Constitutional Amendment Bills: briefing

Meeting report

SECURITY AND CONSTITUTIONAL AFFAIRS SELECT COMMITTEE
24 October 2001
CONSTITUTIONAL AMENDMENT BILLS: BRIEFING

Chairperson: Chief M. Mokoena

Relevant Documents
Summary of proposed Constitutional Amendments (see Appendix 1)
Constitution of RSA Amendment Bill [B68-01]
Portfolio Committee Amendments to Constitution of RSA Amendment Bill (see Appendix 2)
Constitution of RSA Second Amendment Bill [B78-01]
Portfolio Committee Amendments to Constitution of RSA Second Amendment Bill (see Appendix 3)

SUMMARY
The Constitutional Amendment Bills and the changes made to them in the National Assembly were explained to the Committee.

MINUTES
Constitution of RSA Amendment Bill
Mr Ismail Momoniat and Mr Vuyo Kahla (National Treasury) briefed the Committee (see Appendix). Mr Ismail said that the National Treasury had inserted a new clause, Section 230A which deals with municipal loans and that the amendment would allow the councils to access long term credit on less onerous restrictions lowering the rate of premium charged on loans - all within the constitutional framework.

He pointed out that most Municipal Councils are not in a position to produce security for a credit facility and that for the most part they rely on a collateral promise based on the rates to be collected in a fiscal year. This collateral promise is premised on uncertainty, which renders such transactions a risky undertaking. Clause 1(b) of section 230A enable Municipal Councils to bind future Councils on the credit commitment they undertake. It was absolutely necessary that the present Council's financial commitments bind all future councils for purposes of contractual and administrative ease. (Clause 17 of B68B-01)

Discussion
Mr Mathee (NNP) said that Councils ordinarily raise funds through bonds. He sought to know the kind of loans the amendment is trying to address.

Mr Momoniat replied that the amendment refers to the Municipal Finance Management Draft Bill and the whole borrowing regime provided for by that Bill. He said that the constitutional amendment would lay down the framework for the relevant Bill to make provisions with regard to the conditions of borrowing. He added that the amendment covers all manner of borrowing.

Mr Lever (DP) asked whether it was not necessary to set up standards and guidelines for such borrowing.

Mr Momoniat replied that questions of standard and guidelines were all set out in the Treasury policy paper on borrowing by Councils. He said this regime of policy is a very complex area, which he did not want to delve into at the moment.

Mr Matthee asked what difference was there between the Second Amendment Bill's Clause 10 of B78b-01 (Section 230) and the First Amendment Bill's Clause 17 of B68b01 (Section 230A). He said the two provisions look similar.

Mr Kahla agreed that they looked identical at a glance but in substance they were not. He said that the two provisions clarify the position far much better now than previously when they were collapsed into one clause. One clause deals purely with Municipal Councils while the other refers to provinces and the provincial government. There had to be a clear separation of power between the provincial and the local government establishments hence the two provisions.

Mr Matthee asked for confirmation that the proposed amendments have been advised by sound legal opinion and that there is no danger of conflict between municipal and provincial mandates. As he understood it, the powers of the Councils should fall under the oversight role of the NCOP. He noted that it was common knowledge that some of the powers exercised by the Councils are also concurrent powers. The Committee must be sure that this issue has been fully investigated.

Mr Kahla replied that section 74 (3)(b) adequately addresses Mr Lever's concern. He said the section deals only with provincial powers and has nothing to do with the municipalities. He noted that there was a clear separation of power between the provincial and the local government establishments.

Mr De Lange, the legal advisor with the Department of Justice, added that this issue has been the subject of much debate but that he was satisfied that in its present form, the section is properly drafted.

Mr Matthee said that in terms of the Constitution, the NCOP is mandated to intervene in Municipal Council matters and that the new section seems to exclude this mandate. He said the section does not seem to make any sense at all adding that the section could engender intractable problems.

Mr De Lange admitted that this was rather a grey area but explained that at the moment one has to go by the clear provisions of the Constitution.

Mr Momoniat said that the section is only concerned with the failure to fulfil financial obligations and does not touch on legislative matters. He said that the provision might not be consistent with the spirit of political inclinations but that it sufficiently addresses the mischief it seeks to remedy.

Constitution of RSA Second Amendment Bill
Mr Momoniat said that this Bill consists of many diverse amendments on practical matters relating to finance that had required clarification. He pointed out that the "municipal intervention issues" originally in the Bill have been delayed for further consultations and that the "financial emergency" issue has been withdrawn completely.

He pointed out that Chapter 11 of the Municipal Finance Management Bill provides the process for restoring a municipality in financial crisis to financial health. He said that further consultations are called for on this and thus the pertinent clauses in the tabled Second Amendment Bill have been removed. He said, however, that this matter would return at the start of the next legislative term.

Mr Momoniat said that on the issue of "Fettering" a new clause was adopted by the Portfolio Committee, Section 230A in the First Amendment Bill which separates municipal borrowing from the provincial regime. He added that the section empowers municipal councils to bind the municipality as to future revenue streams and future budgets. The section allows for a lower cost of borrowing and eliminates internal contradictions between "bridging during a fiscal year" and "12 months," in the case of short-term borrowing.

The Bill incorporates many separate amendments related to practical matters that have arisen under the existing constitutional provisions. He pointed out that the amendment was not urgent but that it was needed for a sensible management of legislation:

Clause 1 amends section 73 to provide that the Minister of Finance must introduce money Bills and certain other related financial legislation. This would ensure that the National Treasury has assessed the financial and economic impact of the Bill before introducing it.

Clause 2 extends the term "money Bill" in Section 77 to include bills abolishing, reducing, or granting exemptions from national taxes, levies, duties, or surcharges and bills authorising direct charges.

Clause 3 and 5 relates to supervision of local government (amending sections 100 and 139) but these have been removed from the Bill before the Committee and the matter has been delayed for further consultation.

Clause 4 amends section 120 which deals with the provincial equivalent of a money bill. Only MECS for Finance could introduce bills abolishing, reducing, or granting exemptions from provincial taxes, levies, etc.

Clause 6, adding a subclause to Section 155, has been delayed for further consultation. It dealt with the executive and legislative authority of a municipality when its council cannot function. Clause 7, amending Section 159(3) regarding dissolution of a council, was consequential and has also been delayed for further consultation.

Clause 8 amends section 163 to refer to local government participation in selection processes rather than local government nomination for members to the Financial and Fiscal Commission. It should be read together with Clause 12 for clarity.

Clause 9 would have amended Section 213 but that it has been withdrawn completely.

Clause 10 does not introduce anything new but is amending Section 216 only to clarify that stopping a transfer of funds to enforce norms and standards can only be done in the case of a serious or persistent material breach.

Clause 11 amends Section 217 regarding procurement so as to make mandatory preferential procurement policies within a national regulatory framework.

Clause 12, which should be read with Clause 8, amends Section 221 to reduce the number of Financial and Fiscal Commissioners from the original 22 to 9 members. This is based on the policy view that the current number is needlessly too large. Three members would be selected from the provincial list after consulting with provincial premiers and two members would be selected from the local government list after consulting organised local government.

Clause 13 is a technical issue that seeks to amend Section 226 to authorise legislation governing direct charges against provincial revenue funds and payments due to local government

Clause 14 is also a technical issue that seeks to amend Section 228 to clarify that surcharges are imposed on taxes, not on "tax bases" which was confusing. Every tax expert that examined the original section could not make sense of its purport. Apart from deleting the confusing words, it improves the powers of the provinces in this regard.

Clause 15 amends Section 230 to limit its application to provincial borrowing. The new section 230A in the first Amendment Bill will deal with municipal borrowing. The clause was amended to rewrite it in a clear manner.

The Chair noted that there were no questions from members on the amendments proposed by the National Treasury. He then excused the Treasury team and invited Mr Lange from the Department of Justice brief the Committee on the non-financial amendments to the Constitution and other Bills. [This part of the meeting was not monitored by PMG].

Appendix:
PROPOSED CONSTITUTIONAL AMENDMENTS
NCOP Standing Committee on Justice and Constitutional Development
24 October 2001

THERE ARE TWO AMENDMENT BILLS: -
Constitution Amendment Bill, 2001
· As approved by NA Portfolio Committee, includes "fettering" amendment related to Municipal Finance Management Bill
· Financial emergency issue delayed for further consultation.

Constitution Second Amendment Bill, 2001
· Must be adopted by both NA and NCOP
· Practical matters related to financial matters and other issues
· Municipal intervention issues delayed for further consultation

Constitution Amendment Bill, 2001
Financial Emergency Issue
For background:
· First Amendment Bill originally added subsection 155(8) to the Constitution
· Laid the foundation for MFEA budget powers under Municipal Finance Management Bill Ch 11.
· MFM Bill Ch 11 provides process for restoring a municipality in financial crisis to financial health.
· Further consultation is needed on that clause, in relation to 4 other clauses originally in Second Amendment Bill
· This matter will come back at the start of the next legislative term.

"Fettering" issue
· New section 230A in First Amendment Bill:
- Separates municipal borrowing from provincial
- Empowers municipal council to bind the municipality as to future revenue streams and future budgets
- Allows lower cost borrowing
- Eliminates internal contradiction between "bridging during a fiscal year" and "12 months," in the case of short term borrowing

Constitution of RSA Second Amendment Bill, 2001
· Includes many separate amendments, related to practical matters that have arisen under existing constitutional provisions
· not urgent, but needed for sensible management of legislation

· Clause 1 changes section 73 to provide that Minister of Finance must introduce money bills and certain other financial legislation.
- This assures that National Treasury has assessed the financial and economic impact.

· Clause 2 extends the term "money bill" in Section 77 to include bills abolishing, reducing, or granting exemptions from national taxes, levies, duties, or surcharges, and bills authorising direct charges.

· Clauses 3 and 5, amending sections 100 and 139, relating to supervision of local government, have been delayed for further consultation
- would have given national executive power concurrent with provinces to intervene in local government.
- The NCOP role would be changed to a veto, rather than an approval.

· Clause 4, amends section 120-- provincial equivalent of a money bill: Only MEC for Finance could introduce bills abolishing, reducing, or granting exemptions from provincial taxes, levies, etc.

· Clause 6, adding subsection 155(9), as to executive and legislative authority when council cannot function, has been delayed for further consultation
- would have provided for exercise of authority when council "for any reason" cannot function

· Clause 7, amending section 159(3), regarding dissolution of a council, was consequential, has been delayed for further consultation.

· Clause 8 amends section 163 to refer to local government participation in selection process, rather than local government nomination, for members of FFC.

· Clause 9 would have amended section 213, has been withdrawn completely.
· Clause 10 amends section 216 to clarify that stopping a transfer of funds to enforce norms and standards can only be done in the case or a serious or persistent material breach.
· Clause 11 amends section 217 regarding procurement to make mandatory preferential procurement policies within a national regulatory framework.

· Clause 12 amends section 221 to reduce the Financial and Fiscal Commission from 22 to 9 members.
- 3 members selected from provincial list after consulting with provincial premiers
- 2 members selected from local government list after consulting organised local government

· Clause 13 amends section 226 to authorise legislation governing direct charges against provincial revenue funds and payments due to local government

· Clause 14 amends section 228 to clarify that surcharges are imposed on taxes, not on "tax bases."

· Clause 15 amends section 230 to limit to provincial borrowing. New 230A in first amendment bill will deal with municipal borrowing.

Appendix 2:

As to be voted on
PORTFOLIO COMMITTEE AMENDMENTS
TO
CONSTITUTION OF THE REPUBLIC OF SOUTH AFRICA AMENDMENT BILL
[B 68—2001]
(As agreed to by the Portfolio Committee on Justice and Constitutional Development
(National Assembly) )
__________
NEW CLAUSES
1. That the following be new Clauses:
Substitution of section 54 of Act 108 of 1996
3. The following section is hereby substituted for section 54 of the Constitution:
"Rights of certain Cabinet members and Deputy Ministers in the National Assembly
54. The President, and any member of the Cabinet or any Deputy Minister who is not a member of the National Assembly, may, subject to the rules and orders of the Assembly, attend and [may] speak in the Assembly, but may not vote.".
Amendment of section 58 of Act 108 of 1996
4. Section 58 of the Constitution is hereby amended by the substitution for the words preceding paragraph (a) of subsection (1) of the following words:
"Cabinet members, Deputy Ministers and members of the National Assembly—".
CLAUSE 5
1. Clause rejected.
NEW CLAUSE
1. That the following be a new Clause:
Substitution of section 93 of Act 108 of 1996
7. The following section is hereby substituted for section 93 of the Constitution:
"Deputy Ministers
93. (1) The President may appoint—
(a) any number of Deputy Ministers from among the members of the National Assembly; and
(b) no more than two Deputy Ministers from outside the Assembly,
to assist the members of the Cabinet, and may dismiss them.
(2) Deputy Ministers appointed in terms of subsection (1)(b) are accountable to Parliament for the exercise of their powers and the performance of their functions.".
 
CLAUSE 9
1. Clause rejected.
CLAUSE 10
1. Clause rejected.
CLAUSE 15
1. Clause rejected.
NEW CLAUSE
1. That the following be a new Clause:
Amendment of section 176 of Act 108 of 1996
15. Section 176 of the Constitution is hereby amended by the substitution for subsection (1) of the following subsection:
"(1) A Constitutional Court judge [is appointed] holds office for a non-renewable term of 12 years, [but must retire at] or until he or she attains the age of 70, whichever occurs first, except where an Act of Parliament extends the term of office of a Constitutional Court judge.".
NEW CLAUSE
NEW CLAUSENEW CLAUSE
1. That the following be a new Clause:
Insertion of section 230A in Act 108 of 1996
17. The following section is hereby inserted in the Constitution after section 230:
"Municipal loans
230A. (1) A municipal council may, in accordance with national legislation—
(a) raise loans for capital or current expenditure of the municipality; and
(b) bind itself and a future council in the exercise of its legislative and executive authority to secure loans or investments for the municipality.
(2) Loans for current expenditure—
(a) may be raised only when necessary for bridging purposes during a fiscal year; and
(b) must be repaid within twelve months.
(3) National legislation referred to in subsection (1) may be enacted only after any recommendations of the Financial and Fiscal Commission have been considered.".
LONG TITLE
1. On page 2, from the seventh line, to omit all the words from "to provide for mechanisms" up to and including "legislative authority" in the ninth line, and to substitute:
to make enable a municipal council to bind itself and a future council in the exercise of its legislative and executive authority to secure loans or investments for the municipality


Appendix 3:

As to be voted on
PORTFOLIO COMMITTEE AMENDMENTS
TO
CONSTITUTION OF THE REPUBLIC OF SOUTH AFRICA SECOND AMENDMENT BILL
[B 78—2001]
__________
(As agreed to by the Portfolio Committee on Justice and Constitutional Development
(National Assembly) )
__________
 
CLAUSE 1
 
1. On page 3, from line 4, to omit paragraph (b) and to substitute:
"(b) a Bill which provides for legislation envisaged in section 214.".
CLAUSE 2
1. On page 3, from line 25, to omit subsection (2) and to substitute:
(2) A money Bill may not deal with any other matter except -
(a) a subordinate matter incidental to the appropriation of money; [or]
(b) the imposition, abolition or reduction of national taxes, levies, [or] duties or surcharges;
(c) the granting of exemption from national taxes, levies, duties or surcharges; or
(d) the authorisation of direct charges against the National Revenue Fund.
CLAUSE 3
1. Clause rejected.
CLAUSE 4
1. On page 4, from line 23, to omit subsection (2) and to substitute:
(2) A money Bill may not deal with any other matter except -
(a) a subordinate matter incidental to the appropriation of money; [or]
(b) the imposition, abolition or reduction of provincial taxes, levies, [or] duties or surcharges;
(c) the granting of exemption from provincial taxes, levies, duties or surcharges; or
(d) the authorisation of direct charges against a Provincial Revenue Fund.
CLAUSE 5
1. Clause rejected.
CLAUSE 6
1. Clause rejected.
CLAUSE 7
Clause rejected.
CLAUSE 8
1. On page 5, in line 33, to omit "and".
2. On page 5, in line 35, to omit "[and " and to substitute "and".
3. On page 5, in line 36, to omit "(iii) nominate persons to the Financial and Fiscal Commission]" and to substitute:
(iii) [nominate persons to the Financial and Fiscal Commission] participate in the process prescribed in the national legislation envisaged in section 221(1) (c)."

CLAUSE 9
1. Clause rejected.
CLAUSE 12
1. On page 6, from line 18, to omit paragraphs (b) and (c) and to substitute:
(b) [nine persons, each of whom is nominated by the Executive
Council of a province, with each province nominating only one person] three persons selected, after consulting the Premiers, from a list compiled in accordance with a process prescribed by national legislation;
(c) two persons [nominated by organised local government in terms of section 163] selected, after consulting organised local government, from a list compiled in accordance with a process prescribed by national legislation; and
2. On page 6, from line 25, to omit paragraph (b) and to substitute:
(b) by the insertion after subsection (1) of the following subsection:
"(1A) National legislation referred to in subsection (1) must provide for the participation of—
(a) the Premiers in the compilation of a list envisaged in subsection (1) (b); and
(b) organised local government in the compilation of a list envisaged in subsection (1)(c).".
3. On page 6, in line 28, to omit subclause 2.
CLAUSE 15
1. Clause rejected.
NEW CLAUSE
1. That the following be a new Clause:
Substitution of section 230 of Act 108 of 1996
10. The following section is hereby substituted for section 230 of the Constitution:
"Provincial loans
230. (1) A province [or a municipality] may raise loans for capital or current expenditure in accordance with [reasonable conditions determined by] national legislation, but loans for current expenditure [-
(a)] may be raised only when necessary for bridging purposes during a fiscal year [and
(b) must be repaid within twelve months] .
(2) National legislation referred to in subsection (1) may be enacted only after any recommendations of the Financial and Fiscal Commission have been considered.".
LONG TITLE
On page 2, from the seventh line, to omit all the words from "to provide for national supervision" up to and including "equitable share;" in the thirteenth line.
2. On page 2, in the fourteenth line, to omit "further".
3. On page 2, in the twenty-sixth line, to omit "further provision for the regulation of municipal and" and to substitute "provision for".