Minister on position of Acting NLC Chairperson; Update on NLC process, with Minister and Deputy Ministers

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Trade, Industry and Competition

31 March 2021
Chairperson: Mr D Nkosi (ANC)
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Meeting Summary

Video: Portfolio Committee on Trade and Industry, 31 March 2021

In a virtual meeting, the Committee was briefed by the Minister on the status of the Acting Chairperson of the National Lotteries Commission (NLC), Ms Zandi Brown. Members heard that this matter was particularly urgent due to time sensitivities. The Minister reported on: the context of appointing an Acting Chairperson (Nov 2020 – Jan 2021), governance questions and advice and recommendations from Members pending the appointment of a nominee. The Committee heard that the appointment was made to take effect from 30 November 2020 to end January 2021. This date was extended to the end March 2021.

The Committee process on recommending a candidate for the position of NLC board chairperson was made last week but the House process was not yet complete – this would essentially mean the NLC would be without a chairperson until the House confirmed the Committee report.

The Committee heard that the key question was whether or not the Minister had the authority to appoint someone as an Acting Chairperson. After careful consideration of the statute and following legal advice, the Minister asserted his view that the Executive Authority had the implied power to appoint one of the members of the board to perform the functions of the Chairperson until the period that a new Chairperson could be appointed in terms of NLC legislation. The Minister explained he now has three options: to appoint an outsider as chairperson of the board, appoint another member of the NLC, or extend Ms Brown’s acting term “for a short period” until a new permanent chairperson is appointed.

The Committee was keen to know how this might affect potential issues on and about the separation of powers, and were particularly concerned about the nature of its role in the matter in comparison with merely being appraised by the Minister on developments. Members and the Minister expressed the urgency to address governance and establish credibility. A Member of the DA even suggested that there be a ‘special sitting’ to clear out the deep-seated corruption causing paralysis in the Department.

Members said there was a serious challenge between the DTI and the entity, and the Board needed to conduct itself constitutionally and the Committee also needed to continue its role of oversight in making sure that the DTI and the NLC execute their mandate. The Minister said that ‘the need to restore the credibility of the NLC was at the heart of good governance’.

Members debated whether the Minister had the power to appoint an Acting Chairperson. They concluded that the merits and/or demerits of this person’s character should be left to the discretion of the Minister.  

Majority of Members agreed the Minister extend the Acting-Chairperson’s contract. This position was supported by the ANC and the ACDP. The DA proposed an external candidate be put forward.

Meeting report

The Chairperson welcomed everyone including the Minister and Deputy Ministers.   

The agenda for the day was adopted.

Update on the NLC process to date
The Chairperson said that Committee process had concluded, and the National Assembly process now needed to take place.  The Committee Report was published. There was nothing further that needed to be reported on in the meeting regarding this aspect. The Committee would be briefed fully when the process unfolded.

Mr M Cuthbert (DA) did not see an issue with discussing the permanent appointment of a board chairperson (the process of appointment thus far), as was raised by Ms J Hermans (ANC).

The Chairperson said the agenda item of the NLC process to date would be noted. The Committee would be updated as the process moved forward.  On the Minister’s briefing, issues of concern had been raised from the NLC Board – the Chairperson had received a letter to this effect. The letter was from the Minister in response to Ms D Ledwaba (Chief Audit Executive: NLC) regarding the legality of the appointment of an Acting Chairperson. The Chairperson, on behalf of the Committee, appreciated that the Committee was now being updated. The Committee needed clarity on its role in the matter in comparison to being appraised by the Minister on developments. The Committee also wanted to know how this might affect potential issues on and about the separation of powers.

Briefing by the Minister on the position of Acting Chairperson of NLC Board
Mr Ebrahim Patel, Minister of Trade and Industry, thanked the Chairperson for accepting the request to brief the Committee despite the fact that Parliament was in recess. He also thanked staff and Members for making time for these meetings. 

The Minister said that he sought recommendations from Members. This would only come as a result of a discussion on the Acting Chairperson. He clarified upfront that he would not be speaking to any of the matters relating to the appointment of the permanent Chairperson, nor to address any of the substantive matters of the forensic probe (HAWKS) and the SIU investigation. He raised the following three matters each of which will be discussed further below:

· Context of appointing an Acting Chairperson (Nov 2020 – Jan 2021);
· Governance questions and
· Advice and recommendations from Members pending the appointment of a nominee

Context of appointing an Acting Chairperson (Nov 2020 – Jan 2021)
On 12 November 2020, the names and CVs of three candidates were submitted by the Minister to the Committee and Chairperson for consideration and recommendations for appointment. This would be referred to as ‘the permanent Chairperson’ so as not to confuse issues (this was the Chairperson of the NLC). Included with this were the names of those who were nominated in terms of the public nomination process based on a precedent from 2017, as made by the previous Minister of Trade and Industry. The previous Minister had provided the Committee with one name of a candidate proposed as Chairperson.  Following requests from the Members for a wider pool of names, the previous Minister submitted three names for consideration. The Committee considered these names and made recommendations.
The Minister had requested the Committee (in line with Section 3.3 of the NLC Act) to make a recommendation by 30 November 2020. Members were reminded that Section 3.3 of the Act sets out a dual role for the Minister as an appointing agent, and for the Committee to make recommendations prior to an appointment being made; and that there were different legal interpretations on the role of the Committee in the process.

The Minister said that he complied with the request to furnish the Committee with the full list of names and CVs. He requested Members to make recommendations by 30 November 2020 on the suitability of candidates for the appointment of a NLC Chairperson. This would coincide with the timeline of the end of the previous Chairperson’s term of office. The Committee initially developed a work plan with a timeframe which, if met, would not have required an Acting Chairperson. However, Members obtained legal advice and in combination with their own opinions, followed a different process. The Minister said that he supported this ‘different process’ and the timeline dates were revised. A decision was taken to appoint an Acting Chairperson given that the expiry date of the previous Chairperson was imminent. An appointment was made from 30 November 2020 to end January 2021 (subsequently extended to end March 2021).

Governance questions
The Minister had been asked to clarify the basis for this decision. He said that this was related to matters of governance and the questions were as follows:

Whether they needed a Chairperson for the Board?
Could the board itself appoint a Chairperson?
Could the Minister (as the Executive Authority) appoint an Acting Chairperson? If so, on what basis?
If the Minister was empowered in this way, what were the considerations in the appointment of Ms Zandi Brown? and
Implications from the Public Finance Management Act (PFMA) perspective?

The NLC’s Act was not explicit in how and by whom someone could be considered and appointed as Chairperson (like many other statutes). After careful consideration of the statute and following legal advice, the Minister asserted his view that the Executive Authority had the implied power to appoint one of the members of the board to perform the functions of the Chairperson until the period that a new Chairperson could be appointed in terms of Section 3.1 A. Legislation needed to be interpreted to include those auxiliary/implied powers reasonable and necessary for its operation - which ultimately enabled them to carry out their function. This needed to be done on a regular basis, as the statute did not deal with all issues but clearly set out the legal framework. The courts had warned against reading these powers into statute unless necessary for the operation of the NLC Act and not merely a matter of convenience. If there was an absence, or an executive authority did not have a wide hand to read anything into it, they needed to apply the test to the law where necessary.

The Minister was satisfied that the appointment ofan Acting Chairperson was necessary for the operation of the NLC Act and not just a matter of discretion. The NLC stated that “there shall be a Chairperson.” As such, he (the Minister) had the power to make this appointment. The NLC Act specifically required that “the board shall be in place and include a Chairperson,” with no provision for exceptions. Section 3.1 of the NLC Act therefore behoved the Minister to appoint the members of the board.  Section 3.1 equally did not permit flexibility in the composition of the board. It was clear from both the NLC Act and the board functions that the Chairperson did more than just chairing and presiding in meetings. A relevant document in this regard was the Board Charter which listed 17 functions of the board, which could be carried out by someone appointed as Chairperson. It was necessary for the board and regulatory framework that one of the members of the Board exercises the function of the Chairperson on an ongoing basis until such time as a new Chairperson was appointed in accordance with Section 3.1 A. In keeping with the prevailing jurisprudence, the NLC Act needed to be interpreted as containing an implied power permitting the Minister to ensure that a member of the board assumed the function of the Chairperson. Members of the board could appoint someone to the Chairperson position on an ad-hoc basis for each meeting of the board.

As background information, Members were informed that the Board Charter was a document adopted by the board itself to regulate its governance. It did not alter the NLC Act and was not relevant to the interpretation of the Act. The current copy of the Board Charter was dated 12 March 2020, with the document signed and approved by the past Board Chairperson, Mr Nevhutanda. The document described the Board Charter as a document approved by the board itself. As indicated, it was not binding in law and could not supersede the provisions of the NLC Act.

The Minister said that he had considered the implications of the provision in the Board Charter clause 8.2.4 that “if the Chairperson of the board was absent from a meeting, the members present needed to select one of the members present to act as a Chairperson”, and it was abundantly clear that it did not apply to the situation at hand and was only relevant where the serving Chairperson was absent from a meeting. This would require there to be an appointed Chairperson, which was different to their situation – as articulated by the Minister and based on legal opinion. It also did not confer the responsibility of anyone to appoint a Chairperson between meetings. Even if the Board Charter was applicable, it did not provide a foundation for board members to appoint one of their members in these circumstances. Section 8.2.5 supported the interpretation of the NLC as stipulated by the Minister.

The late honourable Ms P Mantashe (ANC) had proposed that the Minister appoint an Acting Chairperson for the board, because the Committee could not leave the NLC in a vacuum. Members made a number of recommendations. Mr Cuthbert proposed that an independent Acting Chairperson be put in place until a new Chairperson was selected by the Minister based on recommendations. Members admitted that this process would only take them until after November.  

Ms Zandi Brown was appointed by the previous Minister in terms of Section 3.1.B of the NLC Act. The Minister had taken legal advice that this would not impact her ability to perform as the Acting Chairperson on an interim basis. He said that he had taken all the relevant factors into account in appointing an existing board member as an Acting Chairperson rather than someone not drawn from the existing board. He had followed legal advice and decided that the appointment of someone from outside the board, while perhaps warranted, might require further detailed processes of consultation, and time pressures in late November, when decisions needed to be made, did not allow for this.

The Minister said that the period of appointment was limited to two months and he felt it prudent to provide the board an opportunity to comment on this. The Board’s response was to suggest a mechanism that had no basis in law – that the Board itself should make an appointment from meeting to meeting. The Minister felt that the representation made did not warrant that he not extend Ms Brown’s term for another two months.

The Minister wrote to the Minister of Finance and the Director-General of the National Treasury to inform them of his decision to appoint Ms Brown as the Acting Chairperson of the NLC Board indicating the rationale and legal basis for this decision. If this appointment was correct, issues of irregular payment would not arise.  Members were informed that even in circumstances where deficient appointments were the case; there was a procedure for this in the PFMA (condonation by National Treasury).

Current situation - advice and recommendations from the Committee 
The Members interviewed candidates for the position of the Chairperson (over the March period) and adopted a report with its recommendations. Given the delay in this being adopted by the National Assembly, the Committee felt it had to address the matter that the contract of Ms Zandi Brown (the then Board Chairperson) was expiring that day and by later that day, the Minister would need to make an appointment.

The options for appointing an Acting Chairperson were as follows:
Extension of the contract for a further (short) period;
Appointing a board member and
Appointing someone outside the NLC as an Acting Chairperson pending recommendations via Parliament.

The Minister said it was very important to receive input from the Committee in the course of the meeting. He said that he was not planning to deal with the broader investigation with the NLC. The four board members that had written to the Minister had escalated from simply noting the opposition to refusing to participate. However they said they would ensure that the NLC served the South African people in the framework of the Constitution.

The Chairperson said there were two key questions already previously raised by Members. First, whether the Committee had any role in the decision other than being appraised. And second, would this not be a potential conflict of interest or challenge with a separation of power. ‘Given the NLC Act, did the Members have a role in the appointment of the Acting Chairperson’? ‘Obviously, the Committee needed to perform and provide oversight that government was following the law’.  He said they would encourage co-operation in finding solutions.

Members were invited to respond.

Mr Cuthbert understood that the Minister would not want to discuss the HAWKS and the SIU but thought that the Minister should give a response instead of remaining silent for six months as this gave the impression of uncertainty to the general public and did not illicit much faith by Members. Time needed to be set aside to keep Members abreast of what action had been taken thus far.

It was clear that the NLC could not continue with Mr Alfred Nevhutanda - under whom the NLC was looted unabated for ten years with many corruption exposés - at the helm.  At the time, Mr Cuthbert argued strongly that an independent person with no vested interest in the NLC would have been better. After this, Ms Brown did not speak out against the looting. This was his opposition to Ms Brown at the time. A smooth transition, until a permanent Chairperson was appointed, would have been possible with an independent Acting-Chair appointed. The DA Members had said they should expedite the process at the end of 2020, however ANC members of the Committee were not interested in working into the December period to ensure they were able to finalise this process and restore a semblance of credibility in the NLC. The DA had strongly urged ANC Members to consider this, though they were told they were not handling the process in the correct manner.

He asked the Minister what action would be taken against the four NLC Board members who had not only initiated a fightback against him through strategic leaks but had also threatened legal action against him. ‘Was the Minister willing to disclose the name of these four board members who sought to challenge the process followed’? There were calls to fire the NLC Board.

On behalf of the DA, he strongly suggested that an external candidate take leadership of the NLC board. He cautioned that if the current board members continued in the way they had, they would see fights in the NLC. They might need parliamentary advice on seeking a special sitting of the House to consider the appointment or a Committee report that needed to be submitted by the Minister to the House so that they could appoint a permanent Chairperson. He urged Members to do what was right for poor South Africans.

Mr D Macpherson (DA) asked whether four months later, this meeting was already not too late and should have already taken place in November when they knew there would be an extreme delay in the appointment of an Acting Chairperson as Mr Nevhutanda was on his way out. He said that this was a crisis of NLC governance which was predictable.  ‘This conversation was thus far too late’. He pleaded for a time when the national government would listen to the rational voices in the opposition who were trying to provide a veil of credibility to the process. He found the status quo to be in poor form, poor taste and to be really problematic. He agreed with the Minister that they needed to uphold governance, though there was a full-scale conflict unfolding between the Minister and the NLC because of the entrenched patronage and millions of Rands at stake. He envisaged they might have a cataclysmic outcome and wanted to know why the Minister had allowed a board which was the antithesis to good governance to continue for so long. ‘It was unacceptable that board members refuse to answer parliamentary questions and had ‘hid’ behind an SIU report’. He commended the Minister for stepping in when these board members refused to answer the parliamentary questions put to them. He supported the suggestion by Mr Cuthbert of the special sitting to clear out the ‘deep-seated corruption’ causing paralysis in the DTI.

Mr S Mbuyane (ANC) said there was a serious challenge between the DTI and the NLC. The communication and engagement between the Minister and the Board was worrying as evidenced especially by the ‘back-and-forth’ letters between them. He cautioned that the Board needed to conduct itself constitutionally and the Committee also needed to continue its role of oversight in making sure that the DTI and the NLC execute their mandate. He suggested that the Minister and the NLC Board have frequent meetings to solve their challenges. He recommended that the contract of the Acting Chairperson be extended.

Mr Z Burns-Ncamashe (ANC) said that the key question was whether or not the Minister had the power to appoint someone as an Acting Chairperson. In his view, the Minister was empowered to make this appointment because the NLC is classified as a Public Entity (PFMA Section 48 P) which designates the Minister as the accounting authority (PFMA Section 49) with fiduciary responsibility (PFMA Section 50). Mr Burns-Ncamashe explained that the position of Chairperson of a Public Entity (in this case the NLC) whether acting or permanent, was a function with responsibility and in this regard, the Minister was responsible to ensure compliance on behalf of the Board.  It needed to be made clear to these board members that they needed to act in a manner consistent with the PFMA. He added that the other matters, such as those related to criminality, included matters of impropriety which needed to see justice take its course.  It seemed that Members who had already spoken were of the view that the Minister had the power to appoint the Acting Chairperson. The merits and/or demerits of this person’s character should be left to the discretion of the Minister along with instruments in vetting impropriety. He suggested that the Committee let the parliamentary process unfold until such time as a suitable person is appointed.

Mr W Thring (ACDP) felt the Committee has done its work as far as the shortlisting of the candidates was concerned. He encouraged the Minister to deal with every allegation levelled at any member of the NLC. They needed to find a way forward and ensure that the NLC had the respect of Members and citizens of South Africa. With the imminent expiry date of the contract of the Acting Chair, as the ACDP, they would have preferred an external Chairperson be appointed. Due to the conditions they were in, it was more viable to extend the contract already in place. Hopefully there would not be legal challenges with this and the contract would not continue to be extended. Misappropriations of funds needed to be dealt with, with all crime-fighting arms they had.

Ms J Hermans (ANC) appreciated the Minister’s briefing. She was glad that the HAWKS and the SIU investigations were happening, and they would be given the space to conclude their work and that all parties involved would be met with the full might of the law. In terms of appointing an Acting-Chair, she said that the only logical action that could be taken was to extend the appointment of the existing Chairperson, especially with the Committee report already being ATC’ed. She looked forward to the matters at the NLC being attended to with a functional organisation uplifting the poor.

The Chairperson said it was important to ensure the Committee did not present an approach which was legally undermining when the matter was taken to the House.  

Minister’s Response
Minister Patel appreciated the ‘enormously’ helpful set of comments by Members. Members’ concerns were legitimate although they were not in the realms of what he could respond to. This was because they did not want to threaten the integrity of the investigation on the basis of procedural defects. He concluded that the investigations needed to be completed with integrity and that the persons involved in questionable behaviour were brought to book.

The Minister had considered that the DA preferred the outcome of selecting an independent Chairperson, as they had mentioned the previous year. In the event of bringing in an external person, he had taken legal advice on the time this procedure would take - time they clearly did not have. Their lawyers were evaluating the functionality of the NLC board on a continuous basis and he would apply his mind to the matter of making public the names of the four members. They wanted to ensure that all processes had integrity and that the law could take its course. If the allegations were true, the stakes were high – involving high sums of money and implications for the poor.

The need to restore the credibility of the NLC was at the heart of good governance. The very serious allegations against the NLC meant that the South African public had the right to demand accountability and the appointment of the Chairperson was an important step here.  The issues raised were being constantly scrutinised by legal experts.

He recognised the frustration and did not want to undermine it. Mr Mbuyane’s suggestion to find ways to enhance the engagement between the DTI and the NLC was valid, and would rely on the Accounting Officer, who was also reaching out to meet with the Commissioner. He described Mr Burns-Ncamashe’s responses as an “impressive masterclass” making fundamental points specifically on the scope of the Chairperson’s role. He summarised the consensus of the Executive Authority to appoint the Chairperson and said that the question of time was a highly complex issue. The discussion held the previous year had been factored in and the broad recommendation was that the Minister (as the Executive Authority) would extend the contract of the Acting Chairperson (this was the position of the majority), alternatively he would appoint an external candidate to serve as acting chairperson (the DA proposal).

The Chairperson concluded that a more engaging process between the Minister and the Board was important particularly with reference to the communication thus far with ‘back-and-forth’ letters. He thanked the Minister for his inputs.  He appreciated that they were not having a public discussion and that the matter was not in social media.

The meeting was adjourned.


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