and related services; and (o) provide export and import financing.

Clause 3
Section 5(b) & (c)
Mr Sibisi said that, in subsection (b), "industry or industrial undertakings" would be substituted by "activities contemplated in section 3". Subsection (c) would be worded " industrial undertaking with additions of ancillary or related economic, undertaking". He said that section 5 would be repealed because it dealt with objects of corporation that were already adequately covered by section 3, as repealed by Act No. 9 of 1995.

Clause 4
Section 8
He stated that section 8 of the Bill proposed to exclude members of Parliament, members of provincial legislatures and municipal council members from serving as directors of the IDC.

Clause 5
Section 11(1) & (2)
Mr Sibisi said that the amendment to subsection 1 would read "chairperson shall be a non-executive director and may not". He argued that the amendment changed the use of the word "chairman" and provided for gender sensitivity and the issue of delegation of power by the managing director.

Clause 6
Mr Sibisi informed the Committee that sections 12(3)(a), 12 (10) and 13 of the Act were obsolete and had to be repealed.

Clause 7
He said that, in section 16, the words "declaration of dividends" were to be substituted for "appropriation of profits". He also said that a new provision was to be added to the section that read "dividends may from time to time be declared by the board with the approval of the Minister".

Clause 8
He said that section 18 of the Act was to be repealed. He also said that, in section 19, "table" would be substituted for "lay", and the words " upon the tables of both houses of" would be omitted and "in" would be added to complete the sentence. Additionally, the words "sitting of Parliament" would substitute the words "in ordinary session".

Clause 9
Mr Sibisi reported that section 23 of the Bill, dealing with the short title of the Act would change to read "this Act shall be called the Industrial Development Corporation Act , 1940".

Clause 10
In Clause 10, Mr Sibisi said that the principal Act was amended with the words "he", "him", "his" and "chairman", wherever they occurred being replaced by "he or she", "him or her", "his or her" and "chairperson", respectively.

Mr Sibisi concluded his presentation by saying that the new amended Act would be named the "Industrial Development Amendment Act, 2001". He also mentioned that consultation in the drawing up of the Bill had been done with the National Treasury and the IDC.

The Chairperson requested clarity on section 12(30(a) which dealt with B shares in the IDC and the fact that they seemed to no longer be in existence.

Mr Sibisi replied that the B shares had been issued as private sector shares while the Government held the A shares. He said that since the Government wholly owned the IDC, any reference to B shares was obsolete.

Mr Fenyane wanted to know what had happened to the B shares.

Mr J. Strydom, Legal Advisor to the Department, explained that the B shares were authorised in 1940 but were never issued.

Mr Sibisi added that the legislation was only providing an enabling framework in the event that shares would be offered to the private sector. He said that the need to offer shares to the private sector had never arisen.

Mr Fenyane asked for the reason Parliament was being asked to debate the issue of shares in the IDC when Parliament was not a shareholder.

Mr Sibisi responded that the IDC was a product of parliamentary statute and was not a company under the Companies Act.

The Chairperson asked for the intentions of the Department in proposing that section 10 of the Act be repealed. He noted that, if the section was to be repealed, the power of the Minister of Public Enterprises to grant permission for the sale of IDC shares in ISCOR would be removed.

Mr Strydom agreed with the Chairperson and added that the only requirement would be that the IDC would be required to report such a sale of shares to the Minister.

Mr T. Tshivhase, Head of Legal Services for the IDC, added that there had been an intervening period during which ISCOR was privatised in 1989. He said that, during the privatisation, 12% ISCOR voting shares were made available to the IDC with the condition that the IDC would not dispose of the shares without consulting ISCOR shareholders.

Mr Sibisi added that a new shareholding arrangement between the IDC and ISCOR changed the arrangement. He said that the Minister had, in 1989, set conditions that the IDC would not vote or dispose of its shares. He said that this condition was made out of consideration of the need to attract foreign investors into ISCOR.

Mr Theron asked whether the IDC needed to ask for the Minister's permission if it wanted to dispose of its shares at ISCOR. He said that, if so, that simply meant that repealing section 10 simply brought the law into harmony with current practise.

Mr Fenyane asked whether the main point of the amendment was the deletion of an obsolete clause.

Mr Sibisi responded that the IDC was wholly owned by the State. He said that the Minister, as the shareholder representative, issued directives to the IDC through the IDC board. He said that, if the amendment was to be viewed in totality with the rest of the Bill, it would be clear that the interests of the government were secured.

Mr Fenyane requested that discussion of the Bill be postponed to another meeting as time had run out. However, he said that there were issues in the Bill that concerned him, such as the proposed 100% gearing. He felt that such gearing was risky, and he would like the Department to explain why they made the proposal.

Mr Sibisi responded that there was nothing wrong with the gearing proposal made by the Department because gearing was normal business practice.

The Chairperson stated that time had run out and that the Bill would be discussed the following week. The meeting was adjourned.

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