Second-Hand Goods Bill: briefings by Edward Nathan Sonnenbergs & Southern African Book Dealers Association; Mandating Procedures of Provinces Bill: deliberations

NCOP Security and Justice

21 August 2008
Chairperson: Kgoshi L Mokoena (Limpopo, ANC)
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Meeting Summary

The Committee deliberated on the Mandating Procedures of Provinces Bill. The Chairperson stated that there was an issue around definitions that were inserted into the Bill by the Portfolio Committee on Justice and Constitutional Development. The Committee had already adopted the Bill; however, they had later decided that they did not approve of the definitions for “mandating procedures” and “questions” that had been inserted in the Bill. The Select Committee asked their advisers how they should proceed in rejecting the amendments.

The Committee was informed that once the National Assembly adopted the Report, the Select Committee had two options; they could either accept or reject the Bill. In order to reject the Bill, Members would have to get mandates from their provinces saying that the provinces rejected the Bill. Once the proposed amendments were rejected, Parliament would establish a mediation committee where the Select Committee would have the opportunity to engage with the Portfolio Committee about the proposed amendments. The Committee decided that they would let the process unfold until the matter came back to the Select Committee.

Edward Nathan Sonnenbergs and the Southern African Book Dealers Association commented on the Second-Hand Goods Bill.

Edward Nathan Sonnenbergs informed the Committee that they were submitting their proposal on behalf of Midas Metals Limited, Innox Metals Limited, Kasper Logistics Limited and Simran Investrades Limited. These were South African Companies involved in the purchase, sale and export of scrap metals. The companies feared that the Bill would have far-reaching effects for dealers involved in second-hand goods.

The scrap metal dealers pointed out that Clause 2 of the Bill, which dealt with the Obligation to register, stated that a dealer could only be registered if he/she was a “natural person”. Section 14 of the Bill also stated that one needed to be a permanent resident in South Africa in order to be registered as a dealer. They claimed that these sections were discriminatory against foreign nationals involved in the second-hand goods industry. The companies proposed that clause 14 on Disqualification, be amended to say that a person could register as a dealer if he/she became a holder of a valid work permit issued under the Immigration Act.

The Southern African Book Dealers Association informed Members that books were of low value and therefore were not attractive to those involved in organised crime. High-priced books formed a small part of the book trade and more expensive items passed through established legitimate pathways. They stated that the Bill was discriminatory because it targeted the used book trade and not the new. The Bill also criminalised book dealers because it associated them with organised crime. The Association stated that the Bill was “unworkable” because of the amount of administrative work that it would give book dealers. The Act would force dealers to close down under the weight of the administration work. Full and part time employees would then become redundant. The Association recommended that books had to be removed from the jurisdiction of the proposed Act or that the legislation had to be relaxed so there was less administrative burden on book dealers.

 Members wondered if foreign nationals who had previous convictions would submit to providing additional information as well as fingerprints. Edward Nathan Sonnenbergs informed the Committee that foreigners who applied for work permits already had to be vetted through the Home Affairs system. Some Committee Members could not understand why books were included in the Bill. They also wanted to know the extent to which the Bill could be relaxed if the main objective of the Bill was to support government in fighting crime. The presenters thought there was a sufficient body of legislation that regulated how trade was run from a crime prevention point of view. The Book Dealers association informed the Committee that it was capable of self-policing, as it kept records of all purchases and all book dealers communicated all book thefts to one another.

A member of the South African Police Service informed the Committee that books were inserted in to the Bill during the drafting process, as some people thought that there were some books that were very valuable. He explained that when associations were accredited the Minister could exempt dealers from complying with the Act. The idea of the Bill was to allow different industries to regulate themselves so that members of the industries had the benefit of being exempt from the Bill. The idea was not to punish foreign nationals, but to draw them in to a specific association so that they could be involved in the process of self-regulation. The State Law Adviser thought that the Committee could solve the issue of the exclusion of foreigners from being registered as dealers by defining the term “permanent residence” in the Bill.

The Book Association could not understand how accreditation would solve the issues that Bill presented. They still requested the removal of books as a category in the Bill. The scrap metals industry still felt that the Bill discriminated against foreign nationals. They thought that there were other means that could be used to deal with crime.

The South African Police Service reminded the Committee that other legislation did not have the same aim as the Second-Hand Goods Bill, which was to stop crime generated by theft. He explained that the situation was not as dire as the presenters thought. Businesses could still apply to the Minister for exemption from the Act.

The Book Association noted that being accredited was still not satisfactory for the industry, as it still did not relax the administrative burden on the book dealers. Edward Nathan Sonnenbergs informed the Committee that it still needed to tell people the criteria they had to satisfy to achieve accreditation.

Meeting report

Other Matters: Deliberations on Mandating Procedures of Provinces Bill [B 8D-2008]
The Chairperson stated that one issue concerning the Bill had to be cleared up. He reminded everybody that the issue was around definitions which had been inserted by the Portfolio Committee on Justice and Constitutional Affairs and with which the Select Committee was not comfortable. The Select Committee did not approve of the Portfolio Committee’s definitions for “legislative mandate” and “question”. However, the Select Committee had already adopted the report, which included the insertion that they were now uncomfortable with. Therefore, the Select Committee wanted to find a way out of this predicament.

The Head of the Committee Section, Ms Zanele Mene, informed the Committee that because they had adopted the report, it would go to the House of the National Council of Provinces (NCOP). The report was now with the National Assembly (NA). Once the NA adopted the report, the NCOP would be briefed. If the NCOP did not want to adopt the amendments in terms of the Constitution and the rules of Parliament, then there was nothing that the Select Committee could do about it. The Select Committee had two options, either to accept or reject the amendments. If the Committee wanted to reject the amendments then Members would have to get mandates from Provinces saying that they rejected the Bill. Once the proposed amendments have been rejected, immediately Parliament would establish a mediation committee. Once the mediation committee was established, the NCOP would have the chance to engage the NA and convince them that they did not want those amendments. Then the report would be tabled in both Houses and the Bill would be passed and given to the President. The way forward was to inform the Provinces that they had to send mandates that rejected the proposed amendments.

Ms Jodi-Anne Niekerk, the Procedural Adviser to the NCOP, stated that the advocates had looked at the definitions that had been inserted by the Portfolio Committee. There was an understanding that there had been concerns by the Portfolio Committee and what they had thought they were addressing by including the definition of “question” and so on. She thought that the changes were made without the benefit of knowing the actual procedures and the way the NCOP operated. The amendments had the effect of widening the ambit for which mandates would be required. This meant that mandates would be needed for motions, for internal processes, draft resolutions and international agreements. The Constitution, Section 76 (2) (d), only gave the NCOP two options, either adopt the amended Bill from the NA or reject it. She recommended that the Select Committee reject the Bill. This would then put in process the development of the mediation committee. She understood that the Select Committee had completed its deliberations on the Bill. There was a report that needed to be programmed that would “come above the line” for the NCOP plenary. The Bill could be referred back to the Committee. This would allow the Select Committee to reconsider the Bill and to receive the mandates from the provinces that rejected the Bill.

Advocate Johan Labuschagne, Director of the Department of Justice and Constitutional Development, stated that he could not comment on the processes and procedures that the Committee had to follow. However, it was clear to him that the way that the Bill was formulated would definitely create an additional burden on the NCOP. Should the Committee reject the amendments proposed by the NA, the Committee would have to follow the processes provided in the Constitution.

Ms Mene stated that the way forward was to speak to the Office of the NCOP to inform the Speaker of the situation and so that the provinces did not get confused in terms of the processes that had to be followed. The provinces had to be fully aware of the mandates that they needed to bring regarding the Bill.

The Chairperson asked the State Law Advisers’ to comment.

Adv Herman Smuts, State Law Adviser in the Office of the Chief State Law Adviser, stated that he could not comment on the issue, as he was not aware of the problems that the Committee was having with the Mandating Procedures of Provinces Bill. However, after hearing what Ms Mene, Ms Niekerk and Adv Labuschagne had said about the procedures that the Committee had to follow, he fully agreed with them.

Mr A Moseki (North West, ANC) wondered if there had to be some sort of Committee resolution to take the route that the advisers’ had explained to them.

The Chairperson stated that they should let the process unfold until the matter came back to the Committee. He thanked all the advisers’ for their advice.

Second-Hand Goods Bill [B 2B-2008]
Edward Nathan Sonnenberg submission
Mr Siyabonga Mahlangu, the Director at Edward Nathan Sonnenbergs (ENS), stated that the submission was being made on behalf of Midas Metals Limited, Innox Metal Limited, Kasper Logistics Limited and Simran Investrades Limited, all of which were South African companies. These companies were involved in the purchase; sale and export of scrap metal in various countries.

Mr Mahlangu stated that the companies fully supported the objectives of the Bill; however, they felt that certain provisions in the Bill in its current form could have serious and far-reaching consequences for existing and future dealers in second-hand goods.

Clause2 of the Bill, on Obligation to Register, stated that all dealers had to be registered; however it also stated that to be registered one had to be a “natural person”. The companies were also concerned that Clause 14(1), which spoke about Disqualification, would disqualify people from being registered who were not permanent residents in South Africa. The term “interest” was not defined in Clause 14(2) and had a wide meaning. The term “interest” could be interpreted to include shares of all classes, members’ interests, partnership interests and other rights and forms of equity. The companies were concerned that people who were not permanent residents in the country would be barred from managing, controlling, owning or holding any interest in businesses that operated as scrap dealers anywhere in the country.

ENS pointed out that affiliated companies would be incapable of registration and would be unable to conduct their business activities. This could force them to shut down and cease operations. The prohibition on foreign owned or managed companies seemed premised on the basis that they were or were likely to become involved in illegal activities.

Mr Mahlangu used the Constitution to argue that foreign companies affiliated to local companies had the right to equality and to not be discriminated against. They argued that
Clause 2 and Clause 14 of the Bill discriminated against foreign nationals who were managing South African companies involved in the second–hand goods industry and also discriminated against the foreign shareholders of South African companies involved in that industry.

The ENS proposed a few amendments to Clause 14. They proposed that Clause 14(1) (e) be amended to say that a person could be disqualified from being registered as a dealer if he or she does not permanently reside in the republic or if he or she was not the holder of a valid work permit as issued under the Immigration Act. They also proposed that Clause 14(2) (a) be amended to exclude persons referred to in Clause 14(1) (e).

The ENS proposed amendments to the accreditation of associations. They recommended the insertion of a section that required the Minister to promulgate regulations, which would set out the criteria in terms of which associations would be accredited. They also wanted to amend inspection powers that would require companies such as affiliated companies to submit information and documentation such as proof of registration, registered address and audited financial statements that might be required to evidence the nature and extent of business activities conducted by entities as well as the composition of management structures. |

Southern African Book Dealers Association submission
Mr Geoff Klaas, a committee member of the South African Book Dealers Association (SABDA), informed the Committee that SABDA represented the established sector of the book trade. He stated that books were of low commercial value and was therefore not attractive to organised crime. Books had very little scrap value bar that of recycling value.

Small businesses formed the bulk of second-hand book trade and the bulk of trade operated on high volumes of low value goods. Most used books sold for less than R100. High priced items formed a very small part of the trade and more expensive items normally passed through established legitimate pathways.

SABDA stated that the Second-Hand Goods Bill was discriminatory and it criminalised book dealers. It was also “unworkable” to book dealers. The Bill discriminated against the used book trade whilst ignoring the new book trade. Associating book dealers with areas of activity of organised crime was criminalising legitimate business activity. The Bill was unworkable because the amount of work it would give book dealers was completely out of sync with the value of goods and human resources available to the dealer.

Mr Klaas addressed crime in the book trade. He stated that usually only certain individuals stole books. These people were caught and processed by common law usually with the close co-operation of the trade. Booksellers had an effective network for informing members of stolen items and have reported successes in both returning books and apprehending thieves.

In terms of records that are kept of purchases, Revenue Services VAT rules required that all booksellers keep records of purchases including contact details and the identity of the seller. Expensive items are usually sold on invoice to recorded parties.

Mr Klaas also discussed the effects that the Act would have on book dealers. The Act would force dealers to close under the weight of administration. Full and part time staff would be made redundant. Book dealers were seen as net contributors to the tax base. The Act would cause VAT, PAYE, company and personal tax contributions to fall. SABDA warned that damaging the second-hand side of the industry would do as much harm to society as damaging the new book side. They warned that the Bill would cripple the book dealers’ ability to trade worldwide.

SABDA concluded by saying that books should be removed from the Bill altogether or that the legislation should be relaxed so that there was less of an administrative burden on book dealers. There was a conclusive case for the removal of books from the jurisdiction of the proposed Second-Hand Goods Act. The loss of trade was not only a loss to small businesses; it was also a denial of access to knowledge.    

Discussion
Mr J Le Roux (Eastern Cape, DA) stated that he thought books were the most important assets that any country could have. He could not understand why books were included as a category in the Bill. He wanted to the South African Police Service (SAPS) and the Legal Advisers’ comments on the issue.

Mr M Mzizi (Gauteng, ANC) noted Mr Mahlangu’s concerns on what the Bill would do to foreign trade. He wanted Mr Mahlangu to comment on Clause 4 of the Bill, which spoke about requiring information on application by a natural person and said that a Commissioner might require the applicant to provide additional information and particulars, and might require that the applicants’ fingerprints be taken. He wondered if foreigners who had previous convictions would submit to this.

Mr Mahlangu addressed the issue of foreign nationals with previous convictions and questionable records. He stated that people had to move away from the presumption that a certain category of person was inherently criminal. If there were a problem of crime in the scrap metal industry, the Bill would apply to local dealers as well as to foreign dealers. However, the country had a very mature state “craft”. When a person applied to enter the country, he or she needed to be vetted through the Home Affairs system. If a person applied for a work permit in this country, they also went through the rigorous Home Affairs process. The companies that they work for also had to report to the South African Revenue Service (SARS) regularly. Local companies also had to register with the Department of Trade and Industry (DTI). He stated that his clients, who had been trading in the country, had not been questioned by the police or involved in any criminal activity in the last five years.

Mr Mzizi commented that the Bill spoke about three categories, which were scrap yards, pawnbrokers and recycling. He saw now that the Bill also spoke of sporting equipment, clothing and valuables, books and shop-fitting equipment. He did not see any relevance in dealing with some of the items and he did not see which category the five mentioned items would fit in to.

Mr N Mack (Western Cape, ANC) stated that he had always disagreed with the
registration of second-hand goods valued at over R100. He stated that the threshold for registering goods should be higher. He asked SABDA the extent to which the legislation should be relaxed if books were not excluded from the Bill. He also wondered which category paintings would fit in to.

Mr Klaas answered that putting values on certain objects could be a difficult task to do. He agreed that R100 was too low a threshold for general activity and the purposes of law enforcement. He thought that the object of the Bill was to eliminate major crime. There was legislation that dealt with the pursuit of petty criminals. This Act would impose too much bureaucratic administration and paperwork on the book trade and it was the equivalent of using a “sledgehammer to squash an ant”. The result would not be a direct correlation with the effort involved to achieve the Bill’s desired result. He asked the Committee to bear in mind that there were other statutory requirements for any trader. All traders had to keep records of every purchase for tax purposes. If it was found that the good was stolen, then there would be a document in place that could chart the purchase or the transaction. The Bill called for duplication of effort on the part of the trader.

Mr Klaas stated that there were objects such as paintings that had considerable commercial value. There were also objects that could be pilfered from major institutions, which needed to be addressed. The more valuable an item was, the more documented it was in the market place. Therefore, if someone came to a bookseller with a major book, the book’s existence would already be well known. One of the ways in which book traders ‘regulated’ was that they did not just buy a valuable book “over the counter”; they wanted to know where the person obtained the book and how it came into their possession.

Mr Moseki wanted clarity on the amendment that ENS proposed for Clause 14(1) [refer to ENS presentation]. He did not understand ENS’s amendment to the clause, as it seemed fine to him. He noted that the overall objective of the Bill was to support the government in fighting crime. The presenters had said that they needed flexibility on certain aspects of the Bill. He wanted to know how ENS’s proposal would help the government top deal with crime.

Mr Mahlangu stated that the Committee could rely on certain measures that could be found in Clause 14(e) of the Bill, where the Minister could prescribe conditions on a certain categories of goods. If he were the Minister, he would consider if it was appropriate for him to say that anyone selling copper wires, for example, needed to satisfy certain criteria. He wanted to emphasise why his clients were so anxious about Clause 2 and 14 in the Bill in its current formulation. It would mean that his clients would need to close down their businesses. Once the Act is passed, they would be committing an offence if they continued to trade because they had in their equity, foreign interests. If the businesses closed down, it would affect unemployment, foreign exchange as well as tax. He stated that the Bill would affect “outside” discrimination of the foreign nationals that traded in the scrap metal industry.

Mr Mahlangu stated that Clause 14(1) (e) had to be amended because the term “permanently reside” had to be defined. The term was only defined in the Immigration Act. He wondered if the Committee was “dove-tailing” or incorporating the Immigration Act by reference. The scrap metal industry had a problem with the phrase “does not permanently reside” because this country required skills and investment; yet did not grant permanent residence to foreigners easily. A person needed to satisfy certain criteria. The legislation had to be relaxed so that experts in the scrap metal industry, who did not permanently reside in the country, still had the opportunity to contribute to the South African economy.

Mr Moseki stated that he sympathised with SABDA to a certain extent, however he was worried that they were not involved in regulation. One way of curbing crime and ensuring that crime was dealt with was to regulate everything that they did. He wanted to know how SABDA helped the police to ensure that crime was eradicated at all levels.

Mr Klaas stated that he believed that there was a sufficient body of legislation that firmly regulated how the trade was run, both from a revenue and crime prevention point of view. SABDA was committed to fighting to crime; however, booksellers found that crime was not a significant aspect of the trade. Most booksellers did not get offered stolen goods, nor did people steal books for commercial gain, they stole books for personal gain. 

Ms Meredith Kempthorne, a member of SABDA, stated that belonging to the organisation was a matter of pride and that there were a number of criteria in the constitution that they had to meet. SABDA was a very ethical association and they stressed the importance of ethics in dealing. If this was transgressed then you were no longer part of association. Therefore, SABDA was capable of self-policing.

Mr Klaas stated that the Association fully supported all aspects of the Bill as well as its intentions to regulate crime. Booksellers kept records of everything they purchased. All they were asking for was relaxation in some of the measures regarding selling which were administratively impossible for booksellers. Every book would have to be recorded with identity numbers, which was administratively impossible. This was the aspect of the Act that they were asking to be modified.      

The Chairperson stated that the Committee would discuss the submissions the following week. He noted that there were very strong opinions from both groups.

Mr Bert van der Walt, the Director for Legal Services in the South African Police Service (SAPS), stated that books were inserted in to the Bill during the process of drafting, as it was felt that some books could be quite valuable. The Bill, like all other legislation, tended to regulate for the ideal situation and therefore covered as much as possible. If books that were in a set were sold one by one, each book could have a value of less than R100. However, the set of books could be worth over R1000. He did not have a specific opinion with regard to books; however he thought that this was an excellent example of how the Bill intended to work. SABDA was an association that had an ethical basis that would discipline its members, police its members and communicate if goods were stolen. When such an association was accredited, the Minister might very well exempt the dealers from complying with the Act. The idea of the Bill was to allow the different industries to regulate themselves so that their members had the benefit of exemption from the Bill. There would be recommendations when the different associations applied to the Minister to be exempt.

Regarding the scrap metal industries, it was a pity that ENS did not raise these issues in 2005 when there were discussions about scrap metal dealers. This was also an example of dealers that belonged to an association. They could request an exemption from the Act through the association.

In terms of what was said by Mr Mahlangu about the Immigration Act, Mr van der Walt reminded the Committee that Acts were read in context, therefore the question of foreigners would be read in the context of the Immigration Act.  

Mr van der Walt informed the Committee that in South Africa about 5000 tons of copper vanished per year. Therefore the scrap metal industry had to be regulated very stringently. The scrap dealers that belonged to an association may request the benefit of the exemption from the Bill. The idea was not to punish the foreign nationals but to draw them in to these specific associations so that there was a process of self-regulation.

Ms Ntombebandla Mnyikiso, State Law Adviser at the Office of the Chief State Law Adviser, added that she agreed with what Mr van der Walt was saying about accreditation. SABDA was covered because they did not have to go through the registration process and they were exempted from the provisions of the Act. She thought that the Bill was not specifically targeting foreigners; it looked at those that did not have permanent residence in the country. The Bill was not discriminating against foreign nationals who wanted to invest in the country; however if people thought that it was then the term “permanent residence” had to be defined.

Mr Klaas stated that he was a little confused at the response about accreditation, as it still does not address the core issue of whether the actual category of goods should be in the Schedule of the Act or not. SABDA was requesting from the Committee the removal of books as a category. SABDA did not mind being an accredited organisation; however, they were looking to have books excluded as a category of goods that fell under the Act. He asked the Committee to explain how accreditation was going to solve SABDAs problem.

Ms Kempthorne added that booksellers seemed to be included in three parts of the Bill, as household goods, books and valuables. This was problematic.

Mr Mahlangu stated that he disagreed with Ms Mnyikiso’s interpretation of the Bill. He said that it was incongruent with the approach that the Constitutional Court had adopted in interpreting the Constitution. He pointed out that Section 9 of the Constitution said that everyone had a right not to be discriminated against. The term “everyone” included foreign nationals. He stated that permanent residence was defined in the Immigration Act, which meant that the person only required permanent residence in the country if he or she was a foreign national. He added that there were three kinds of people in the country, citizens, permanent residents that were former foreign nationals who had not yet been naturalised and foreigners. This differentiation made it inescapable to reach the distinction of those three types of people. Therefore, he could not understand Ms Mnyikiso’s comments on the bill, as he thought it was a very literal interpretation. The Constitutional Court could ask itself if there were any other measures that could be used to deal with crime without discriminating against foreigners. He thought that the Committee needed to address the Bill and what they wanted it to achieve.

Mr van der Walt stated that the situation was not as dire as Mr Mahlangu was trying to sketch. The Bill specifically stated that people could apply to the Minister for exemption from the Act. The Minister would then apply his or her mind when making the decision. Other legislation that made exceptions for foreigners did not have the same purpose that this Bill did, which was to stop crime generated by the theft of goods. If there was a person that was a foreign national that did not reside in the country, then there was still a process in which these people could be accommodated to register as a dealer.

Ms Mnyikiso stated that one point that the Committee could agree on was that the issue had to do with permanent residence. This term had to be defined in terms of the context in which it would be used in this legislation. The Committee would only be able to move forward with the Bill once it clarified and understood the context in which the term “permanent residence” was defined. She thought that the Bill indulged in justifiable limitations according to Section 36 of the Constitution and was not targeting any specific group.

Mr van der Walt stated that he thought that defining “permanent residence” would solve the problem.

Mr Klaas commented that Ms Mnyikiso seemed to believe that becoming accredited would be sufficient to solve the problem. He noted that this was hardly satisfactory for the industry. He wondered how being accredited relaxed the administrative burden on booksellers.

Mr Le Roux addressed the issue of getting an exemption. He wanted to know what this meant in practice. He had not heard any reason as to why books were included in the Bill. If there was crime in bookselling, then it was so small it could be considered negligible.

Mr van der Walt answered that books were included to make the application of the Act as wide as possible. The present Act excluded household and office equipment, and presently this was one of the biggest crime problems. The members of accredited associations might be exempted from certain provisions in the Act such as keeping a record of all purchases. Some associations would not be expected to comply with every provision in the Act. Because SABDA represented ethical and honest dealers, its members would be exempted from the Act.

Mr Mahlangu stated that people lived in an era of competing human rights. There was the right to freedom of association, which was a right that had to be read in its entirety. If a scrap metal dealer applied to an association for membership and the association then decided to reject the application, then the scrap metal dealer would become “vulnerable” to the Bill and might not be able to trade. He added that there was serious collusion and there were serious counter-commercial interests in the industry. The Bill worked well in an association but a single scrap dealer would be in trouble.

In terms of the exemption that one could seek from the Minister, the Act did not tell people the criteria that they had to satisfy to achieve accreditation. It also put some dealers’ at more of a disadvantage because if the Act was implemented in its current state and a dealer was not a member of an association, then the dealer will not be able to trade from the date of the Act’s commencement. For the Committee to promote competition in the scrap metal industry, it needed to lessen the burden of dealers becoming members of an association.

Mr Klaas stated that SABDAs primary concern still rested on the question of accreditation not being a sufficient safeguard against the inclusion of books within the ambit of the Act and the consequences that would flow from it.

The Chairperson stated that the Committee had listened to all the arguments and it was now time to redraft the legislation if they needed to. He thanked the presenters for a very fruitful conversation and invited them to attend the deliberations on the Bill. The presenters should feel free to submit more amendments to the Bill before 9 September.

The meeting was adjourned.

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