Hansard: NA: Unrevised hansard
House: National Assembly
Date of Meeting: 30 Nov 2023
Summary
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Minutes
UNREVISED HANSARD
NATIONAL ASSEMBLY
THURSDAY, 30 NOVEMBER 2023
PROCEEDINGS OF HYBRID NATIONAL ASSEMBLY
Watch here: Plenary
The House met at 14:01.
House Chairperson, Ms M G Boroto, took the Chair and requested members to observe a moment of silence for prayer or meditation.
CONSIDERATION OF REPORT OF STANDING COMMITTEE ON FINANCE ON RATES AND MONETARY AMOUNTS AND AMENDMENT OF REVENUE LAWS BILL
AND
CONSIDERATION OF REPORT OF STANDING COMMITTEE ON FINANCE ON TAXATION LAWS AMENDMENT BILL
AND
CONSIDERATION OF REPORT OF STANDING COMMITTEE ON FINANCE ON TAX ADMINISTRATION LAWS AMENDMENT BILL
The DEPUTY CHIEF WHIP OF THE MAJORITY PARTY: Hon House
Chairperson, thank you. I move:
That the Reports be adopted.
There was no debate.
Motion agreed to.
Report on Rates and Monetary Amounts and Amendment of Revenue Laws Bill adopted.
Report on Taxation Laws Amendment Bill adopted.
Report on Tax Administration Laws Amendment Bill adopted.
FIRST READING DEBATE – RATES AND MONETARY AMOUNTS AND AMENDMENT OF REVENUE LAWS BILL
AND
FIRST READING DEBATE – TAXATION LAWS AMENDMENT BILL
AND
SECOND READING DEBATE – TAX ADMINISTRATION LAWS AMENDMENT BILL
Xitsonga:
Nkul M J MASWANGANYI: Ndza khensa, Mutshamaxitulu.
English:
House Chair, I hereby present the Report of the Standing Committee on Finance on the Rates and Monetary Amounts and Amendment of Revenue Laws Bill, the Taxation Laws Amendment Bill and the Tax Administration Laws Amendment Bill.
Chairperson, Ministers present, Deputy Ministers, Members of Parliament, the three Bills were Tabled in Parliament by the Minister of Finance together with the Medium-Term Budget Policy Statement, MTBPS.
The Rates and Monetary Amounts and Amendment of Revenue Laws known as the Rates Bill is a section 77 Bill dealing with national taxes, levies, duties and surcharges. The Rates Bill reflects the commitment to fiscal transparency and responsiveness including the government’s dedication to aligning taxation with the evolving needs of both citizens and the economy. The Bill strikes a balance between revenue collection and public health demonstrating a nuanced approach to national wellbeing. The Taxation Administration Laws
Amendment Bill, TALAB, contains proposals on employment, individuals and savings, general business taxes, taxation of financial institutions and products, tax incentives, international tax, VAT, carbon tax and customs, and excise tax.
The primary objective is to ensure that tax legislation remains up to date and aligned with current economic and policy considerations reflecting the government’s commitment to effective tax management and administration. It seeks to improve the tax framework, promote revenue collection and maintain the financial stability of the nation. The Taxation Administration Laws Amendment Bill, TALAB, aims to revise several SA tax related laws and regulations to enhance tax administration, transparency and compliance with international anti money-laundering and counterterrorism financial standards.
We support the proposed amendment to TALAB. The proposed amendments will benefit both taxpayers and the broad national interest. As the committee we conducted public hearings. The committee conducted public hearings to receive written and oral submissions from stakeholders. We are presenting these Reports against the background of what is happening
internationally. The main threat to the outlook is geopolitical conflict and threats to human rights and democratic institutions across the globe. Peace, respect for human rights and democracy all seem under attack across the world. This difficult situation puts pressure on the economic integration and networks that develop over the past three decades.
The Ukraine-Russia war and the war between Israel and Palestine are causing shortages and price increases in energy, fertilizer, food markets, etc. The resulting inflation caused the cost of living crisis in developed and middle income countries and exacerbated the cost of living crisis in countries with higher poverty levels such as South Africa. The associated hardships contribute to conflict and instability within countries. The central banks efforts to reduce inflation by raising interest rates have worsened the negative impact of the cost of living crisis and increased global inequality.
This precarious situation is made even more precarious because of the damage and risks caused by global climate change which seems to be worsening. The central banks have treated inflation as if it was caused by increased demand. The blunt
instruments of raising interest rates by central banks around the world when faced with rising inflation has not kept inflation by lowering economic growth and employment in developed countries. However, the rising rates have put further upward pressure on prices and debt repayments while boosting the profits of the banks.
We are presenting these Reports against the background of the Rand manipulation. The committee is very much concerned about the banks manipulating the US dollar-rand pay by fixing bids offers spreads, the spot exchange rate and the exchange rate and the fix. Evidence has been presented to the committee by the Competition Commission that the SA Rand has been manipulated by foreign banks in collaboration with the SA banks. The banks divided markets by allocating customers in terms of which one trader withholds or pulls its existing bid or offer from the market.
Any form of manipulation of the Rand has the direct impact on the South African economy and households. The committee has an outstanding meeting with the SA Reserve Bank to further process this matter. On the fiscal network and taxation, the SA government now has higher interest rates on sovereign debts which pressures them to cut government expenditure at the time
when it is needed most. The lower tax revenue and higher expenditure have contributed to a higher budget deficit and slightly more government debt, contrary to the projections of National Treasury in the 2023 budget review.
The National Treasury data for April to August 2023 showed that gross tax revenue increased by 2,6% on a yearly basis. The National Treasury forecast in the February 2023 budget review was that gross tax revenue will increase by 5,6% for the entire 2023-24 fiscal year. If the current underperformance of the tax receipts continues through the fiscal year, it will mean an expected tax revenue shortfall of R53 billion relative to budget forecast. Most of the revenue shortfall is due to lower corporate income tax collection specifically from mining companies following the recent decline in commodity prices. The GDP ratios and budget deficits have increased even though the National Treasury remain committed to fiscal consolidation which was introduced as a temporary measure since 2012.
The 2023 budget tax proposal include the inflationary relief through a 4,9% adjustment in personal income tax brackets and rebates. The 2023 budget inflation estimation is lower than the SA Reserve Bank estimate of 6,2% in 2023. Higher inflation
rates without adequate wage tax relief adjustment will lead to real declines in wages and disposable income for household respectively. The main argument for relief has been to support the middle income earners. There is a challenge of a capital flight. Chairperson, capital flight and illicit export concealment of wealth abroad led to reductions in the tax basis.
The committee is concerned about the impact of trade means invoicing on fiscus. This means invoicing which occurs through underinvoicing of exports and overinvoicing of exports is being critical to solutions against illicit financial flows.
There has been limited development on majority of the issues raised in the 2022 taxation and revenue relief except in two areas. The Billing and Settlement Plan Multilateral Instrument, BSPMLI, was published in the government Gazette on
25 November 2022. The Base Erosion and Profit Shifting Multilateral Instrument, BEPSMLI, was approved and ratified by Parliament.
The carbon fuel levy for 2023-24 will increase by 1 cent to 10 cents per liter for petrol. On levies, the none adjustment to the fuel levy and the Road Accident Fund provided significant relief in the context of high inflation, rising fuel prices
and exacerbated cost of living crisis. The fuel levy is considered to be a regressive tax instrument. The levy disproportionally impacts low income household. The committee highlight this issue because the tax instrument must be linked to how it is spent.
There are several potential areas for more taxes to be collected including amongst others; an excess profits tax would be imposed on companies that used the inflation upsurge to boost profits to make up for their COVID-19 loses, excess profits from the interest rate hikes will also be targeted and windfall taxes for sectors that benefited from the commodities’ boom. A review of tax incentives and the removal of those that are no longer effective should also be considered. Progressive tax on wealth, the Financial and Fiscal Commission had meanwhile added that wealth taxes can be expanded by intensifying the taxations of donations and estate duties.
Chairperson, it is also suggested that the carbon tax be hiked. We commend the National Treasury and Sars commitment to responsiveness, effective tax collection and management. Our recommendations focus on striking a balance between revenue generation and the promotion of economic growth ensuring that
tax systems remains affordable, progressive and supportive of SA’s development.
In conclusion, I want to indicate that let us commend the hardworking employees of Sars who work very hard to make sure that all of us here as South Africans as we can speak for now, tax collections have gone beyond ... [Interjections.] ...
The HOUSE CHAIRPERSON (Ms M G Boroto): Hey, hon Gumbu!
Xitsonga:
Tatana Gumbu!
Mr M J MASWANGANYI: Thanks, Chairperson. As I was saying that we want to commend the Sars employees for their hard work to collect tax under very difficult circumstances.
Xitsonga:
Ndza khensa, Mutshamaxitulu.
Mr J N DE VILLIERS: Chair, perhaps we should impose a penalty tax on the members who interrupt us here in the House. And as Benjamin Franklin famously said: “There are only two certainties in life, death and taxes” I however have to point
out that death doesn’t get worse every time the Finance Minister does a budget speech. The Bill before us introduces various different tax increases to enhance the country’s revenue. The country’s budget is no different to that of an individual’s budget. If your debt is too high and your expenses are more than your income, then you are heading for a cliff. I believe it was Ernest Hemingway who famously said: “Bankruptcy happens gradually and then suddenly”.
So as South Africa’s debt obligation and expenses rise every year, our income needs to rise at, at least the same tempo or better to make sure we do not run into a revenue deficit so that our country’s expenses do not get outstripped or does not obstruct our income. So the problem is, if the economy doesn’t grow but the population keeps on growing and the countries expenses keep on growing and our debt keeps on growing, then there is logical to conclude that the only way to raise the income we need for our expenses is to tax our current taxpayer harder, as we are currently doing.
But Chair, you do not need a degree in economics to understand that continual increases in tax does not stimulate business to expand and grow. Therefore, it does not help to grow the economy, and so it does nothing to create more jobs or
taxpayers. So, what it seems the government does not want to understand is that the only sustainable way to increase our country’s income is to grow the number of taxpayers so that there is more tax. This means policies and legislation that increases economic activity so business can grow and thrive. More people can find jobs and ultimately more taxes can be paid by a bigger tax base, not by taxing the already strained tax base to death.
You do not grow an economy and create more jobs and taxpayers by pushing through NHI, which will kill the private health sector and threaten millions of jobs. You do not stimulate the economy and create more jobs and taxpayers by placing ridiculous tax on fuel sold to taxpayers who are under tremendous pressure due to the current cost of living crisis. You don’t grow the economy, create more jobs and more taxpayers by increasing the Public Sector Wage Bill every single year, with above inflation increases whilst you cut the budgets to provinces and local governments who need that money for service delivery more urgently than the ANC millionaire managers who are currently being prioritised above all other spending. You do not grow the economy and create more jobs by bailing out state-owned entities that are completely dysfunctional and have no chance of being sustainable. You do
not grow the economy and create more jobs by cadre deployment and rendering the state unable to deliver the very basic services that create the environment where people can create more opportunities in the economy.
This Bill could have been a powerful opportunity for implementing the DA’s proposed fiscal policies that would genuinely have aided South Africans and stimulated economic growth. Policies like reducing the fuel levy and expanding the zero-rated food basket which would bring immediate financial relief and boost consumer spending. Throughout 2023, South Africans have become poorer, and today they faced the worst cost of living crisis this country has ever seen as household struggle to put food on their tables and millions go hungry.
The Minister’s oversight reflects the ANC’s indifference towards implementing the DS pragmatic solutions that would have alleviated the burden placed on South Africans while battling the cost of living crisis. In 2024 however, if voters want fiscal policies that stimulate the economy, creates jobs and brings taxes down, they have to fire the ANC and employ the only professional outfit in town that can rescue South Africa, the DA. The DA does not support the Bill.
The HOUSE CHAIRPERSON (Ms M G Boroto): Are you allergic to this chair? What happened?
Mr M MANYI: They didn’t put it today. House Chair, as the EFF, we express our profound apprehension concerning the proposed Tax Laws presented by the Minister of Finance. Our critique is centred around the inadequacy in prioritising progressive taxation, a long established strategy aligned with pro-poor principles. We are sad that the Minister’s submission falls short of effectively addressing income inequality. The exigency of a more nuanced approach involving a higher tax rate for the wealthy is paramount to creating a fairer economic landscape.
The recommendation of a wealth tax by one of the advisory bodies, I think it’s BPO, underscores the missed opportunity by the Minister to adopt a more comprehensive and pro-poor framework. Our disappointment transcends the mere absence of a cohesive pro-poor framework. It extends the Minister’s failure to generally address economic disparities and failure to safeguard vulnerable masses. Particularly disconcerting is the focus on regressive taxation measures such as the proposed increase in excise duties. This in our perspective, although sounds acceptable, but contradicts the professed dedication to
social justice and has the potential to perpetuate socio economic disparities.
We draw attention to the Minister’s apparent disconnection from the grassroots with those painful realities. Despite alcohol and tobacco being non-essentials, but the truth of the matter - whether you like it or not - is that they continue to serve as coping mechanisms for many in the lower income bracket. Not that we promote alcoholism or anything like that, but the bottom line is that we can’t stop people from drinking because of all kinds of social issues. The increased excise duties are poised to render these products even less accessible, potentially driving the vulnerable individuals towards loan sharks and exacerbating ... [Inaudible.] ... in our communities.
Our concern as the EFF extends beyond taxation to encompass workers’ rights and social welfare. The 2023 Tax Laws lack concrete support for the working class, with insufficient details on the job security, fair wages and workers’ rights. This confirms our concerns about the ANC's commitment to fundamental pro-poor principles and the well-being of our labour force. Which means there’s none of it. Furthermore, our scrutiny delves into the submission stance of the
environmental sustainability, small businesses and democratic governance. We stress the intrinsic link between environmental sustainability and social justice, urging comprehensive plans aligned with national interests. Concerns arise around their apparent bias and incentives favouring renewable power producers over coal plants, despite their investments in clean burn technologies, potentially jeopardising national energy security.
The lack of attention to small businesses, both in terms of easing their operational burdens and ensuring their meaningful participation in the economy, is a substantial shortcoming. We emphasise the caution against corporate influence and seek assurances that tax policies do not disproportionately pay by large corporations at the expense of the broader population.
Lastly, the apparent dismissal of numerous progressive submissions from the public hearings raises doubts about transparency and democratic nature of the decision-making process.
In conclusion, the EFF unequivocally rejects the current form of the proposed Tax Laws. We call for a revaluation that incorporates a more robust and pro-poor approach, addressing income inequality, safeguarding vulnerable masses and aligning
with principles of transparency and developmental state. We argue that the whole strategy around the issue of this renewables is also to defund Eskom because the strategy is to take the lucrative clients of Eskom and have them as independent suppliers of themselves. So, at the end of the day, you have the revenue line of response being denuded. So, before you know, Eskom will be a no-go concern. And maybe that is the strategy so that it can be sold to the friends of Ramaphosa. Chairperson, we are sitting here with ...
The HOUSE CHAIRPERSON (Ms M G Boroto): Hon Manyi, just take your seat. Hon Radebe.
Mr B A RADEBE: Hon House Chairperson, I am rising on Rules 82 and 84. Rule 82, we cannot refer each other on personal terms. Rule 84, the allegations that these things will be sold to the friends of the President must come to a substantive motion.
The HOUSE CHAIRPERSON (Ms M G Boroto): Thank you. Hon Manyi, we refer to each other as Mr, President, and hon. On the second issue, you know that you have to bring a substantive motion if you have any allegations. Please proceed.
Mr M MANYI: Thank you, Chair. Chairperson, we are sitting here with ... [Inaudible.] ... collection of tax revenue. And the issue here is that also the contract of the Commissioner of Sars is expiring end of April next year. But the Minister is keeping the country in the dark. Nobody knows what exactly is going to happen. Are they renewing the contract? What exactly are they doing? We don’t know. But the fact of the matter is that the contract is expiring next year. The Minister is keeping everybody in the dark with all those things. How can we have certainty? How can anybody support these kinds of Tax Laws where even the head of the tax operation is unknown? We reject this.
IsiZulu:
Mr E M BUTHELEZI: Ngiyabonga Sihlalo, ngicabanga ukuthi ngizokhuluma ngolwimi lwakithi ukuze abantu bakithi bezwe inhlekelele esibhekene nayo njengezwe. Akukhathaliseki ukuthi singabamathe kangakanani nolimi ekuzameni ukuxoxa izindaba ezithinta izintila kanye nezimali zabantu. Iqiniso eliphambu kwethu elithi abantu bonke la eNingizimu Afrika bayahlupheka, bacwila ezikweledini nasekuhluphekeni okwesabekayo ngenxa yomnotho wezwe lethu ongakwazi ukukhula. Konke lokhu kuyishwa kungenxa wohulumeni osiphethe, onganakekeli izidingo zabantu nongasenandaba nabantu abamkhetha ukuze abasebenzele.
Iqiniso elinye futhi elithi noma ngabe kuthiwa uhulumeni uyazama ukuqoqa izintela ezindaweni zonke akwazi ukuqoqa kuzo kodwa lokho akwanele ngoba ukuze sikwazi ukusimama njengezwe sikwazi ukufeza okuhlosiwe kudingeka kwande abantu abasebenzayo ukuze uhulumeni azokwazi ukuqoqa intela ebantwini abaniningi, sikwazi ukunciphisa isikweletu sethu njengezwe.
Ukungabi bikho kwamathuba omsebenzi sazi kahle sonke ukuthi kungenxa kwalo hulumeni ophethe izwe uhulumeni weqembu likaKhongolose, ongenandaba nabantu. Sikhuluma nje nguye owengamele ngaphezu kwayo yonke inkohlakalo ekuhulumeni. Nguye obulala zonke izingqalasizinda okuthinta u-Eskom, Transnet, nazo zonke izinkampani zikahulumeni ezimiselwe ukulekelela ukuthi kwakheke amakhono umnotho wethu ukwazi ukusimama.
Ngakho ke Sihlalo siyiqembu le Nkatha kade sigcizelela ukuthi abantu sekufike isikhathi esihle sokuthi baziphindiselele kuhulumeni. Elinye iqiniso lithi noma kuthiwa kukhona izintela ezikhona esikwazi ukuziqoqa njengezwe kodwa kunodaba lohulumeni ophethe ongafuni ukuthi alusombulule, lolu lokuthutsheleziswa kwezinkece nelokwebiwa kwenkece ukuyi ...
English:
... elicit financial flows ...
IsiZulu:
... uma uhulumeni engalilandeleli lolu daba yilapho eziningi kakhulu izizumbulu zezigidi ezilahleka khona. kunabantu abahwebayo ezweni nabenza inzuzo kodwa abangayibeki ezithebeni ukuze bakhokhe intela efaneleyo. Ngakho ke iqiniso lithi ke kuningi vele esingakulindela kuhulumeni ngoba nguye oyisizathu sayonke le nhlekelele esikuyo. Njengeqembu le Nkatha elinakekela abantu neqembu lentando enhle sifisa ukuthi bonke abantu balelizwe ukuthi ithuba selizivezile lokuba balaxaze uhulumeni onganakekeli, balaxaze ukuhulumeni okhohlakele, balaxaze uhulumeni onogovane ojulileyo ongasenandaba ukuthi wakhethwa ukuthi enzeni.
Ukhetho oluzayo lusho ukuthi abantu baleli zwe bakhetha uhulumeni wabo ozoshabasheka eqoqe izintela engaziqoqele ukuzikhwabanisa. Ngisho eqoqa izintela aziqoqele ukuthi akhe izingqalasizinda esizoba isisekelo ukuthi umnotho wezwe ukhule. Hhayi lamanketshana esawathemba aphenduka aba yilabantu abayibo. IFP iyaweseka umbiko ngaphansi kwalombandela. Ngiyathokoza kakhulu.
Mr W W WESSELS: House Chairperson, it’s too hot for a tie. I don’t know why we have to wear European stuff, but it's Africa. House Chairperson ... [Interjection.]
The HOUSE CHAIRPERSON (Ms M G Boroto): Order.
Mr W W WESSELS: ... hon Maswanganyi is correct, that there is an attack on human rights, globally. But in South Africa there is also a human rights crisis and at the core of that crisis is our taxpayers’ money is utilized. We can talk about this tax Bill, but we can’t talk about it without reflecting on what happens to taxpayers’ money.
The nexus is, that a government should earn taxes and not just collect it. We have a problem in South Africa where ... and the hon Manyi is not correct. We don’t have an under collection of tax or under collection of tax revenue. We have a lack of taxpayers and where the hon de Villiers is correct.
We don’t have enough taxpayers. Why? Because of the unemployment crisis, because there’s no investment in infrastructure, because the policies of the ruling party do not stimulate economic growth and investment in the economy. That’s the problem. The problem is not getting the cash cow to produce more milk and more milk for government to utilize on luxuries, because that is what’s happening to taxpayers ‘money. It's being spent on luxuries.
And we can’t talk about the tax Bill without also reflecting on the adjustment appropriations Bill, which once again, put more money in protecting Ministers and less money in healthcare. It takes away from education and puts money to luxuries.
We can’t talk about taxes without reflecting once again. On how much your President spends on a flight when he goes overseas on catering on the presidential jet. That’s a shame.
And that is why we cannot support this, tax Bill. We can’t support a tax Bill which are just here. I have a lot to say. I have a lot to say. And let me also say House Chairperson, the problem is that the ANC does not care about the people out there. The ANC does not care what happens to the money that is collected by these Bills... [Interjection.]
The HOUSE CHAIRPERSON (Ms M G Boroto): Order, order members.
Mr W W WESSELS: ... let’s talk about the carbon tax. What happens to carbon tax, what is supposed to happen to carbon tax, what happens? It’s not ring fenced at all. It’s not utilized to combat climate change or to do anything with regards to the problem we are facing, in that regard. No, it's
used to once again feed the fat cat ANC cadres and comrades. That’s the problem with tax collection in this country.
This government does not care, they only collect cut tax, they don’t earn tax. Because if you give value for money, if you give services to people, then you earn taxes.
The problem House Chairperson is that people do not have disposable incomes. The 73% of disposable household income are currently utilized to service debt repayments. Why? Because of the cost-of-living crisis. Then we have to reduce taxes to have more disposable income so that people invest in the economy.
They should spend money, like you spend the taxpayer’s money on your luxuries. The people out there should be able to spend money so that there’s more money spent. That’s the problem. We cannot support this, Bill. I thank you, House Chairperson.
Mr S N SWART: House Chairperson, these taxation Bills must be seen against the country’s poor economic growth levels, which have resulted in lower-than-expected revenue collection. And this has been caused by ongoing power cuts, poor rail, and harbour performance and, of course, poor policy decisions.
In recent years, South Africa benefited from high commodity prices, resulting in increased revenue collection, sad they are ... [Inaudible.] ... prices have fallen faster than expected, and of course the logistics and power crisis has aggravated matters.
South Africa’s mining sector was a critical source of revenue in the recent past. And played a significant role in stabilizing the economy after the COVID-19 long and hard lockdown.
It is estimated, however, that Transport Network, Transnet’s collapse is costing the country R1 billion a day, in lost economic output and billions of rands more in potential investment. This has largely resulted in tax revenue for this year being revised downwards by staggering R56 billion, compared to February’s budget, and this trend continues over the median term. The ACDP finds this deeply concerning.
Mining profits dropped almost R100 billion, resulting in provisional mining corporate tax collections falling by R24,6 billion or 54% relative to the same period last year. While lower commodity prices and weaker global demand have played a role, increased Eskom power cuts and transmits
logistics crisis must be laid squarely at the ANC-led government’s door, as this was preventable, was foreseeable and could have been addressed.
As far as these Bills are concerned, a number of the amendments are of a highly technical nature, and I will only focus on certain aspects due to the time constraints. The solar energy tax credit is a reality at rebate and despite significant lobbying to broaden the scope of the equipment covered by the credit, this has not been acceded to. This ACDP believes it’s regrettable, given the energy crisis facing nation.
As far as tax administration is concerned, the ACDP is concerned, and share it’s concern about challenges experienced by taxpayers regarding inaccuracies from third party data on the auto assessment process. We support the committee’s recommendation of a thorough review of this process to ensure that fairness, accuracy, particularly regarding third party access and third-party data, is achieved.
Ongoing stakeholder engagement should be prioritized to enhance the system while safeguarding taxpayers’ interest in this regard.
We also recognize the support tax incentives in promoting various sectors which encourage private investment and enhance accountability in tax exempt structures. I thank you.
IsiNdebele:
Nom G J SKOSANA: Ngiyathokoza Sihlalo ohloniphekileko, malunga ahloniphekileko, nesizwe sekhethu, lotjhani.
English:
For the ANC the matter of taxation is the life blood for the state to function and provide the necessary services for human and socioeconomic development. Set out by objective criteria and not some arbitrary formulation, it is taxation that must provide the revenue to meet the objective demands of a five- year-plan, the policies of the governing party manifesto and a five year Medium-Term Strategic Framework.
The taxpayer syndrome that we hear in this House from liberal thinkers tells to try and equate and conflate the state and the individual. And that we are dealing with taxpayers’ money and therefore on these basis the state must account to an individual.
A developmental approach says the state accounts through an open parliamentary oversight process for the money it has appropriated against programmes laid out in a Budget Vote to meet the needs.
The framework of our tax system is defined as progressive as it cross-subsidises the poor by the wealthy.
[Sihlalo ohloniphekileko,] Hon House Chairperson, it was 10 years ago, that the ANC-led government set out as a policy initiative to review and asses to our Tax Policy Framework. The purpose was to support the objectives of inclusive growth, employment, development and fiscal stability.
The demand to increase the revenue base to meet the people’s needs was a key consideration. Improving tax compliance and dealing with problems of base erosion and profit shifting.
Philosophically, the ANC asked for an examination of the overall tax base and tax Biden including the appropriate tax mix between direct taxes, indirect taxes, provincial and local taxes.
In terms of longer-term economic thinking and planning, we call for an analysis of the sustainability of the overall tax to gross domestic product, GDP, ratio for each of the three major tax instruments which are personal income tax, corporate income tax and VAT.
An evaluation of the economic and social impact of the tax system and assessment of whether the current tax structure is able to generate sufficient and sustainable revenues to fund government’s current and future expenditure priorities is what has brought us to where we are today.
We are not chasing after opportunistic and liberal notions that this is taxpayers’ money and therefore government must account to me as an individual. Such thinking fails to grasp the relationship between the state, public finances and tax obligations with the state for the general wellbeing of the nation.
Taxation legislations is therefore steeped in government’s policy orientation and how it has to manage the fiscus.
So, what are the positives from this years’ Tax Laws Amendment Bill?
[Malunga ahloniphekileko,] Hon members, the updating of taxes, levies, duties and such charges have been designed to promote revenue, a critical factor in providing support for government policy programmes.
The amendment provide for anti-amendments rules for loans, for trust and for a fast stronger regulation of the transfer of wealth, reinforcing anti-avoidance rules aimed at preventing the tax pretransfer of wealth, both domestically and internationally.
Whilst tax avoidance is not illegal, its lack of ethical and moral approach, greatly assisted by tax advisors, that is a problem. Each year SA Receiver of Revenue, Sars, has to tighten up loopholes that have been exploited by advisors in a bit to lesson tax responsibility to the state. This years’ amendment tighten and close down further loopholes that cause a loss of revenue to the state.
In terms of tax incentives to build and grow sectors of the economy, the Amendment Bill provides for a range of different incentives including research and development. This include renewable energy incentives which do not mean as the EFF was trying to tell us in the committee and here that we are
cutting the revue base of Eskom and that this Amendment Bill is contributing to the financial collapse of Eskom.
Definitely, that is not the case, hon Manyi.
[Sizwe sekhethu,] Fellow South Africans, our concern remain that further tax relief has been provided for the private health sector and this needs to be reviewed in the next year’s Amendment Bill. In order to assist the financing of the National Health Insurance, NHI, we should be ensuring that revenue from tax is skewed in favour of public health. We are unapologetic on our stance on that De Villiers. The sooner you accept that the better. On the issue of the NHI and we believe that the hon Wessels will also support us because he has been emphasising that we need to put more money on health care. So he should be the first to support the NHI.
So, neither should we see any alteration to VAT in the announcement of the R15 billion being raised in the next years’ Budget.
So, with regard to positives in the Tax Administration Laws Amendment Bill, there are a number of positives amendments which deals with antimoney laundering and counterterrorism.
This threatens government’s programme which is spread across a number of agencies.
Critically the amendments are also designed to meet the outstanding requirements of the Financial Action Task Force in order for the country to exceed grey listing. I know the DA has been very vocal on the issue of the grey listing. So, as the ANC we support all these Bills and the Report of the Standing Committee on Finance. Thank you very much.
The HOUSE CHAIRPERSON (Ms M G Boroto): The hon Shaik Emam!
Mr H G APRIL: Hon House Chairperson.
The HOUSE CHAIRPERSON (Ms M G Boroto): Yes hon Heinrich.
Hon House Chairperson, just before the hon Shaik Emam, hon House Chairperson, there is a lot flies in this House, and I think that is some kind of a health risk. I just wanted to make you aware. I am very worried. There are big green flies. Thank you, hon House Chairperson.
Mr M MANYI: What point are you rising on?
The HOUSE CHAIRPERSON (Ms M G Boroto): Alright. Thank you for that. The issue will be looked into. Thank you. The hon Shaik Emam.
The hon April rose on a point of privilege if you need an answer.
Proceed hon Shaik Emam.
Mr A M SHAIK EMAM: Hon House Chairperson, now what is obvious is that the revenue collection in the country is down. The question we need to ask is: Why is the revenue down? Firstly, it is the energy crisis. Of course prior to that it was covid. What that has resulted in a whole lot of businesses shutting down. The energy crisis currently if you look at certain sectors businesses bakeries, food outlets and things cannot survive with the energy crisis.
We also note House Chairperson that there is no solution inside anytime in the future. So, it simply means that more businesses are going to close down, more people are going to be unemployed, less revenue is going to be collected, but your expenditure is going to continue to rise. If you look at your Wage Bill and other things.
Hon Houses Chairperson, it is not sustainable to borrow for consumption. That is one of the problem area that we see.
South Africa is fast becoming a socially dependent state, rather than making people more productive. We are not going to be able to sustain in the long run than an amount of social assistance this country provides.
Now the question is: What can we do? We have less money. Can we not do more with less by being more productive? I have raised time and time again the issue particularly where you do not get value for money.
Now while the taxes are down and there is revenue cuts in many, many sectors and that was particularly as a result of of nonspending. If you look at the Western Cape for instance, there is a housing crisis, but they have not spend their money, so when you take the money away, departments are complaining. However, they have a mandate and a responsibility to spend that money and spend it effectively and they do not do that.
Hon House Chairperson, let us look at KwaZulu-Natal. Look at the amount of money that is wasted as a result of not getting value for money through corruption. However, nothing will be
done about it. We have raised it with the Minister that let them advertise these tenders that have been awarded to who to what is the value, itemised billing and we are told that it is a process that they supposed to follow, but they do not do it and they just get away with murder. This is how these political parties are sustaining themselves.
So, it is not that we have a crisis, I think we need to pay attention to how we manage it and how we put processes in place to get better value for the money that we are actually spending. So, that is the other problem.
Hon House Chairperson, one of my serious concerns is the National Health Insurance, NHI, which we want to roll-out. However, up to this very day we really do not know where the funding is going come to provide satisfactory services of the NHI. My fear is that it is going to collapse before it even takes off. Thank you, hon House Chairperson. [Time expired.]
Mrs W R ALEXANDER: Good afternoon, Chair. The COVID-19 pandemic and the persistent cost of living increases have impacted our disposable income, dampened confidence, triggered banking sectors, financial market volatility and time tightened financial conditions.
We have never been in a worse time for economic activity and employment. In times of economic downturn, the poorest and the most vulnerable segments of the population are disproportionately affected.
Fiscal policy can help tame inflation and protect the most vulnerable. Using smart fiscal policy can help restore price stability and lessen the impact of rising costs on the vulnerable households.
Fiscal policy must be balanced but must balance the need for sustainable revenue generation with the imperative to foster a growth friendly environment.
While a robust tax infrastructure and the mobilisation of revenue remains essential for long term economic stability, it’s important to recognise the role of tax policy in the broader macroeconomic context and an effective and equitable tax system is critical and should be carefully calibrated to support rather than impede growth.
From the mid-2021 to mid-2022 food and energy prices rose faster than any other prices. To the extent that households’ nominal income has not increased proportionally. As a result,
their purchasing power or real income has declined and real income is a proxy for the standard of living.
The DA appeals to the Minister of Finance to implement the committee’s recommendations in viewing with the South African reality that there is a need to include additional food items to the zero-rated food base ... [Interjections.] ...
Speaker, am I protected?
The HOUSE CHAIRPERSON (Ms M G Boroto): Hon member, ignore them and proceed.
Mrs W R ALEXANDER: We as the DA believe that this will alleviate the pressure on the vulnerable households who are battling to put food on the table, with 81% of South African households already skipping one meal a day due to soaring food costs.
Solar tax breaks offer sunlight, but not enough. When you consider the magnitude of the energy crisis that South Africa is facing, the gains that the Treasury seeks to obtain is injudicious and defeats the so-called energy incentive tax.
Introducing the solar energy tax incentive demonstrates government’s commitment to addressing the current energy supply but Treasury’s fiscal conservativenism may be the ultimate undoing of this.
The Electricity Minister has said that his department wants the tax rebate to include inverters and batteries as this would increase the amount of solar installed. Inverters and batteries are essential common components for a solar system.
In spite of this, National Treasury has dismissed these calls and says it will only be focusing on the components that generate electricity.
This has shown that inverters and batteries without solar panels cause grid strain and has increased power demands as soon as loadshedding is lifted.
One way South Africa is trying to combat the energy crisis is through this tax incentive. But Treasury’s misunderstanding on how solar systems work and the disconnect and sore tighteners is going to be the undoing.
While the tax breaks are certainly most welcome, taxpayers are left wanting.
The damages done to households needs to be addressed in order to respond effectively to the sharp inflation spikes that we’ve seen over the past three decades. All levels of society are adversely affected by inflation and those who earn any type of wages suffer the most since their salaries do not rise proportionately with the cost of living.
The soaring debt and the declining revenue system has left us wondering whether the Financial Minister will indeed increase taxes next year to cover the country’s ever growing budget shortfalls.
The DA does not support the Tax Amendment Laws Bill. In its current form, the bill reflects the ANC’s budget, which is that both damaging to the economy and not well in the wellbeing of this country. Thank you very much, Chair.
The HOUSE CHAIRPERSON (Ms M G Boroto): My apologies, hon Alexander, for not recognising you by name because your name is on the Speakers List.
Mr G P MASUALE: House Chair, as the ANC we support this report from the Chair of the portfolio committee. For us the tax remains a fundamental tool for redistribution of income and wealth, especially in an economy that reflects extreme inequality.
It is the sustainable tax base that generates the revenue for the state to carry on popular programmes. Our revenue base is negatively impacted upon by high levels of unemployment and poverty, compounded by the contradictions that remain embedded in the structure of the economy.
In order to achieve the developmental outcomes that the ANC has set, one of the key pillars of economic policy is to increase domestic resource mobilisation.
The increase of domestic resource mobilisation is achieved through further progressive tax reforms which provide greater revenue. In addition, leveraging development finance from sources at the lowest rates and from institutions whose orientation is aligned to our development objectives; that is the path that we have chosen.
Borrowing for developmental purposes is what governments do. They invest in debt in order to generate growth from that investment and develop the economy, bringing in greater revenue.
We have taken note from the Medium-Term Budget Policy Statement that revenue collections are projected to be almost
57 billion lower than was projected in February, mainly due to falling commodity prices and rising Value-Added Tax refund claims.
Hon house Chair, compared to other middle-income countries, we have a relatively broad tax base. Although conservative economists would want us to believe differently in their quest to pay lower taxes.
Taxation has multiple objectives besides revenue generation. Through a system of incentives, it can be used as an instrument to redirect production and inputs, as well as to achieve the desired redistribution of income in addressing inequality, a key objective of the ANC and government policy.
We do wish to recognise significant reforms that are being implemented in SA Revenue Services, SARS. To increase tax
revenue collection, we want to aid that SARS has got to have a far more rigorous evaluation, however, of its performance.
The fact that 80% of cases that are referred to the Tax Ombud go in favour of taxpayers suggest there may be something not going right at SARS. This requires attention.
Suddenly, there remains significant space for increasing tax from domestic sources. These would include:
Firstly, an excess profit tax being implemented on companies that have used inflation upset to boost profit and make up for COVID-19 losses.
Secondly, excess profits derived from interest rate hikes.
Thirdly, expanding the illicit financial flow frameworks in addition to the base erosion and profit shifting to stem the loss of revenue.
Fifthly, the removal of ineffective tax incentives.
Sixthly, what many said in our public hearings, progressive measures to tax wealth.
For the ANC these are important measures to build the revenue base of the state for developmental objectives.
At this point, hon House Chair, I wish just to comment on some of the speakers who spoke before me.
There are areas in which we convert. Hon De Villiers, we certainly agree that there needs to be an expansion of the tax base so that the burden of taxation does not rest on the few individuals and companies. From that assessment, it stands to reason that the expansion thereof has got to take place. We’ve got to implement measures that are aimed at expanding that base. For instance, you come here and make an issue with the National Health Insurance, NHI, that we shouldn’t be proceeding with the NHI. The reason is that you seem and others who think like yourselves that anything towards ensuring access equitably is resisted. It is resisted. We have a pattern throughout, in fact, even in decrying the issue of expanding the tax base, it is amounting to the protection of those already privileged, and this is the unfortunate consequence of your assertions, certainly.
As a country we must transform. We must change from a country based on a privileged minority benefiting in a corner there,
to make for the majority to participate, even in this tax issue, we’ve got to expand the ability for people to come into the tax net.
Of course, hon House Chair, I may as well just comment, lastly, on hon Manyi, who came here, and I listened very attentively. He has a problem with everything. [Interjections.] You worry ...
Given a chance, what it is that they would be able to do? And of course, as you would have seen, where both these extremes come together, it’s chaos. They've tried it. They’ve tried it. They’ve tried it with coalitions. The coalitions don’t work because between them they represent divergent extremes; nothing works. In fact, their articulation here is but proof that the country needs the ANC.
Like water in the desert, it needs the African ... to save the people from this calamity, represented by this divergent perspective shared between these so-called dominant parties after the ANC.
But the truth, it’s beginning to dawn. Even those who are pollsters, they are beginning to tell the story that, in fact, it is not as it is suggested ... [Interjections.]
Mr M MANYI: Your time is up.
Mr G P MASUALE: ... thank you ...
The HOUSE CHAIRPERSON (Ms M G Boroto): Hon Masuale ... hon Manyi, please.
Mr G P MASUALE: ... it is in fact the pollsters are already pointing in the direction of the truth. Here they speak to satisfy themselves that the people ... the ANC does not care about the people. The ANC cares about the people, all of them. Unlike yourselves. In fact, bi-election after another, there is demonstration by the people in their numbers, they support the ANC ...
The HOUSE CHAIRPERSON (Ms M G Boroto): Yes, hon De Villiers? Wait, hon member.
Hon De Villiers?
Mr J N DE VILLIERS: The speaker’s time is up.
The HOUSE CHAIRPERSON (Ms M G Boroto): No, it’s not. You are not the timekeeper and you are wasting time.
Hon members, as I’m sitting here, I’m watching the clock. So, please stop doing that.
Proceed!
Hon Manyi, you don’t do that. Hon De Villiers, you don’t do that.
Proceed. You still have two minutes and 54 seconds. Proceed!
Mr G P MASUALE: Hon House Chair, the truth hurts, that’s why there is impatience. In fact, when they sit here, they tell themselves in as much they want to believe the fact that the ANC does not care. In fact, on the ground they are being rejected for such assertions. The majority of the people ... in fact, even the pollsters are showing that ... and the ANC come the next election, we’re going to clobber all of you.
Thank you.
The HOUSE CHAIRPERSON (Ms M G Boroto): The hon Tatana [Mr] Masondo, the Deputy Minister.
And before you come, hon Masondo. Hon Loate, you hand was up, I didn’t want to disturb the speaker on the podium. Can I hear?
Mr T LOATE: Just as much, hon Chair, on your list ...
The HOUSE CHAIRPERSON (Ms M G Boroto): Wait. Hon members, I can’t hear.
Proceed, hon Loate, please.
Mr T LOATE: Hon Chair, I was just wondering why, is it by omission or design that we were left out of the list in front of you?
The HOUSE CHAIRPERSON (Ms M G Boroto): Hon Loate, my apologies. You are not on this Speakers List. I thought you had communicated that, and you should have raised your hand immediately. Unfortunately, at this stage when the ANC has spoken, I am unable to bring you in. Thank you very much. If
it was an omission by the Table Staff, I want to really apologies on their behalf. Thank you.
Xitsonga:
XANDLA XA HOLOBYE WA TIMALI: Mutshamaxitulu ...
English:
... and hon members, the three tax Bills represent the culmination of the efforts to implement the tax announcement that the Minister of Finance made in the February 2023 Budget. The primary objectives influencing these adjustments in excise duties can be summarised into four. Firstly, to promote healthy lifestyles by discouraging tobacco and alcohol consumption, to reduce tobacco and alcohol affordability overtime because it is irresponsible and excessive alcohol consumption that worsens, amongst other things, the situation of the poor. Thirdly, is to bolster revenue generation and to increase economic growth. We always try to strike the balance between these objectives including economic growth. It is for this reason that there is no increase in the health promotion levy in the 2023-24 and 2024-25 financial years. This was announced by the Minister in the 2023 Budget where he stated that the health promotion levy will remain unchanged for the fiscal years 2023-24 and 2024-25. This decision was made to
allow stakeholders in the sugar industry time to recognised amidst the complications from the increased regional competitive pressures and in the aftermath of the floods in 2022.
We have however noted the comments on the general inflationary increase in the excise duties on alcohol. In the light of the concerns raised by the industry, we are reviewing the alcohol excise policy. We have also noted the comments regarding the increase in the excise duty rates on cigarettes which contributes to the higher prices. The excise policy framework for tobacco products is currently under review and once completed we will start with the consultation process.
We must consider the harm done by cigarettes which creates a multitude of other costs in our society. We have also noted numerous submissions and presentations from the tobacco industry on the extent of the illicit trade in cigarettes. As government we acknowledge the problem of illicit trade and that it contributes and undermines the health and excise policy objectives. However, the problem of illicit trade is also an act of criminality and cannot be dealt with through excise rate adjustments but need to be effectively addressed through robust compliance and law enforcement mechanisms. It
is for this reason that the SA Revenue Service, Sars, is also collaborating with other law enforcement agencies such as the SA National Defence Force, the SA Police Service as well as the immigration division of the Department of Home Affairs to address issues in the tobacco supply chain.
The SA Revenue Service, Sars, is harnessing its capabilities to make noncompliance with legal tax obligation hard and costly to those who are engaged in these criminal pursuits. In addition, Sars in implementing several compliance measures which include requiring cigarette manufacturers to install Sars approved cameras in their factories in order to track the origin and the legality of ... [Interjections.]
Mr M MANYI: Chair, I wanted to ask if the Deputy Minister can take a question.
The DEPUTY MINISTER OF FINANCE: May I do so at the end.
The HOUSE CHAIRPERSON (Ms M G Boroto): Okay, if there is time! Thank you. Proceed, hon Deputy Minister.
The DEPUTY MINISTER OF FINANCE: The installation of Sars approved cameras to track the origin and the legality of the
cigarettes production is done because there are companies that run two lines of production, one for legal trade and the other for illicit trade.
Hon members, we view tax measures to boost energy generation. In the 2023 Budget we announced rooftop solar tax incentives for individuals who invest in solar panels. This was aimed at dealing with the severe energy crisis currently being experienced by our country. The government is proposing and has proposed various tax incentives for residential and business installation to help boost South Africa’s energy generation, improve energy efficiency and also to reduce pressure on the electricity grid. Furthermore, these tax incentives encourage businesses and households to invest in clean electricity generation capacity which can supplement electricity supply. Some of the other benefits associated with this temporary tax measures are that businesses will reduce their carbon footprints and save money on their energy bills. Thus, indeed, the price of electricity has been on the rise and solar power can help consumers to keep their monthly bills lower.
There are several antiavoidance measures in this Bills. Some of these measures are not new, but we just twisted them. These
antiavoidance measures are aimed at curbing tax avoidance schemes that businesses and individuals enter to reduce their tax liabilities or how much they should be paying to Sars.
Complicated financial structures that are used solely to avoid and undermine the tax fairness of our system deplete the funds available for the government to serve the poor and support the economy in general. We all agree that this is distasteful when so many people, particularly the poor, are struggling.
Hon members, the Tax Bill contains amongst other measures the implementation of the fight against base erosion and profit shifting. These measures will help us to fight international transactions that have enabled companies to do profit shifting and undermine our tax base in different ways.
In addition, the Tax Bills contains amendments to deal with gaps identified by the 2021 October Financial Action Task Force, FATF, mutual evaluation process. This evaluation identified a wide range of technical deficiencies in South Africa’s money laundering and terror finance system.
Hon members, I am pleased to report ... [Time expired.] ... together with the adjustments ... Thank you very much for your attention.
Debate concluded.
The HOUSE CHAIRPERSON (Ms M G Boroto): Before I proceed, I just want to respond to the hon Loate. Hon Loate, please, check with your office because the information we have is that you will only be participating in the SA Post Office Bill and the Independent Municipal Demarcation hence your party was left out. That is the clarity I just got from the Table staff.
Rates and Monetary Amounts and Amendment of Revenue Laws Bill read a first time (Democratic Alliance, Economic Freedom Fighters, Freedom Front Plus and African Christian Democratic Party dissenting).
Taxation Laws Amendment Bill read a first time (Democratic Alliance, Economic Freedom Fighters, Freedom Front Plus and African Christian Democratic Party dissenting).
Tax Administration Laws Amendment Bill read a second time (Democratic Alliance, Economic Freedom Fighters, Freedom Front Plus and African Christian Democratic Party dissenting).
RATES AND MONETARY AMOUNTS AND AMENDMENT OF REVENUE LAWS BILL
(Decision of Question on Second Reading)
There was no debate.
Bill read a second time (Democratic Alliance, Economic Freedom Fighters, Freedom Front Plus, African Christian Democratic Party and Congress of the People dissenting).
Read a second time.
TAXATION LAWS AMENDMENT BILL
(Decision of Question on Second Reading)
There was no debate.
Bill read a second time (Democratic Alliance, Economic Freedom Fighters, Freedom Front Plus, African Christian Democratic Party and Congress of the People dissenting).
CONSIDERATION OF REPORT OF PORTFOLIO COMMITTEE ON COOPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS ON INDEPENDENT MUNICIPAL DEMARCATION AUTHORITY BILL
There was no debate.
The Deputy Chief Whip of the Majority Party moved: That the Report be adopted.
Motion agreed to (Democratic Alliance, Economic Freedom Fighters, Freedom Front Plus, African Christian Democratic Party and Congress of the People dissenting).
Report accordingly adopted.
INDEPENDENT MUNICIPAL DEMARCATION AUTHORITY BILL
(Second Reading debate)
The MINISTER OF CO-OPERATIVE GOVERNANCE AND TRADITIONAL
AFFAIRS: House Chair, hon Ministers and Deputy Ministers, hon members, good afternoon. I stand before you with great enthusiasm as we deliberate on the Independent Municipal Demarcation Authority Bill. The legislation marks the culmination of extensive engagement with various local government stakeholders over many years, reflecting on a commitment to improve our democratic processes, but also ensuring an effective functioning of our municipalities.
Looking down today why some of the parties opt not to adopt or rather support a process which seems to look into the administrative complexities but also at times signify to ensure that the processes of local government are streamlined. We are on a wall-to-wall system which will also ensure that there's more division of services that is equitable to people who are in the wards. So demarcation boundaries are an intricate process. I understand why it could be objected to, possibly not an understanding of what it is. One requires careful consideration, historical, and socioeconomic factors are also included. The Constitution defines very well and the structures extract its mandate from there. Why this piece of legislation in the process is important? Over 49 municipalities have been studied by the Demarcation Board, the Independent Electoral Commission, IEC, and the Department of Co-operative Governance and Traditional Affairs, to look into what is important and what needs to be done. The population size of areas where the changes happen, the settlement patterns, governance, arrangement and the economic base, which is the structure of the sustainability of the municipalities.
Earlier on we were debating here what makes it easy for us to have a better tax base. The economic base at the municipal level should be a foundation for ensuring that the country
steps up with regard to the collection but with infrastructure maximisation. For example, the Indaka Local Municipality, in the term 2011 to 2016, had an unemployment level of 57%, due to demarcation when eMnambithi Ladysmith was combined, we were able to turn down with the support of the national Department of Transport, for example, with roads ... economic to 34%. So there are positives. We mark the difficulties which we had in Vuwani, Merafong and Matatiele. What have we learned? We need to ensure the infrastructural needs are taken care of, financial viability is part of it ... We deal with personal debt collection also, but the cycle and the term of how often we demarcate. I don't mind the noise. Statistics SA and the 2021 Census does indicate what are the benefits. The National Treasury and local government reports also indicate what the issues are. Why are we improving on the Act? We are renaming, yes, it is important for an authority but also, we're looking into the appointment of the boards. We're looking to the National Assembly itself having representation in the boards. I thought those who don't understand would be clapping hands now.
While looking into the term into a 10-year cycle, but also on the part-time basis of the servicing of the member. The splitting of communities is to be avoided, but the threshold
needs to deviate from 15% to 30%, and not separate traditional leadership or areas. We require the authority to undertake a municipal capacity assessment so that we do away with the apartheid spatial development framework, which is still a persistently difficult platform to deal with. These changes are not mere technicalities. They are building blocks for a more responsive, inclusive, and effective municipal demarcation system.
IsiZulu:
Ayasaba amagwala.
English:
We anticipate a reduction in community arrests. We anticipate an improvement horizon on service delivery. We anticipate minimal litigations and we anticipate a seamless process which will ensure that a wall-to-wall system in South Africa ensures that all services are given to its residents in a ward in an equitable manner, but will also ensure stakeholder participation.
In conclusion, we embark on a journey to deliberate on this Bill, we do so cognisant of the impact on the lives of ordinary citizens it will help, and we stand committed to our
values, efficiency in government and a better future for all. The Bill will soon be assented to at the NCOP.
IsiZulu:
Ngiyabonga.
Mr F D XASA: House Chairperson, Ministers and Deputy Ministers, hon members, the Independent Municipal Demarcation Authority Bill, IMDAB, was referred to the Portfolio Committee on Co-operative Governance and Traditional Affairs as per ATC
95 of 21 June 2022. The Bill proposes to repeal and replace the current Municipal Demarcation Act, Act 27 of 1998, as to establish an independent municipal demarcation authority that will be responsible for the determination or redetermination of municipal boundaries and delimitation of wards.
The name change from Municipal Demarcation Board to Independent Municipal Demarcation Authority aligns with the provision envisaged in section 155, subsection 3B, of the Constitution. The Bill also brings together sections from other local government legislation that has direct impact on municipal demarcation.
Among the Bill’s key provisions is the introduction of the Demarcation Appeals Authority, something that was not there in the in the current Act. Aggrieved persons had no place to appeal to and the currently the new Bill is proposing that people must be able to appeal, and I think that proposal was highly appreciated generally across the country.
We also envisage extensive public participation process in municipal boundary determination or redetermination and delimitation of wards. This is also another critical area which was also highly appreciated across the country. To address the governance and financial sustainability challenges arising from the frequent municipal boundary changes, the Bill also proposes a 10-year interval for municipal boundary determination. This was also generally accepted across the country in order to bring stability on the process of municipal processes.
In line with the procedure outlined in section 76 of the Constitution, the portfolio committee conducted public hearings on the proposed legislation across the nine provinces. Oral and written submissions were also solicited, received and processed. Although some people were not in favour of the proposed Bill, most individuals and stakeholders
welcomed it as an antidote to the ills that bedevilled the current demarcation process.
To ensure that the envisaged authority functions optimally, the portfolio committee is going to continue to advocate for the establishment of provincial offices of the authority.
Generally, we would want to recommend to the House to agree to the proposed legislation as it was generally accepted across the country because it was addressing especially experiences of the past 20 years from protests by communities taking us to court and generally everybody accepted the proposal.
Therefore, we recommend that the House agrees to the piece of legislation. Thank you very much.
Ms E R J SPIES: Hon Chairperson, the objective of this Bill is to amend the Local Government Municipal Demarcation Act 27 of 1998 to rename the Municipal Demarcation Board to the Independent Municipal Demarcation Authority, selection and appointment of a chairperson and board members and the establishment of the Demarcation Appeals Authority and the undertaking of municipal capacity assessment assessments.
Well, ironically, independence is hardly at the core of this Bill.
The Democratic Alliance maintains its position that the Bill is flawed as it creates opportunities for political interference in the Municipal Demonstration Body. The DA’s refusal to support the Bill was primarily motivated by section clause 10(1)(b) which deals with the appointment of board members. It is our considered view that the proposed selection panel composition presents potential for harmful political interference, as it gives outsized influence to the President, Minister and committee chairpersons over the selection process.
The DA suggested that an alternative selection process for the board be followed. Our position is that the process should follow a parliamentary selection process where nominated persons are interviewed by a committee of the National Assembly with the incorporation of public participation opportunities.
While the proposed establishment of the Demarcation Appeals Authority appears to be a good provision on the surface, it is also susceptible to political interference because only the President and the Minister have a say in the appointment of a chairperson and board members after public calls for nominations.
With the ever-present risk of gerrymandering and considering a demarcation will now only be done after 10 years, the country cannot afford to have an appeals authority that is politically compromised. Just like the IMDA, the DA holds the view that the chairman and board of the Demarcation Appeals Authority be selected through a parliamentary selection process.
The legislation is a highly consequential Bill for local government affairs and as such, in its current form, cannot be accepted. In our view, the integrity of the public participation process is also highly questionable. The Office of this Chief State Law Adviser advised the portfolio committee on the public consultation process. The conclusion it came to is that based on the public participation process or the report, they were unable to express a view on whether the public participation hearings were reasonable. Given the advice and the recent Constitutional Court judgement related to the Traditional and Khoi Leaders Act, its insufficient public participation process, the DA cautioned the committee on the gaps in the public participation process of this Bill.
In most instances there was a lack of prehearing education and communication of the Bill content. For example, at a public hearing in Athlone in the Western Cape, minutes after arriving
at the venue, members of the committee were informed that there would be no hearing taking place due to the public education unit not doing its work. An estimated R150 000 of taxpayers’ money wasted. The same meeting had to be rescheduled, probably at the same cost or higher, with no one being held liable.
Insufficient notices were given to the public and summaries of the Bill were only made available towards the end of the public hearing process, and from the look of it at great cost. Most people spoke on service delivery issues and issues of delimitation of wards and not at all to the content of the Bill. The ANC must understand the threat that what they are doing through legislation to protect their networks may be used against them when they lose power as well. They have never believed this to be possible until now, but the writing on the wall is now much clearer. The DA does not support the Bill.
Ms H O MKHALIPHI: Chairperson, the demarcation and the delimitation of wards and municipalities are crucial to the sustenance of democracy. This process must be free of any political influence and enable sound administration of the democratic process. Section 155(3) of the Constitution
requires that an institution dealing with demarcation issues must be completely independent, to avoid narrow political interest to influence decisions on demarcation.
The Independent Municipal Demarcation Authority Bill attempts to strengthen this process of the demarcations of the wards and municipalities. We are broadly in support of the establishment of the new independent authority tasked with this function and broadly in support of the functions this board will have.
The process outlined for the appointment of the board, however, as outlined in clause 10 of the Bill does not leave much room for the appointment of independent members of the board. For the selection panel, say for the appointment of a Constitutional Court judge designated by the Chief Justice, and the appointment of the ... Interjections.] ... Commission for Gender Equality, all other appointments are laced with political connotations. The process itself is initiated by the Minister, who must, at the end, send the names to the President, which must consist of three names more than the required number.
For a more open and accountable process, perhaps Parliament is the most suitable institution to conduct the selection process for the appointment of the board members, not a selection panel.
Clause 25(2) of the Bill provides that the board can only determine whether or not a municipality ought to be categorised as a Category A municipality, after consultation with the MEC and the Minister. This leaves the decision about such an important issue only to politicians. We want to argue that there must be a parametric requirement for consultation with civil society and community structures, before a decision of this nature is made.
Furthermore, regarding the determination of the status of a municipality, the Bill provides that, when a determination is made as to under what category the municipality falls, the determination can be revisited only after 10 years. This is too long. This period is too long and instead of including the number of years, the board ought to be empowered to revise the status of a municipality, based on several verifiable factors, including key performance indicators for certain categories of municipalities.
On clause 27, which makes provision for consultation for the determination of municipal boundaries, we would have loved that there be provision for oral engagement and submission by members of the community. Limiting the forms and submissions to merely written formats may exclude a large number of our people.
Clause 35 of the Bill must not only consider the number of voters per ward, particularly in the context of rural areas, where the population ... [Inaudible.]. Clamping villages that are far apart from each other into a single ward, hinders representation and delivery of services.
Lastly, the board must have capacity to conduct their affairs, instead of going to the municipalities and ask the municipality to do their work, because there are factions within that municipality and the community will suffer due to those factions. So, the board must have enough resources and they must have the capacity to perform their duties, without relying on the Speakers of the municipalities. At the end of the day, when you go to the communities, they will say that they have never heard of any consultation from this Municipal Demarcation Board. We support this Bill. Thank you very much.
Ms S A BUTHELEZI: Chairperson, the IFP welcomes the fact that the amendments to this Bill encourage the value of transparency, something that has been greatly lacking, when it comes to the Municipal Demarcation Board, spanning from the appointment of the board members to the decisions made by the board. Over the years, we have seen how the Municipal Demarcation Board has become highly politicised and often wielded as a political weapon that strategically shifts municipal borders, especially before election periods.
Therefore, we welcome the amendments stating the requirement for extensive public participation prior to demarcation, and the obligation it place on the board to publish its reasons for any changes. This ensures that the people directly affected by the amalgamation of municipalities have a platform to raise their grievances, especially considering that a DMB research paper from June 2021 found that amalgamating municipalities did not result in improved service delivery.
Those amalgamated municipalities that were studied remained financially distressed.
As the IFP is a party that is based on both the principles of transparency and accountability, we welcome the fact that the Bill disqualifies political party office bearers and fulltime
employees of organs of state from being members of the board. However, we remain concerned about the various ways in which this can be circumvented. Perhaps the Bill should have explicitly stated its disallowance of any persons with political affiliations to serve on the board. We have to ensure that we put adequate barriers in place to curb gerrymandering.
Furthermore, we want to echo the sentiments of the minority view that the process followed for the selection panel should follow a parliamentary selection process, when nominated persons are interviewed by a committee of the National Assembly with the incorporation of public participation opportunities. We have seen how this process has ensured that appointments are based on principles of meritocracy. Subject to the concerns raised, the IFP supports the Bill. Thank you.
Mr I M GROENEWALD: Hon Chair, demarcation is one subject that is the vastly researched over the world and the result is always that governments use demarcation as a tool to hold power. We could see this, especially before 1994, where the government at that time used to manipulate the borders of constituencies to hold on to power.
We are at the brink of removing a ANC government from power, and break the one-party majority in South Africa. South Africans must know that the ANC will do everything in its power to stay in government, so that the political connected elite can keep on sucking the state purse dry.
The Demarcation Authority Bill is one of such tools. Although some of the oppositions proposals were accepted in the Bill, is there one specific proposal that the department flat out resisted and did not accept the proposal made by opposition. This specific proposal is that of the selection panel responsible to recommend the appointment of the Demarcation Authority Board.
The selection panel, as it is in the Bill, can be manipulated to appoint yet again cadres. The opposition, knowing that they will become the government of the day in the next election, proposed that such a selection panel must consist of a multiparty committee of Parliament ensuring transparency.
Afrikaans:
Behalwe vir deursigtigheid, moet daar ook verantwoordbaarheid wees van so ’n afbakeningsowerheid en is dit algemene kennis
dat die ANC-regering nie wil verantwoording doen vir sy aksies nie. Hoekom sal dit op die afbakenings van grense anders wees?
Die VF Plus is van mening dat die aanbeveling van die afbakeningsraad, in ’n openbare proses, deur ’n komitee, saamgestel uit die Parlement, aanbeveel moet word.
Die afbakeningsraad se bevoegdheid om grense te skuif, wat gemeenskappe direk raak, moet verantwoordbaar staan teenoor sulke gemeenskappe. Die onbereidwilligheid om gehoor te gee aan die voorstel, dat die aanbevelings paneel uit ’n multiparty-komitee van die Parlement moet bestaan, eerder as ’n partydige komitee van kamerade is bewys dat daar planne is om onverantwoordelik om te gaan met die samestelling van grense.
English:
The ANC cannot be trusted and all the cat on a warm plate moves, will not save you. Today, I want to tell the ANC that no matter what plans you make, it will not succeed. There is a new government on its way, and your action is being questioned, because you cannot be trusted.
You are a failed government that had the opportunity to govern, but you enriched yourself rather than being accountable. Therefore, you must blame yourself that you will be in the opposition seats come the next election and make space for a new government that want to rebuild the country you destroyed. The FF Plus do not support the Bill. Thank you.
Mr A M SHAIK EMAM: Chairperson, the NFP will support the report here and this amended Bill. Indeed, I think when you talk about demarcation. Chairperson, I think when you talk about demarcation, there’s a high level of suspicion around the word demarcation. We have seen and I personally have seen in KwaZulu-Natal how people are bussed from one area to the other area where political parties have greater strength in order for them to win particular wards and things. So, we do hope that this initiation of the Demarcation Appeals Authority, will deal with some of these issues, particularly given the fact that public participation and stakeholder engagement will be enhanced.
But perhaps, maybe we must look at something bigger in the near future. We need to reduce the number of provinces and cut down on costs. But I see there’s a high level of obsession in this House and all it is about ANC, removing ANC, ANC failing,
you know. But what I don’t hear is anyone talking about in the interest of the country and its people, how we could find common ground.
I would like to remind some of my friends that when they handed over this apartheid government to the democratic South Africa, South Africa was bankrupt. Let us not forget that. And now you had to start from a bankrupt state. You had to make provision for all that has happened during the days of apartheid. How you manipulated, how you victimised people, how you did not provide for certain sectors of the community. You even went to the extent of dividing and ruling tens of thousands of blacks ... [Inaudible] ... with collusion with some political parties. Let us not forget all these things.
Let us work together and find common ground.
I agree that this goes a long way, although I have concerns about its independence, even though it says that there will be no political affiliation, which is a good thing. What about that no political affiliation in those local government that you putting mayors and municipal managers? Can we not go a little bit there as well or is that filling the pockets up?
So, we don’t want to touch on that, but we want to touch on this. Let us be consistent as far as our arguments are
concerned. The NFP will support this Bill. Thank you very much.
Mr G G MPUMZA: House Chair, Ministers and Deputy Ministers, hon members of the House. The Municipal Demarcation Board’s alignment with the objectives outlined in the National Development Plan is important in its commitment to addressing spatial injustice, inequality and inefficiency. Their dedication is reflected in their pursuit of a national spatial vision has articulated in the National Development Plan, in the National Spatial Development Framework and in the Integrated Urban Development Framework.
The primary goal is to bring about a fundamental transformation in South Africa’s spatial history, by guiding urban growth towards a sustainable model characterised by compact, connected and co-ordinated cities and towns. To achieve the vision of the Municipal Demarcation Board, the Municipal Demarcation Board recognises the necessity of playing a significant and transformatory role in various aspects, including integrated urban planning, planned governance, integrated transport and mobility, integrated infrastructure and inclusive economic development.
The overarching aim is to strengthen linkages between rural and urban spaces, fostering a more balanced and sustainable developed trajectory. To execute this comprehensive approach, the Municipal Demarcation Board acknowledges the importance of establishing quota ties and collaboration with key stakeholder institutions. This collaborative effort extends to entities such as Co-operative Governance and Traditional Affairs, Cogta, SA Local Government Association, Salga, municipalities and the academic community.
By fostering partnership with these stakeholders, Municipal Demarcation Board, MDB’s aim is to contribute significantly to the realisation of a more sustainable, equitable and a spatial framework for South Africa’s future. The Independent Municipal Demarcation Authority Bill, introduced by the Minister of Co- operative Governance and Traditional Affairs aims to replace the Local Governmental Municipal Demarcation Act 27 of 1998.
It also promotes amendments to the Local Government, Municipal Structures Act of 1998, specifically focusing on the removal of section 2, 3 and 4 of that Act.
The primary objective of the Bill is to establish an Independent Municipal Demarcation Authority with the authority to oversee the entire municipal demarcation process in the
country. This includes the power to facilitate public engagement in the demarcation of the municipalities and the delimitation of wards. The Bill outlines the appointment process of the board, defines the powers and establishes mechanisms for appealing decisions made by the board. In practical terms, if the Bill is passed, the existing demarcation board will be changed to be the Independent Municipal Demarcation Authority Board. This will give effect to the processes of appointing the proposed Demarcation Appeals Authority members, which will be helpful to speeding processes of appeals.
The rationale behind this scrutiny stems from the concern that individuals with limited financial means might encounter obstacles in assessing the legal system due to associated costs. These geographical areas are situated within specific provinces, thereby placing the responsibility for comprehensive spatial planning process and the decisions under the purview of the respective executives.
Hon members of the opposition, it is therefore important to view executives as role-players not always political interference.
IsiXhosa:
Thina nto zaziyo asothukanga nto xa niphikisa lo Mthetho Oyilwayo kuba siyazi ukuba ...
English:
... the ... [Inaudible] ... psychosis of apartheid ...
IsiXhosa:
... inibambile. Niyoyika ukuphuma phaya kanti le...
English:
... Demarcation Bill ...
IsiXhosa:
... iza kunikhulula kobu bukhoboka.
English:
Integrating the executives into the processes is not merely a procedural requirement, but also aligns with both political and legal propriety in navigating this cause of easing the appeals process. The appeal mechanism is orientated towards benefiting the economically disadvantaged, ensuring that appeals are economically feasible and within reach of the less affluent. The Bill allows for a comprehensive consideration of
these issues, endorsing a meticulous examination of the ward delimitation processes in collaboration with affected stakeholders.
This process is designed hon Smalle to ensure that the establishment of ward boundaries is carried out ... [Inaudible] ... considering the local landscape and avoiding potential conflicts. Furthermore, the legislation hon Spies advocates for the creation of provincial representation, offices or measure, intended to facilitate more accessible and efficient engagement between the demarcation authority and municipalities, communities, stakeholders at the regional level.
In addressing concerns about the appeals process, the Bill introduces provision for provincial appeals authorities. This initiative is aimed at mitigating a burden on the system and expecting responses to grievances by allowing appeals to be considered at a provincial level. Moreover, the Bill emphasises the importance of strengthened communication and consultation. It underscores the need for these processes to be grounded in practical and meaningful elections. The authorities explicitly tasked with taking a proactive stance in public meetings, responding to questions from attendees,
hon Spies and actively participating in discussions to ensure a robust exchange of perspectives.
This commitment is active engagement and aligns with ANC-led government objectives of fostering transparency, responsiveness in the municipal demarcation processes. The mechanisms for public participation in ward delimitations May involve public consultation. We support the Bill. [Time expired.]
Mr T LOATE: Chair, the Independent Municipal Demarcation Authority Bill has an interesting chapter on municipal capacity assessments. These are defined as the assessment of the capacity of a municipality by the authority to perform the function and exercise the powers vested in the municipality.
As of November.2023, there are 66 municipalities out of 257 in our country that are dysfunctional. A staggering 43 municipalities in South Africa have collapsed and require urgent intervention to rescue them. Another 151 municipalities are deemed bankrupt and insolvent and are unable to pay creditors, and third parties including the South African Revenue Service and pension funds.
Most of the distressed municipalities are found in areas in Kwazulu-Natal, Eastern Cape and Limpopo. What purpose will be served by having the Independent Municipal Demarcation Authority conducting municipal capacity assessments at least once every five years when poor governance, weak institutional capacity, poor financial management, corruption and political instability have been diagnosed time out of the number?
What new values will this new authority bring in assessing financial viability, governance, service delivery, institutional arrangements and spatial planning, when all these problems have been constantly laid bare over two decades? Does this government not already know all the problems that need correcting? Does it not already know the factors that have resulted in revenue management failures, rising indebtedness, creditors and service delivery failures?
The report, which the authority is being charged to compile, will merely state what has already been reported and has been available over every year for the past two decades. This Bill, when enacted into law, will achieve nothing whatsoever. It will be hopping on the same spot. Every time around, measure of this government has been a dismal failure because it keeps wanting the report of the problems and has no idea what
solutions to implement. We will give this Bill a chance, but all that Cope is asking is for is for solutions now, not years in abeyance. Thank you.
Mr M NYHONTSO: Chairperson the PAC supports the Bill ...
IsiXhosa:
... kodwa sinethemba lokuba siza kuba nethuba lokukhalaza kweli ithuba kwaye sichaze nendlela ukumiswa kwemida (demarcation) ekungasanelisi ngayo, kuba usuke ubone nje izinto zingasahambi kakuhle ungasekho nakule ndawo ubuzalelwe kuyo izolo. Ngapha koko Sihlalo, siyaxhasa.
English:
Thank you Chair.
Mr J F SMALLE: Hon Chair, the emphasis of the wording in the Independent Municipal Demarcation Authority Bill must be on independence. The ability of the Minister to determine priorities and time frames for the determination or redetermination of municipal boundaries, after consultation, brings into question the ability of the board to act independently and not accepting those demarcation inputs for considerations as it is required. The applicants seeking
relief in the case of Matatiele and Others against the Eastern Cape government and KwaZulu-Natal governments proved with costs against the ANC government that, when political influence is used to drive determinations or redeterminations of boundaries, it exposes government’s shortcuts of a transparent process.
The future will be no different, especially when the ANC loses provinces such as Gauteng and KwaZulu-Natal in the upcoming elections. The unwillingness of the ANC to force board members to declare all state previously held political offices, is nothing else than the reapportionment of an ANC cadre deployment policy and capturing of the demarcation board, rendering the board indebted to its masters. Disclosures is one of the pillars of the King IV recommendations because it supports the imperative to apply practices not for their own sake.
In assessing the independence of the board, optimal board composition is required to strike a balance between knowledge, skills, experience, diversity, and independence. The current demarcation board in its own version statement sees itself and I quote:
The Board is an independent authority responsible for the determination of municipal boundaries.
Nothing can be further from the truth. We know, and South Africa knows that when the ANC loses political support within municipalities, wards or even wants to create new metropolitan cities as to incentivise the educated deployment policyholders, the demarcation board is rendered toothless.
Just like in the past, this Bill that seeks to ensure independence within the demarcation process will never be independent as long as the ANC continues to muddle policy within the independence of the board. This will lead to confusion, distorted boundaries and frustrated communities. The DA does not support this Bill.
Ms D R DIREKO: Chair, it clearly shows that the hon member who just left the podium did not read the Bill properly. That is why he came with the allegation of capturing demarcation board or processes. If he read the Bill properly, he could have seen that it gives more power to our people instead of the current Act that we have now. It also gives them more powers to dispute and their favourable time frame to get their response from the dispute of demarcation processes instead of what we have currently. So, if he have read the Bill properly, he
could have seen that we are making the lives of our people a little bit easier than it is today.
Chair, the process of demarcation has been proposed that we moved from the five years cycle to the 10 years cycle. The reason why we are doing that is because we want to bring stability in our municipalities. When we were doing the public participation hearing we then realised that in most cases you'll find out that, in this five years cycle, you have this particular ward in this particular municipality and then after five years, they are moved from that particular municipality to the other municipality, which then creates instability in terms of the planning in our municipalities.
We also raised the issue of the importance of executive in this new Bill. Previously, we did not have enough tools that empower the executive to check the viability of demarcating the municipalities or the processes. But now we are saying before we can demarcate our municipalities or our ward, the executive must perform assessment to ensure that there is a viability on what they are doing because we've been doing the medication processes. There's a situation where the demarcation went wrong.
We can go to Free State, the issue of Kopanong where you will just mix this poor towns together and at the end of the day the municipality collapses and there's nothing. Hence, we are saying the executive should also form part that in every process of demarcation, they must check the viability of that process so that they can take a decision.
We all know our beloved all-white kitchen party FF Plus; they are known for nothing good except crying in the wrong funeral. Hence, they came here crying in the wrong funeral and ended up believing their own lies. We are here discussing issues of national importance, issues that are affecting our people on a daily basis and our member there hon Groenewald comes here and speaks about the ANC losing power. That's what - I mean, it's irrelevant.
It's not necessarily addressing the challenges that we are facing now. If it was a part of your campaign strategy, you are crying in the wrong funeral. Go out there and campaign. Not in this particular platform using the challenges of our people to popularise the organisation, it's really wrong.
I was surprised because you never form part of the public participation. Maybe it's because you were allergic to what
you were going to see there, or your conscience was speaking to you. You were afraid going to the people there on the crowd because you are from the all-white party. Maybe you're afraid that you're going to dye you black. Hence, you're not part of this public participation.
Mr W W WESSELS: Chairperson?
The ACTING CHAIRPERSON (Mr Q R Dyanti): Take a seat hon Direko. Take a seat hon Direko.
Mr W W WESSELS: Chairperson, I would say that it's unparliamentary for the member to reflect on the race of members in this House and it's not a point of debate and I would request you to rule on that.
The ACTING CHAIRPERSON (Mr Q R Dyanti): Thank you hon member. Hon Direko, please stay on your speech.
Ms D R DIREKO: Thank you, Chair. So, the honourable member was afraid to go to the public participation. That is why, when he came to the podium, he was found winding because he did not know what to say. He did not know what happened with the process, so we understand why you were found winding. One
thing you wanted to popularise yourself, but unfortunately you exposed yourself and the party that you come from.
Hon Chairperson, the Constitution of the Republic of South Africa, adopted in 1996, outlined the imperative principle governing the establishment of municipal boundaries and the delimitation of wards within our country. According to section 155(3), the Constitution mandates and insists that national legislation must enact to define the criteria and the procedures for determining municipal boundaries. Hence, we are entrusting the significant task to an independent authority.
Furthermore, section 155(4) underscores the importance of independency in the delimitation of wards, especially in electoral system, featuring ward representation. In such cases an independent authority appointed in accordance with the procedure and criteria specified by national legislation is entrusted with the responsibility of demarcating wards to ensure a fair and impartial electoral framework. This constitutional framework reflects a commitment to transparency, fairness, and establishment of robust foundation for democratic governance at a local level in South Africa.
Strengthening the Independent Municipal Demarcation Authority and the thoughtful determination of municipal boundaries holds paramount important in fostering effective government, equitable representation, and sustainable development within our country.
Firstly, a robust independent demarcation authority serves as a solid foundation for ensuring the integrity of local government structures. By strengthening the Independent Municipal Demarcation Authority, we are investing in an institution that plays an important role in safeguarding the democratic principle indicated in our Constitution.
Additionally, the demarcation of boundaries is essential in adapting to changing democratic and social economic dynamics, population shift, and evolving community needs, necessitate periodic review and adjustment to municipal boundaries.
The new Bill ensures a proactive approach that ensures that municipality can effectively respond to democratic changes, allocated resources and addressed the major challenges. This adaptability is fundamental to fostering resilience and responsive local government structures.
It is also important to strengthen the work of Independent Electoral Commission, which holds profound significance for the robust functioning of South African democracy, as articulated in our 2015 National General Counsel document of the ANC.
The call for the review of demarcation board guided by ANC conference mandate underscores the evolving landscape of governance and democracy in our nation. The frequency of the boundaries review has been consistently concerned for both the ANC and our community, emphasizing the need for dynamic and responsive system.
ANC as a caring organisation, then concluded that there is a need for us to review our demarcation board because we are an organisation that listens to our people.
Sesotho:
Ha re ntse re tsamaya re mamela batho ba rona, bai le b aba le ditletlebo tse ngata ka moedi moo e leng hore ba bua hore ba tlositswe moo ba neng ba le teng mme ha ba ya ka dimasepaleng tse ding ba fumana hore ha ba fumane disthebeletso tseo ba di hlokang mme re le ANC, re ile ra nka qeto ya hore ... [Nako e fedile.]
The MINISTER OF CO-OPERATIVE GOVERNANCE AND TRADITIONAL
AFFAIRS: Hon House Chair, the Bill provides for the selection panel and the appointment of members of the board, which represents or come from representation of the National Assembly, from the National House of Traditional Leaders and in the current position of the selection of panel.
It also provides in the application process that the Minister and the President creates a long list from who have applied in case there is a replacement. So, it limits and do away with the powers of a Minister deciding to make an advancement outside the system. It sets the time and the period for the board to be five years to commence immediately aligned to the term of the of the Council or the cycle of five years. It even sets the regulation on how the Minister could get into the process.
There's an understanding which is not correct of municipal capacity assessment to what we term the state of local movement. No, hon, here, you are assessing the capability and the capacity of a municipality based on infrastructure that is currently there, that was there in the pre colonisation period and ultimately how you plan, noting that there's migration, there's economies that differ, that regroup and restudies. I
think Economics 101 could be helpful in assisting us on how best we could ensure that the economies of municipalities are designed.
Towns that were there today are not necessarily towns. Hence in Bloemfontein, for example, Mangaung, there's a Big Hole because the market and design of Kimberly’s economy has shifted into a town that needs to be able to be developed towards the economy that is running now, which is mostly social services.
So, it is what informs demarcation and ensuring that we deal with all the issues that demarcation is about. By the way, the Constitution calls for a wall to wall. So, there's no part, even a farm is in a particular ward, and that's where the problem is. Thank you very much.
Question Put.
Debate concluded.
Bill read a second time (Democratic Alliance, Freedom Front Plus and African Christian Democratic Party dissenting).
CONSIDERATION OF REPORT OF PORTFOLIO COMMITTEE ON COMMUNICATIONS AND DIGITAL TECHNOLOGIES ON SOUTH AFRICAN POST OFFICE SOC LTD AMENDMENT BILL
There was no debate.
The DEPUTY CHIEF WHIP OF THE MAJORITY PARTY: Hon Chairperson,
I move that the report be adopted.
Motion agreed to (Democratic Alliance, Freedom Front Plus and African Christian Democratic Party dissenting).
Report accordingly adopted.
SOUTH AFRICAN POST OFFICE SOC LTD AMENDMENT BILL
(Second Reading Debate)
The DEPUTY MINISTER OF COMMUNICATIONS AND DIGITAL
TECHNOLOGIES: Hon Chairperson, Ministers and Deputy Ministers, Chief Whip and Deputy Chief Whip of the Majority Party, members of this august House, fellow South Africans, good afternoon. Hon members, the emergence of digital technologies and the era of the internet has had a significant impact on
the financial and operational viability of postal operators, the world over. The SA Post Office, SAPO, has not been an exception. The Universal Postal Union commissioned research in 2023, it showed that revenue generated from letter posts has declined from 50% in 2005 to 34% in 2021, and will continue to
decline further to 29% in 2025.
The research shows that the parcel and logistics revenue has steadily increased from 11% in 2005, the 32% in 2021, with forecast indicating that this revenue stream will reach 36% by 2025. Further projection show that the parcel revenue will soon be higher than the letter post revenue. This development, hon members, points to an inescapable conclusion that revenue diversification is no longer a luxurious option, but an absolute imperative for the survival of the postal sector amid these market dynamics. Although the rapid technological development has significantly diminished the traditional postal business as we have known it, there are, however, opportunities for the postal sector to diversify its products, to reimagine itself and to transform.
There are still huge opportunities for postal operators in the e-commerce space, which has seen double digit growth in the recent past in the logistics space to leverage on the
opportunities presented by a huge boom in the small parcel market. The Second Reading of the SA Post Office Amendment Bill, a Bill overwhelmingly supported by our people during the consultation process by the committee, represents our collective policy and legislative response to the change market conditions under which the postal sector is operating. Through this amendment, we seek to repurpose the Post Office to provide the diversified and expanded services to respond to the needs of the citizens, to reposition SAPO to serve as a logistic platform for e-commerce, as well as the logistic hub and partner for other industry players.
We are seeking to create an enabler for SAPO to be properly digitised so that it serves as a designated authentication authority that fulfil its role as a national trust centre in this age of digital identity and services. In concrete terms, the Bill advances the aspiration on objectives articulated in the building the Post Office of tomorrow’s strategy which places the entity at the centre of the digital and physical world by integrating the ability to transact digitally and deliver physical items to a specified address. We are confident, Chair, that the Post Office of tomorrow is aligned with the Universal Postal Union, UPU, research, which advises postal operators to integrate their services strategically.
In this regard, the strategy calls for the postal infrastructure to serve as a national backbone for the movement of messages, goods and money. Hon members, we are making this intervention in an environment where in colloquial terms our detractors may argue that the horses have bolted.
Unfortunately, we do not believe in that narrative. Yes, currently SAPO is going through a very difficult process. Over the years, this entity has experienced significant revenue decline, where operational costs exceeded revenue. Currently, it owes creditors about R12 billion. It was given this background that on the 10 July this year, the High Court places SAPO under business rescue, and appointed two business rescue practitioners.
Last Thursday, the practitioners have published the SAPO Business Rescue Plan. We are confident that the rescue plan, which is due to be voted on by the creditors on 7 December, is the best viable option under the circumstances to turnaround the Post Office. We are aware that the business plan proposes difficult choices to save the Post Office. It is at times like these, hon members, that a character and integrity of a leadership is tested. A leadership that lacks the courage of its conviction will pander-up to populism and choose the easiest of choices. However, a principled leadership will
objectively and meticulously evaluate the hard choices available and make a choice that’s in the best interest of the entity and the country.
Yes, the rescue plan proposes a rationalisation and consolidation of branches in the interim, until such time that the debt crisis is resolved. However, it also proposes the availability of points of presence by providing a network comprising postal counters at retailers, and so forth. The plan argues that the cost of labour is 150% of SAPO’s revenue, and therefore unsustainable, and in this regard, it proposes section 189 process. We have emphasised, as the department, that any application of the section 189 process, must be in line with the Post Office of tomorrow’s strategy, which proposes an employer-employee driven scheme, which has the potential to empower the worker and create future opportunities.
Minister Gungubele is on record reiterating that government has got no intention to privatise SAPO. Our approach is to identify strategic opportunities and partnerships to revive the business. The SAPO must still ensure universal postal services as it remains the only footprint for government and citizens, particularly, in rural areas. In conclusion, Chair,
we remain committed in ensuring that the Post Office is safe to continue to deliver the much needed multiple services to our communities. I thank you.
Debate concluded.
Bill read a second time (Democratic Alliance, Freedom Front Plus and African Christian Democratic Party dissenting).
Mr B M MANELI: Hon House Chairperson, hon Ministers and Deputy Ministers, hon members, The People Shall Govern! States:
Every man and woman shall have the right to vote for and to stand as a candidate for all bodies which make laws; All people shall be entitled to take part in the administration of the country; The rights of the people shall be the same, regardless of race, colour or sex; All bodies of minority rule, advisory boards, councils and authorities shall be replaced by democratic organs of self-government.
These words are enshrined in the Freedom Charter and have laid the foundation for an activist and participatory Parliament which we have the honour and privilege of serving today. The ANC remains committed to upholding the values of this
Parliament as an organ of people's power which can be used to advance the national democratic revolution. The Constitution gives rise to this in section 59(1)(a) and section 72(1)(a), which provides that:
The Assembly and the National Council of Provinces must facilitate public involvement in the legislative and other processes of the Assembly and its committees.
It is against this backdrop that the SA Post Office SOC Ltd Amendment Bill is a section 75 Bill, meaning that it does not necessarily affect provinces.
The portfolio committee over and above the written submissions received, proceeded to initiate the public hearing process in four provinces, particularly in rural and urban areas where postal services are rendered as follows, in the Western Cape province on 9 September 2023, in the Cape Winelands District Municipality at the Drakenstein Local Municipality in Paarl at the Simondium Hall. Towards the Eastern Cape province, on Friday 15 September 2023 at Amatole District Municipality in the Mbashe Local Municipality in Idutywa. In Limpopo province, Tuesday 19 September 2023 at the Vhembe District Municipality, Thulamela Local Municipality in Thohoyandou. The fourth would
have been the Gauteng province on Wednesday 20 September 2023 in the City of Ekurhuleni, Tembisa Township.
On 31 October 2023, the committee further deliberated on the Bill and highlighted issues of concern. The parliamentary legal advisor and the state law adviser, having considered the process taken by the committee, confirmed that the committee has proceeded in accordance with the National Assembly Rule
286. The objectives of the Bill, as introduced by the executive are as follows; to amend the SA Post Office SOC Ltd Act of 2011 to provide for the revised duties and expand on the mandate of the SA Post Office, as provided for in this Act and the Postal Services Act of 1998; provide for the repurposing infrastructure to provide diversified and expanded services and make the best use of the infrastructure capacity to extract value and forge partnerships with other stakeholders; to provide for the revised governance structure of the SA Post Office; Also, to provide for the establishment and appointment and functions of the Stamp Advisory Committee; and to provide for matters connected thereof.
These public hearings signify that the ANC truly represents the will of the people. Our support for the rescuing of the post office is not purely a political statement but seeks to
advocate for the marginalized, in particular, to gain access to the same services that those who reside in the urban parts of our country are able to get. This speaks to our government's efforts to deal with the apartheid-imposed spatial planning that sought to separate and racially divide the people of this country, and their vast majority, the poor and working class, black South Africans remain marginalised from attaining access to services such as those offered by the SA Post Office, transactional services, which include attainment of grant money, license renewal, books, distribution, mailing, etc. This is informed by big capital’s reluctance to invest in our rural and township economies. In instances where they do, they inflate prices, making it difficult for our people to gain the necessary access to such services. This, therefore, gives impetus to the work that is done by the government and civil servants through public institutions and SOEs.
Despite its challenges, the SA Post Office remains pivotal for the advancement of our socioeconomic development, and this is evidenced by the views and lived experiences of our people on the ground. The different communities impressed us with their support for clause 3 of the Bill and indicated that the expansion of services provided by the SA Post Office will
greatly assist rural communities. Our communities want to see SA Post Office branches open under the government of the ANC. They cannot afford transport fares to further areas as this creates bigger problems, particularly for people living with disabilities and the elderly.
In the year 2022 Postal Development Report, the Universal Postal Union has articulated that for postal resilience:
Post offices need to have at its foundation, modern and reliable postal services that better connect different parts of the world. Posts need to be resilient by leveraging new business models and meeting the needs of a wider variety of customer types and demographics.
This is in line with the amendments to this piece of legislation which are part of the intervention to review the legislative framework governing the entity to ensure that it is aligned with current developments and to position and empower the SA Post Office to digitally transform and expand on its business offerings, taking advantage of opportunities created by technological developments and create more revenue- generating streams.
The Post Office of Tomorrow Strategy further outlines the modernisation of its product portfolio, which will include e- services, technology modernisation, developing a smart post office, redesigning the logistics operations and creating a post office that can serve as a strategic partner to the government in the delivery of services and business including small, medium and micro enterprises, SMMEs. We are confident that the business rescue process is going to help turn the entity around into a functional entity that competes as an equal player in the digital era. However, we remain concerned that this process will also be accompanied by further retrenchments of around 6 000 employees across the country. We urge that this be avoided by all means necessary using the Post Office of Tomorrow's Strategy and other strategies be employed to save jobs, as opposed to cutting them.
We’re quite aware that the debate that would follow thereafter has already shown in the committee will emphasise more on matters of the current legislation which has made it impossible for the post office to transform as needed.
Therefore, this Bill is an intervention to ensure that we get to that post office of the future as supported by the masses, without any view that declines ... the Post Office of Tomorrow. Hon House Chair, I want to take the opportunity to
thank you, and the ANC support that this Bill goes through. Thank you.
Ms N W A MAZZONE: House Chairperson, as I appear here today, a cold heart fact should hit us all hard in the face: if one Googles the SA Post Office, Sapo, the first and most asked question that appears is: “Does the SA Post Office still exist?”
And here we are, talking about the so-called “Post Office of Tomorrow”, when no one actually knows where the Post Office of today is.
Millions of South Africans can no longer send or receive mail of any kind; social grant recipients and Expanded Public Works Programme, EPWP, workers are sent from pillar to post to collect their money, most times getting stuck with no money nor any way of returning home. Yes, ANC, carry on fooling yourselves that you think you care. South Africa sees you.
Much like our “smart cities” and the “super rail” across the country, a “Post Office of tomorrow” is a pipe dream and yet another way to loot and destroy a state entity.
Last week, the SA Post Office released its business rescue
plan. Its business rescue practitioners, Anoosh Rooplal and Juanito Damons, set out plans to retrench 6 000 workers and to close a further 420 branches across the country.
This is nothing short of devastating; but has been long in the making, due to ANC maladministration. These interventions will worsen our unemployment crisis, as well as worsen circumstances for the most vulnerable that rely on the Post Office.
But have no fear says the ANC, we will install a Stamp Advisory Committee to fix the Post Office. Really, this is what you occupy your efforts with? You need post to put a stamp on. You need Post Offices to buy the stamps from. You need post boxes to receive the mail. You need postal employees to handle the post.
Sapo received R7,9 billion from the taxpayers from 2014 to 2019 and has only continued to deteriorate. Sapo was provisionally liquidated this February, as it defaulted on its R12,5 billion debts. It then received R2,4 billion in February from the National Budget and is anticipated that there will be further bailouts.
Despite this, 396 branches across the country have closed since 2020, and more than 6 000 workers have already been retrenched. There are now more closures and retrenchments expected, as Sapo plans to cut a further R1,2 billion from its annual costs.
Sapo did not receive funds from the Medium Term Budget Policy Statement, MTBPS, which is worth condition for its business rescue plan to have any chance. We are all aware of the country’s fiscal situation due to the ANC. As matters now unfold, there may be no SA Post Office at all.
The DA urgently calls on the Minister of Communications & Digital Technologies, Minister Mondli Gungubele, to address the public on the following: His plans to address Sapo branch closures for customers, who rely on Sapo for postal services and the collection for social grants; whether retrenched Sapo workers will receive retrenchment packages and other support, as Sapo already could not pay its taxes, pension fund or medical aid scheme; as Sapo has no means of financial sustainability, what this will mean for the Sapo Amendment Bill; what Sapo’s deterioration means for the SA Postbank, which is owed a staggering R4,6 billion by Sapo; and whether Sapo’s executive will be reduced or any pay cuts will be seen in its Wage Bill,
as its chief executive officer currently earns, wait for it, nearly R4 million a year.
This Bill does nothing to solve the problems at the Post Office, it is ill-timed and badly drafted. The only mail that we should now occupy ourselves with is the change of address cards to those who currently occupy Union buildings after next year’s elections. Chairperson, I thank you.
Mr S TAMBO: Chairperson, the EFF support the SA Post Office Amendment Bill as a necessary intervention to rescue an entity that is on the brink of collapse. The SA Post Office is one of the entities that has been destroyed by ANC incompetent directors in government. It’s the ordinary people who are suffering the consequences.
As things stand, Sapo reliability stand at R5,5 billion while the entity has negative access value of R6 billion. It is an entity drowning in debts owing to landlords for its offices for over R255 million. The offices of Sapo are closing at a rapid rate. Almost 48% of its branched have already closed while as an exhibited no capacity to digitise to compete with its competitors.
The Amendment Bill provide us with a small opportunity to salvage a desperate situation. The Amendment Bill seeks to expand the mandate of the Post Office by stipulate the encouragement of all government departments to utilise the services of the Post Office for its functions. The EFF agrees that the only way to modernise and upskill the SA Post Office and ensure that the entity generate reliable revenue as if government is self-utilises the Post Office from South Africa. Further Statistics SA Post Office Amendment Bill stipulates that Post Offices can be repurposed and its infrastructure can be released for commercial purposes through partnerships with small, medium and micro enterprises, SMMEs, informal traders and stakeholders.
Critical to the eradication of the crippling debts contracting the Post Office is the crucial amendment contained in the proposed Amendment Bill, which says that the Post Office must enter and negotiate payments agreement with its creditors and explores steps to cancel the crippling evergreen contract.
These interventions are important as we learn through the public hearings held in the Western Cape, the Eastern Cape, Limpopo and Gauteng that the Post Office remains an important means of communication for our people and provides critical services such as grant disbursement.
We must once again register that the retrenchments are not a solution to the financial woes of Sapo and are therefore no means of generating revenue but further digging the grave of the Post Office. There must be an immediate freezing of the closure of Sapo offices if the Amendment Bill is to be of any value. The Amendment Bill is but a short term intervention to ensure that the future generations inherit the Post Office that can render services and is modernise so the poor are not surrender to private capital and E-commence, corridor and social services.
The ultimate solution to rescue public entities that are crucial to the community however liaison removing the government that has destroyed in the first place. This can only happen by registering to vote in the 2024 elections and registering to vote for the EFF to remove this incompetent government. Thank you very much.
Ms S A BUTHELEZI: Hon Acting House Chairperson, South Africans have been subjected to ailing state-owned enterprises despite numerous recommendations from portfolio committees after each oversight. It is discouraging that public funds are injected into these state-owned enterprises, SOEs, each financial year and yet their progress remains nonexistence. We cannot address
the issue of failing state entities by simply enacting laws, policies and regulations without effectively implementing them. That is a futile exercise and quite frankly, a waste of public funds that could be directed elsewhere. Although this is a well-worded Bill, its implementation has the potential to have dire consequences for ordinary citizens.
The mass closure of branches will lead to the unemployment of thousands of people. This will not only add to our already high unemployment statistics, but it will also mean that thousands of families will be drawn back to poverty.
Therefore, this necessitates legislation that considers the effects that the closure of branches will have, one that is reflective of the socioeconomic makeup of the country. The powers given to the Minister are concerning even though SA Post Office, SAPO, is not a Chapter 9 institution, it leaves a lot to be desired. If a Minister will be given so many powers enrich, seemingly almost unlimited. This Bill means not only to address the concerned challenges facing the country, but also to do through mechanism that will allow any elected government, not just the current one to still be able to address these challenges as they have failed to do so in almost 30 years of power.
The turnaround strategy of the SAPO has not taken off after being introduced to the portfolio committee about a year ago, before even receiving the bailout. Instead of bearing the fruits of the bailout and the turnaround strategy, instead we are faced with a SAPO that is dying on arrival. Instead of seeing the digital transformation of SAPO, we are just bombarded with problems and challenges facing both the employees and the end user at the end of ... [Inaudible.] ... restructuring of SAPO still needs to be done within the parameters of reasonableness, effectiveness and functionality, qualities that are necessary in order for the government to strike a balance between effective addressing SAPO’s failure as an institution, and not rendering thousands of workers unemployed and back to poverty which is a dire effect on the economy. The IFP accepts the report. Thank you, Acting House Chair.
Mr W W WESSELS: Hon Acting House Chairperson, the Deputy Minister says that digitisation has had a negative impact on the viability of the Post Office. Yet I’m sure that any member in this House that serves his or her constituency would receive and receive hundreds of complaints from constituencies out there that do not get any service from the Post Office.
Therefore, there is a demand but there’s no supply. That’s the
problem. There’re very viable private institutions out there that’re taking over the market of the postal service because of a failed Post Office.
Therefore, we read the Bill. The Bill almost reads like a recommendation of a report which is really a shame. It says that the Post Office must develop a credit plan facility. Such plan must include evaluation of the Post Office debts. Why must that be legislature? Source funding, really, either from the fiscus and there the problem is or from the market and appropriate steps to cancel evergreen contracts. That’s so obvious. Why should we put this in a Bill? It’s a shame.
However, the fiscus part is the problem, because yet again there’s a request for a bailout, a bailout of R3,8 billion for the Post Office. The Post Office of tomorrow, hon Maneli, is a pipe dream. When we talk about technology, et cetera, whilst the Post Office can’t even deliver on its most basic mandate of delivering mail, then that is nonsensical. How was the Post Office allowed to accumulate debt to SA Revenue Service, Sars, of more than R700 million? Because the ANC government allowed it and ... [Inaudible.] ... this Bill proposes a stamp advisory committee. A stamp advisory committee to do what?
Because if you can’t mail a letter, you don’t need a stamp. I thank you.
Mr A M SHAIK EMAM: Thank you very much, Chairperson. Allow me to raise my concern, particularly on the state of the SA Post Office. Now, whilst we are asking to repurpose the SA Post Office and give them the ability or a mandate to extend the services that they provide to make it viable, let us not forget that the debt currently far exceeds its assets. It is something of about R4 billion.
However, what is concerning is that, in order to achieve this objective: On the one hand, we are shutting down another 80 of our branches, which will take the total to approximately 396 branches that appear to have been closed down]; on the other hand, with a further 6 000 employees being retrenched.
My concern is that I am trying to understand this: On the one hand, we want to enhance the services to make it a success; but on the other hand, we are shutting down the branches. So, I am not sure that would the amount of money that will be pumped into this – because I know there is another bailout on the cards - will be going to have the infrastructure to be a viable option once you are reducing the number of post offices
in terms of your infrastructure. So, that is what my concern is.
Whilst, yes indeed, the SA Post Office at some stage has been a very successful entity, if you look at the latest report of the Auditor-General on state owned companies, performance is dismal. All the state-owned companies! Strange enough, not a single state-owned company gives back any returns or any profits back to the fiscus. So, it is a case of just putting more and more and more money.
Whilst I do agree that we need this, let us also be mindful of the fact that if you continue providing licensing - because we talk about Competition Commission, so that we have to give licensing - same thing with the air routes, you gave more and more and shut SA Airways down. Here, you are giving more and more people to be able to have courier services and do everything else which affects the SA Post Office.
So, perhaps, that is why sometimes a communist system does help, because charity begins at home. You can’t expect these entities to also be successful, but at the same time you are providing more and more opposition to them. Given the fact that South Africa has a very large rural community, and when
you talk about the rural community, you cannot expect it to be profitable, particularly from those post offices that are in rural communities. So, I think we need to be mindful of what we are heading into, in terms of this Bill. And yes, we are giving more and more bailout. This amendment can help. [Time expired. Let me go. Thank you.
Mr T LOATE: House Chair, SA Post Office Amendment Bill is an exercise in naivety. Let me repeat that: This Bill is an exercise in naivety. In Afrikaans, ...
Afrikaans:
... is die woord naïviteit.
English:
In Zulu, ...
IsiZulu:
NgesiZulu kuthiwa ayinampumelelo. yinto efileyo nje.
English:
And, in Sesotho, ...
Sesotho:
Ha re akaretsa, re ka re fela ke boswaswi!
English:
It is astonishing that the ANC-led government believes that SA Post Office, which is teetering dangerously right now, can become the formidable institution that this Bill envisages.
The SA Post Office sample is struggling with declining revenues, outdated technology, failing management, increasing costs, operational inefficiencies, poor service delivery and competition from other postal and courier services.
Trying to expand the mandate of the SA Post Office, which is seeking another bail out, is to wait a year after this Bill is enacted for an appeal for an even bigger bailout. In business, it is a necessity at times to cut losses, not to incur further losses. Passing this Bill will ensure that it will face legal challenges. The Bill also does not guarantee that the SA Post Office will be able to provide the financial services that it intends to offer, as it will have to comply with the normal financial sector regulations, obtain the necessary licenses and approvals from the relevant authorities.
The SA Post Office has driven itself into the ground through utterly failed management. It cannot be resurrected. The Bill
also does not address some of the underlying issues that affect the SA Post Office, such as the lack of adequate management. In due course, the SA Post Office will have closed
130 of its branches. That is 10% of the branches it had just a few years ago.
Over the past few years, the SA Post Office has experienced many glitches in making Sassa payments on time. With a reputation like that, who is going to have confidence that it can render effective financial services. This government’s expectation of creating a large mandate for an entity, which has basely failed to fulfil its basic mandate is naive and it will cost even more jobs to be lost. The Cope, in good conscience, cannot give support to this Bill, because putting a superstructure on a wobbly base can never work. I thank you.
Sesotho:
Ms T BODLANI: Ke a leboha Modulasetulo. Re iphumana moo re leng, ka lebaka la moetapele wa naha ya Afrika Borwa, hobane moetapele enwa o hlolehile ho kgema le dinako.
English:
We are at this point, where we find that this Bill is too little, too late. House Chair, public participation is a key
ingredient to a thriving democracy. The Constitution of the Republic of South Africa obligates the National Assembly to facilitate public involvement in legislation and other processes of the Assembly and its committees.
In line with this, the committee must ensure that its activities fulfil its constitutional mandate. However, the manner in which Parliament handled the SA Post Office Amendment Bill leaves a lot to be desired. First, the Bill was incorrectly tagged by the Joint Tagging Mechanism, as a section 75, while meaning that it did not require direct input from the provinces. This is absolutely ridiculous considering how important the SA Post Office is to South Africa.
House Chair, had the Bill been correctly tagged as a section
76 Bill, South Africans would have had ample opportunity to provide their inputs on the Bill. Parliament would have heard their outcries on this disastrous legislation. The public participation process that we are reporting on, as we stand, was a mere tick-box exercise. Elections are near and the ANC is hellbent on ramming through ill-thought Bills while they still can.
Rather than provide quality results for South Africans, this Bill will not say the SA Post Office. Truly, the ANC does not care for the SA Post Office, just as it does not care for South Africans. Back to the public hearings, the public hearings were held in only four provinces - Western Cape, Eastern, Cape, Limpopo and Gauteng. There was a total of 545 community members that attended the hearings. Limpopo had the highest number of community delegates, with 208; and had the highest number of written and oral submissions.
House Chairperson, we believe that Limpopo performed so well, as local leaders mobilised communities, something this Parliament failed to do. The Public Education Office fails to do its job because half the people that came through the public hearings were commenting on anything but the Bill.
Therefore, House chairperson, this ill-thought Bill does not answer the issues of the rental of the post offices that are closing daily, where landlords are confiscating and maintaining the goods of South Africans, because this post office has failed to pay the rent.
This Bill will not assist the rural communities who will still need to walk long distances for them to get their grants and even other services that the SA Post Office has promised. It
will also not save the 6 000 people that stand to lose their jobs, based on what the business rescue is reporting. House Chairperson, this Bill will do nothing to help South Africans. Thank you.
Mr L E MOLALA: Hon Chairperson, hon members and fellow South Africans, maybe before I get into the speech, I must just correct a few things that the public hearings were well attended and overwhelmingly 100% supported the amendment of the Bill. The ANC is delighted to form part of this debate on the SA Post Office SOC Ltd Amendment Bill. We believe that this amendment, coupled with the implementation of the SA Post Office, SAPO, tomorrow’s strategy, will catapult the recovery of the entity and place it on better path for development and advancement. Hon Chairperson, one of the famous quotes from the book called The Art of War by Sun Tzu reads as follows, “In the midst of chaos, there’s also opportunity.”
Indeed, chaos has been surrounding the SA Post Office, which include, branches shutting down, retrenchments, provisional liquidation, and now it is being placed under business risky, it has brought us to this point, a point which we should embrace by supporting the Bill to be amended so as to lay the foundation for the better and transformed SAPO that is agile
enough to keep up with the times. The current legislative framework provides for SAPO’s mandate of traditional main service, which has almost become redundant due to technological advancements and developments and how people communicate and do business in digital age.
In terms of the legislative framework, SAPO has exclusively, to provide reserved postal services under the Postal Service Act of 1998, which had delivered all letters, postcard, printed matter, small parcels and other postal articles weighing up to 1kg, issuing and sale of project stamp, provision of roadside collection and addressed boxes. As part of its universal service obligation, legislative framework and license of SAPO is required to provide such service to even citizens in the country without discrimination and at uniform fees, which are regulated by the Independent Communications
Authority of South Africa, ICASA.
The SAPO, for your information, has access to around
12 million households through the National Address Database, NAD, and it administers 800 000 parcel volumes. It also plays a pivotal role in the delivery of medication, learning materials across the country, and in partnership with the SA Social Security Agency, SASSA, and Postbank facilitate the
disbursements of grants to the most vulnerable and marginalised of our society. Hon members, particularly from the DA and the FF Plus, confidently advocate for the closure and privatisation of the Post Office, because they reside in affluent areas wherein exists numerous alternatives, wherein affordability is not a crisis. Well, hon members, allow me to bring you back to South Africa and its realities.
In this country, we have close to 9 million people living in rural areas, and close to 12 million in the townships, why is it that you might ask? When the Group Areas Act was passed in 1950, it imposed control over interracial property transactions, property occupation throughout South Africa. The Act created the legal framework for varying levels of government to establish particular neighbourhoods as group areas where only people of a particular race were able to reside and displace hundreds of thousands of people, breaking up families, friends, and communities. Under this law, the black people were evicted from properties that were in areas designated as whites only and forced to move into segregated townships and rural areas.
The townships were established for each of the three designated nonwhite race, which is black people, coloureds,
Indians as per the Population Registration Act of 1950. Till this day, people in the townships and rural areas need to travel for banking and other services. With its massive footprint, the Post Office is able to reach all corners of the country in responding to the right of all the South Africans to receive and impart information as enshrined in our Bill of Rights. These are considered social services that SAPO is required to provide, regardless of whether they derive financial benefit or not, and that has contributed to ailing financial position and closure of many branches.
We call on the department and SAPO with the business rescue practitioners to strengthen the entities business case so that it becomes profitable, while also catering for its universal service obligations. The financial and operational challenges that SAPO is confronted with, undermines the strategic role it can play in the society and economy, and the fulfilment of the universal service obligation mandate. It is with regret that till this day, Mark Barnes has not been held accountable for leading SAPO to where it is today. When he was the CEO of SAPO, the entity received R3,5 billion which was not utilised to turnaround the entity. Our government needs to be steadfast in ending the circle of corruption and maladministration by holding the public servants accountable.
Today, we are sitting with close to 400 branches being closed, deep sited financial and operational challenges which undermines the development agenda of the entity. This has severely impacted the lives of many South Africans, with some unable to get hold of their parcel from SAPO branches and others unable to get access to their grant monies. However, once again, hon members, in the midst of chaos, there’s also opportunities. The District Model, as introduced by the President and adopted by the Cabinet in 2019, present an opportunity for SAPO to access provincial and local government underutilised spaces in existing buildings, over and above, the shopping centres.
This is in line with the envisaged vision of the Bill, as well as the Post Office of tomorrow. Hon Chairperson, we remain hopeful in the business risky process and welcome the National Treasury, as is open to assist SAPO with a further shareholder capital injection as investment capital for repair, modernisation and implementation of the commercial plan. Maybe lastly, I want to remind the opposition that the more... In all your speeches, you talk about the ANC, it is the more you are popularising the ANC because in communication there’s nothing that is called negative publicity. The more you talk about us is the more people love the ANC. The other reminded
opposition is that, when I grew up, my father used to tell me that when you see a dog barking, you must know something is moving.
So, because the ANC is doing something very good, the opposition is always barking the ANC because the ANC is doing some work, so, that’s why you’re always barking. Lastly, Chairperson, I think that the ANC would also want to remind the opposition that we are going to win in the next elections. The more you make noise, is the more you are making us more determined to defeat you. I thank you. The ANC supports this Bill.
Question put.
Bill read a second time.
CONSIDERATION OF REPORT OF PORTFOLIO COMMITTEE ON TRADE, INDUSTRY AND COMPETITION ON COMPANIES AMENDMENT BILL
There was no debate.
Ms G K Tseke moved: That the Report be adopted.
Motion agreed to (Democratic Alliance, Economic Freedom Fighters, Freedom Front Plus, African Christian Democratic Party and Congress of the People dissenting).
Report accordingly adopted.
CONSIDERATION OF REPORT OF PORTFOLIO COMMITTEE ON TRADE, INDUSTRY AND COMPETITION ON COMPANIES SECOND AMENDMENT BILL
There was no debate.
Ms G K Tseke moved: That the Report be adopted.
Motion agreed to.
Report accordingly adopted.
COMPANIES AMENDMENT BILL
(Second Reading debate)
COMPANIES SECOND AMENDMENT BILL
(Second Reading debate)
The MINISTER OF TRADE, INDUSTRY AND COMPETITION: Hon House
Chair, hon members, this House will be considering a significant enhancement of South Africa's corporate governance laws through the reforms set out in both an omnibus Bill and a shorter focus Bill. I would like to suggest three reasons why hon members should consider voting in favour of the Bill.
First, the reforms aim to improve the administration of company law and, therefore, the ease of doing business. For example, it covers timeframes within which notices of amendments to a company’s MOI will be affected. It empowers a court to validate the share issue in certain circumstances and it simplifies financial transactions between holding companies and subsidiaries.
These amendments were substantially shaped by the work of the Specialist Committee on Company Law, a statutory body with the mandate to advise on matters of company law and it's based on the experience gained in implementing the Act since 2011.
Second, the reforms address certain findings of the Zondo Commission as related to holding directors of companies accountable. The Act currently limits applications for delinquency against implicated ex-directors to a period of two years prior to court application. The Bill extends the period to five years and it gives the court discretion on good cause
shown to consider delinquency applications beyond this point. It's part of dealing with the legacy of state capture, but it applies the principle more generally.
Third, the reforms respond to society’s concerns about excessive remuneration and high levels of earning inequalities in the workplace. It resets the balance between, on the one hand, management and boards, and the other hand shareholders and workers. It requires disclosure of executive salaries and the wage gap between the top 5% and bottom 5% of a company. It provides for shareholder votes and the company's remuneration policy and sets consequences if shareholders do not approve the report. These changes are largely the consequence of discussions with workers and business representatives at Nedlac over two-years. Should Parliament adopt the changes in the law, it will update our law and will send two powerful messages, that excessive remuneration and high inequalities fray and weaken our cohesion as a society and should be attended to by shareholders and those who facilitate state capture must be held to account. I wish to thank the portfolio committee for the work done under the leadership of hon Hermans and the constructive tone of the engagements during the sessions that I attended. Thank you very much.
Ms J HERMANS: Hon House Chair, greetings to the Chief Whip of the Majority Party, the Deputy Chief Whip, members of this august House and South African at large. The Companies Amendment Bill and the Companies Second Amendment Bill were introduced to Parliament by the Minister of Trade, Industry and Competition and referred to the committee on 28 August 2023. The core objectives of the Companies Amendment Bill are to facilitate the ease of doing business and reduce red tape and to address inequality between directors and senior management on the one hand, and shareholders and workers on the other hand.
In terms of the ease of doing business, it is important that Company Law is clear, user friendly, consistent with well- established principles and not be too onerous on company. The Bill introduces technical amendments to improve the ease of doing business by providing clarity around certain provisions of the Act, providing greater flexibility to companies in certain circumstances and removing unnecessary provisions in the Act.
These amendments are important as they assist in reducing red tape, thus facilitating the ease of doing business.
Consequently, this would create a more attractive business
environment for investors, improve the efficiency and effectiveness of how the domestic economy is regulated and facilitate job creation, as envisaged in the Economic Reconstruction and Recovery Plan.
In terms of the second policy objective, South Africa is one of the most unequal societies in terms of income distribution. The pay gap in the private sector contributes to the high levels of inequality, in particular between top and bottom levels of companies. Therefore, the Bill seeks to create transparency in terms of executive remuneration and provides a comparison for the remuneration of the lower levels of employees. It also provides for more accountability from directors to company shareholders, in terms of the development of renumeration policies and the implementation thereof.
Furthermore, it provides for the disclosure of this information to shareholders and the public, particularly in terms of the remuneration of directors and prescribed offices of public companies and companies with significant public interest.
The Companies Second Amendment Bill gives effect to the recommendation of the Judicial Commission of inquiry into Allegations of State Capture known as the Zondo Commission, to
amend section 162 of the Companies Act. This would allow the application for a declaration of delinquency to be brought against directors of the two companies identified by the Zondo Commission, after two years provided for in the existing legislation on good course shown.
The application of the Zondo Commission’s recommendation is limited to the two identified companies. However, it is in the public interest for such amendments to apply more broadly. In this regard, the Bill provides for the extension of the period to apply for a director to be cleared delinquent or under probation for two years to five years. Furthermore, it empowers the court to extend that period on good cause shown, even though the conduct in question was committed before this period expired.
These amendments to the Companies Second Amendment Bill would apply retrospectively. An application can be brought to the court to extend the permitted time frames, for example, if evidence emerged after the legislated time period that the director or former director had acted in a grossly negligent manner or abuse their position of power. Therefore, even though an act was committed before the Bill gets passed into
law, a director can still be held accountable and related losses can be recovered.
The committee received 40 substantive submissions on the Companies Amendment Bill and seven substantive submissions on the Companies Second Amendment Bill, as well as a number of smaller submissions from the public. The submissions on the Companies Amendment Bill broadly supported the intent of the Bills. However, stakeholders raised certain pertinent concerns. Several stakeholders were concerned about the constitutionality of the provisions in the Bill, which disclose the names and remuneration of directors and prescribed officers and provide the general public access to such information for private companies with higher public interest scores.
The concerns were specifically in terms of balancing the right of privacy with the right of access to information. Therefore, the committee requested the department to seek legal advice on the matter. Senior counsel was of the view that the two affected provisions did not unconstitutionally intrude on the right to privacy of the intended entities or persons, nor were they in conflict with the provisions of the Promotion of
Access to Information Act of 2000 and the Protection of Personal Information Act of 2013
Secondly, there was broad consensus on the principle to hold directors more accountable in terms of remuneration disparities. There were different views on how this should be done as well as on the appropriate consequences for directors serving on the Remuneration Committee. There were also concerns raised about the unintended consequences of the proposed mechanisms introduced in the Bill.
To address these concerns, the committee has amended the Bill to clarify the expectations of companies in relation to the remuneration policies and reports. This now provides for an opportunity for members of the Remuneration Committee to respond to shareholders concerns in terms of the implementation of the remuneration policy, where the remuneration report was not approved by shareholders.
Some stakeholders also proposed that the gender pay gap ratio should be included within the remuneration report. Within the committee there was consensus on the importance of addressing the gender pay gap disparities. However, there was a
difference of opinion in whether there should be included in the current amendment Bill.
In this regard, the ANC was of the view that its inclusion would require in-depth consideration and public participation on how to incorporate this effectively into the legislation. It stressed that the implication of the process of including this provision, would have delayed the processing of the Bill beyond the current term of this Parliament, thus delaying the relief offered by other provisions in the Bill. Therefore, it had proposed that this be considered in the next Parliament and further legislation be brought in this regard. Other parties were of the view that they should have been included, despite possible delays in the processing of the Bill.
In terms of the Second Amendment Bill, the majority submissions express their support for the Bill as it gives to gives effect to the recommendation of the Zondo Commission and promotes accountability in the private sector. However, the concern was raised about the retrospective application of provisions, in relation to the court extending the period for an application to be brought against the director to be declared delinquent or under probation, as well as for
proceedings to be brought against a director to recover any losses, damages or costs for which they are liable.
In this regard, senior counsel addressed this in the legal opinion and indicated that these provisions were not prohibited by the Constitution as they were not in conflict with the general rule against retrospectivity. I would like to appreciate the spirit in which all parties engage in this process, as the underlying goal was to produce legislation that would enhance the lives of South Africans. I would also like to thank the stakeholders for their valuable inputs as this informed the deliberations of the committee. Therefore, we recommend that the House approve the Second Reading of these Bills. Thank you.
Mr D W MACPHERSON: Hon Chairperson, what should have been an opportunity to pass well thought out legislation and amendments has turned into a quick fix, says the ANC Minister, and can say that he has done something in Parliament about the constant factory closures, job losses and chaos at the ports and on the railways under his watch.
While some of the objectives of the main Bill are noble, there are unintended consequences on disclosure, which may cause
competition issues between major businesses and disproportionately affect smaller businesses in terms of competition, but also in costs of compliance. This would relate to publishing financials, disclosing directors pay, establishing a social and ethics committee, and allowing anyone at any time to view this information. This is unreasonable and a major new cost to business.
Government can’t say that they want to ease the cost of doing business and then add an entirely new layer to doing business. It’s a classic Ramaphosa double speak. The DA notionally supports the revised remuneration two-strike system that compels companies to ensure that executive pays more acceptable and transparent, as well as ensuring that there is some level of accountability should the report not be accepted by shareholders. Those members will be required to step down from the committee but may remain members of the board. This would be in line with other countries and seems to be a compromise between the first deterioration of the one strike and the current system.
But make no mistake, this Bill and clauses is not about reining in executive pay or making pay more equitable as the ANC would have you believe. The truth is, if you want workers
to earn more, you need to have a growing economy that works for everyone and not just the politically connected.
Another missed opportunity was to deal with the gender pay disclosure gap. We know that gender pay disparity is a big problem in South Africa. From the sports field to the boardroom, it is an issue that often makes headlines. The ANC is very quick to talk about doing something to deal with this but is entirely disinterested about actually doing anything about it. So, despite the opportunity to include this in the Bill, the ANC voted against this recommendation made by the DA and other opposition parties. However, the slippery slope in this Bill is the social and ethics committee, which in our view is a two-stage process for government to start extracting unreasonable demands on companies to remain compliant in the future. While noble in its ideal, there are too many unanswered questions which leave the door open to ministerial regulation and interference, and which will massively increase compliance costs for small businesses.
However, the DA does support the position taken in the Second Amendment Bill to implement the Zondo Commission of Inquiry Recommendations on Delinquent Directors and retrospectivity, and this is to be commended. It must be the only department,
including the Presidency that has actually acted on the Zondo Report. So, the Minister, certainly once more stepped ahead of all the other crooks behind them.
However, the DA is of the view that the first Bill is the wrong Bill at the wrong time and is being rushed through Parliament as an election Bill to show that the ANC is holding business to account. We have seen how absurd the manipulation of the rand by the banks is and this is just another opportunity to bash the business community and accuse them of bringing down the economy, which is not true at all because the ANC did it all by themselves. The DA does not support the first Bill, but we do support the second Bill. I thank you.
Mr E MTHETHWA: House Chairperson, Amilcar Cabral says, and I quote:
Hide nothing from the masses of our people. Tell no lies. Claim no easy victories.
This is what the ANC is subjecting us to in this House, excitement worthy of swine as utilitarianism would describe it as such.
The Minister says the Bill intends to deal with delinquency, but we know that this will be another Bill gone to waste as the Minister has a proven track record beyond any reasonable doubt, not to have any appetite of holding anyone accountable, including his own staff in the Communications and Information Technology Commission, CITC. The Minister as a public servant, doesn’t respond to emails, whistleblowers or complaints, and this is what the real problem is, the nonexistence of enforcement.
House Chairperson, it has been 15 years since the introduction of the Companies Act. It is indeed correct that things have improved in terms of various administration processes. It is also true that the Companies Second Amendment Bill seeks to introduce amendments that will go a long way in improving various administrative and policy issues identified in the review process. There is a need for more transparency in terms of payment of directors to curb the pay gap in most companies. It is not only the gender pay gap that we need to deal with, but it is also the racial gap. It is not a secret that the majority of companies continues to pay white directors and senior managers more than Africans. It is also not a secret that the majority of companies refuse to transform, and their management level remains exclusively preserved for whites.
We agree that there is a need for more transparency in terms of the shareholders of companies. Again, we know that the majority of people who want to hide behind the secrecy of trust and the corporate way are the very same people who are running away from transformation. We agree that the requirement to file an annual return with the companies and Intellectual Property Commission, particularly the issue of the latest financial statements, is unnecessary for small businesses. But even the issue of paying 100 rands for everyone’s annual filing must be scrapped. We must put a turnover threshold for companies that must begin to pay a fee for annual filing. The same way we do with the submissions of annual financial statements.
House Chairperson, there is a far greater omission in the Company’s Second Amendment Bill that is deliberate, mischievous, and will undermine all efforts to improve corporate governance, including financial accountability or fight grey listing. This was an opportunity to deal with the issue of profit shifting, base erosion and aggressive tax avoidance, as far as it relates to transparency. We must include in these amendments a non-negotiable obligation for companies to disclose all transactions between subsidiaries. Many of the transactions involving sales commissions,
marketing fees and consultants to subsidiaries based in Bermuda, the Cayman Islands, Luxembourg, Switzerland, the Bahamas, Panama and all other tax havens should be disclosed separately in the annual reports of all multinationals.
Subsidiaries of multinational companies stash away billions of rands to these tax havens. That should otherwise be going to public offers to be used to eradicate housing backlog, build roads, improve ports infrastructure, build additional electricity generation capacity. These billions of rands are monies that should be used to subsidize state-owned companies with the capacity and strategic direction to create jobs.
Monies that we should be using to double senior citizens’ grants, disability grants, care dependency grants, child grants and introduced grants for unemployed grants. But the companies Amendment Bill is silent on these issues.
The issue of anti-money laundering and terrorism is just one side of the problem. We need to address the issue of transparency. We need to use the Company’s Amendment Bill to fight illicit financial flows. We must have a specific way in which the state should have a practical way to go after. delinquent directors.
If a person is declared a delinquent director, the companies that make profits as a result of the delinquent behaviour should also bear the consequences. We now have a situation where the banks are admitting that they manipulated the rand over a very long period of time. But the blame is being shifted to a few individuals. While the banks enjoyed the profits and once paid high bonuses. They can shift the blame, but the reality is that the government is failing. And no amount of amendments will solve a collapsing economy. The EFF rejects the Bill. Thank you, Chair.
Ms S A BUTHELEZI: Acting House Chairperson, the two Companies Amendment Bills, namely, the Companies Amendment Bill of 2023, and the Companies Second Amendment Bill of 2023, mark a significant step towards a better corporate governance framework. The revisions made to this reflect both continuity and necessary changes to the Bill in light of ever-changing circumstances. The Companies Amendment Bill of 2023 brings about several key amendments to align our Companies Act with the principles set out in the King IV report. This report is imperative in our democratic development as it promotes principles to strengthen accountability and transparency in regard to corporate governance in South Africa. One notable amendment is the introduction of a remuneration report for
public and state-owned companies bringing forth transparency and accountability in remuneration. In an effort to promote democracy it ensures that the shareholders bear the responsibility to approve the remuneration policy and implementation report of the annual general meetings.
The Companies Second Amendment Bill of 2023 has made revisions to the extension period for applications related to the director delinquency and proceedings in order to recover losses. This ... [Inaudible.] ... as a significant response to recommendations from the Zondo Commission of Inquiry into state capture. We must caution that whilst the extensions are of essence in addressing potential lapses in accountability, we must ensure that we exercise a balance between accountability and fairness to the individuals involved.
As we look forward to strengthening our public companies, we must not forget the crucial aspect of accountability and transparency as a cultural value instilled within our citizenry. Overall, the state needs to change its own mindset of viewing the public sector as a separate entity from public concern. It is, in fact, the public funds that are used to provide jobs and services and as a result they expect tangible return on taxation by the government. Once the Inkatha Freedom
Party continues to be a constructive watchdog over government affairs we plead for a more conducive environment for private companies to flourish. Persistent load shedding not only impedes public companies, but private ones too. Public companies at least have the government to bail them out, but private companies often face a sink or swim situation.
A perfect case is ArcelorMittal in Newcastle, which was forced to shut its doors due to load shedding as it could not meet the financial pressure imposed and had to cut more than 3 500 jobs. In conclusion, Companies Amendment Bills represent a step forward towards greater corporate governance. However, it is important to find the right balance between accountability, transparency and the smooth functioning of our corporate entities. Thank you, Acting House Chairperson.
Mr F J MULDER: Hon Acting House Chair, if passed, the Companies Amendment Bill will be the first substantive amendment to the Companies Act since it came into force in 2011. The Bill includes a contentious requirement for large companies to disclose the executive remuneration policy to the shareholders for approval. The Bill controversially imposes reporting requirements on large companies to make certain
company records such as annual financial statements and shareholders information available.
The Bill further tightens the requirements to corporate disclosure of true share ownership by obligating companies to request from registered shareholders information about the persons who, in fact, control their shareholdings. One of the main aims of this Bill is to make the process for determining executive remuneration for large companies more transparent. Say one of the items to be included in the report on executive remuneration is a so-called pay gap, of course, a ratio comparing the total remuneration of the top 5% highest paid employees to that of the bottom 5% lowest employees of the company. This measure is a real concern to the Freedom Front Plus because of the possible adverse effects of this provision considering South Africa’s issues with skilled individuals, leaving the country for opportunities in foreign jurisdictions and the effect that it might have on South Africa’s competitiveness for the entrepreneurial innovation in comparison with these foreign jurisdictions.
The Companies Amendment Bill opens the door to more governmental interference in the ownership of companies. The Companies Tribunal will have the authority to make broad-based
black economic empowerment, B-BBEE, even more binding and obligatory. No Bill should be adopted if it disregards the corporate legal personality of companies by unduly piercing the corporate veil. This Bill will exacerbate the growing unease in directors and managers of companies that are keeping the economy of the country afloat. The Bill will only serve to compel investors to reconsider the future employment prospects in South Africa. Therefore, hon Acting House Chair, the Freedom Front Plus rejects this Bill. Thank you.
Mr W M THRING: Hon Acting House Chairperson, as we consider these Amendment Bills, the ACDP wishes to emphatically states that we do not view business as an enemy. On the contrary, the ACDP views the business sector as key to growing our industrial base, increasing our imports and thereby contributing to the national fiscus and creating jobs.
Government’s role is to create meaningful partnerships with the business sector, not make enemies of them. Just as trade unions look after the interests of workers, government has a responsibility to create a conducive environment for doing business.
The ACDP is aware that the Companies Second Amendment Bill seeks to amend the Companies Act of 2008, as recommended by
the Zondo Commission, so as to amend the time bars, in respect of proceedings to recover any loss, where a person is liable, and to amend the time bars for the bringing of an application to declare a person delinquent in terms of section 162(2).
On the other hand, the Companies Amendment Bill seeks to amend the Companies Act of 2008, so as to, amongst others, provide for the preparation, presentation and voting on companies’ remuneration policies and directors’ remuneration report, to clarify how shares which are not fully paid are to be dealt with, and to provide for the presentation of the social Ethics Committee report at the annual general meeting, AGM, or shareholders’ meeting as the case may be.
Now, in our deliberations, the ACDP addressed the concern of including a horizontal pay gap or gender pay parity, in addition to the Palma ratio focus on the vertical gap between the top echelons versus the bottom spectrum.
The vast majority of submissions from the business sector raised concerns about amendments to section 30A which would prevent nonexecutive directors serving on the remuneration committee to continue to do so for a period of three years after a single vote of nonapproval of the implementation
report. The final amendment which moved away from a first strike must be commended and welcomed as any onerous limitations placed on remuneration committees will make a difficult for companies to secure and retain competent skills.
During public hearings and interaction with the business sector, appeals were made to assist in the ease of doing business, and to create an environment conducive for business and to reduce the burden of compliance. The ACDP does not believe that this Bill has gone far enough to do that.
However, an ACDP-led government will do just that. While supporting the Second Amendment Bill, the ACDP does not support the Companies Amendment Bill. I thank you.
Mr C N MALEMATJA: House Chairperson, colleagues, and South Africans. On 29 May 1998, the then Deputy President, Thabo Mbeki, in this House argued that ... [Interjections.] ... material conditions in our society have divided our country into two nations, the one is black and the other one is white. He claimed that the disparity in the material condition was so great that it was possible to label South Africa a country of two nations – one of those nation is white, and relatively prosperous and members of this nation have a possibility to exercise their right to equal opportunity. The second and
larger nation of South Africa is black and poor, it has virtually no possibility to exercise what in reality amounts to theoretical right to equal opportunities.
One of the fundamental policy priorities of the ANC is to economically emancipate the vast majority of blacks in general
- Africans in particular, from the cliché of poverty and unemployment. Interlinked with this is the crisis of inequality. Thirty years since our democratic breakthrough, there continues to be uneven development and growth of the economy because of the structural constraints that reproduce the systematic futures of the economy. The ANC-led government appreciate and understand the important role that the private sector and our state-owned entities need to play in transforming our economy to achieve nonracial, nonsexist, prosperous society that is free from the present inequality as envisioned in the Freedom Charter and our Constitution.
It is from this point of departure that the Companies Amendment Bill find its material existence. Allow me to deal with the following, that apartheid will never come back. Those who enjoyed the apartheid system where there was a boy and a boss, must forget. It is time that earning at the expense of blacks in the form of boy will come to an end and those who
earned high amounts of money because they are bosses, will never have that happen again.
The Bill further provides that where remuneration and benefits are received by company directors or prescribed officers, such directors or prescribed officer must been named and shamed in the annual financial statement.
Sepedi:
O khutisetiwa eng o tieere tihelete ye kaaka – o e gola ebile o tseba gore ga go a swanela go be bjalo?
English:
Why must it be so? That is the reason why the Bill wants to disclose. It must be made clear that the Bill does not seek to dictate the remuneration policy of the company, but call for greater transparency in the remuneration of executive and employees. The proposal for greatest transparency and publication of the pay gap is also in line with the number of private and other initiatives across the world.
In line with the King Report on Corporate Governance in South Africa, which states that the remuneration of executive staff should be fair and responsible in the context of overall
employee remuneration and that should be disclosed as how to address the gap between the executives and the lower staff. This is the time that those who worked at some stage in the music industry, on record companies such as the Gallo Records Company, where the directors were getting a large amount of money, and the artists were not even getting that amount. The EFF must learn not to oppose everything. At some stage they must learn to understand what is it that they oppose. They might be opposing something that is benefiting them.
We are in favour of this Bill because it will mean that the companies can’t go on ignoring inequality in wealth in South Africa. Disclosure will also provide other social actors with evidence to question inequality within the firms. High level of executive pay has become a contentious issue in the world, but stand out in our country where some executives earn half a million per day compared to an average worker who is earning only R800 per month - a poverty line of R25 a day!
The highest paid executive of BHP Billiton earn R946 times higher than the average worker. We need to do more and do better. It starts with adopting the Bill. Despite the overall economic advances we have made over the past 30 years, a lot more need to be done. We even have to ensure that consistent
economic growth, the fruits of these positive results are still to be fully and equitably shared amongst our people, hence the abject poverty will still find coexisting side by side with extraordinary opulence. For South Africa to succeed, there’s more to be done. I trust that we will continue to strive to act in unity to accelerate the advance towards the achievement of our shared national goal. The ANC supports the Bill. Thank you so much, Chair.
Mr D BERGMAN: House Chairperson, there have been many objections and concerns raised about the wisdom of pushing through a Bill that has business professionals perturbed as to the speed of why we are pushing it through our system with such haste. It is heartening that business leaders, legal minds and professionals have all seemed to think that we have one of the most progressive and opportune company acts globally. Like our world-class Constitution, there is enough legislation there to ensure in the right hands a fair outcome can be obtained. However, many were of the belief that one need not fix something that is not broken. Much like our current situation with the ruling party, it is a common occurrence that you often seem to change something that is fixed and you break it until everybody suffers.
The Zondo Commission of Inquiry was the reason for the second amendment, but there is already enough ground to pursue delinquent directors and the corrupt, both civilly and criminally, with current legislation. The problem is that there has been no political will to do so. Language has been another problem cited as problematic as it is ambiguous in clauses and leaves many items up to too much interpretation. This means that we could be trading in our Rolls Royce for a Toyota Tazz.
Lastly, the legislation tends to interfere too much with how directors should be governed. It almost tries to enforce a kind of democracy on both public and private companies through a one-size-fits-all approach but does not seem to be agile enough to give companies their own discretionary powers in their own business.
The DA is all for legislation that would fight corruption and give powers to enforce against those that engage in illicit activities. However, the DA is also supportive of a free market that lessens the bureaucracy and interference of the state in private businesses and cuts red tape. This legislation has potential in many ways. However, with such a short space of time in which to introduce it, we would do well
for our investors’ confidence in this country and that of our economy, if we leave this one, rather to be dealt with in the next term. Thank you.
Sepedi:
Moh J C NTWANE: Modulasetulo ...
English:
The ANC supports the Companies Amendment Bill. Hon Chairperson, allow me to borrow from the words of His Excellency the President, Ramaphosa, who said at the National Anti-Corruption Advisory Council’s national dialogue on building a corruption free South Africa that:
Corruption has wounded our democracy and shaken people’s faith in our institutions. If corruption is not arrested, the greatest damage will not be in the funds stolen, the jobs loss or the services not delivered. The greatest damage will be to the belief in democracy itself.
For a very long time, the act of corruption has been associated with malfeasance in government affairs only. However, the investigations into state capture exposed on a grand scale how government corruption is interlinked to that
of the private sector. Corruption must also be understood as a global problem that impedes service delivery and perpetuates poverty, inequality, injustice, and unfairness. It is not just prevalent in the local context of South Africa and the African continent, but also in the global context and demands a global response.
In 2017, the ANC’s 54th national congress resolved to support the establishment of the Zondo Commission to investigate malfeasance that occurred within the state. We understood at the time that it was necessary to do so as part of a broader effort to end state capture and corruption. Several recommendations came out of that commission of inquiry, one being the amendment to the Companies Act, which recommended that the Companies Act be amended to expand the time bar contained in section 162(2)(3). There were two key recommendations that were made by the Zondo Commission on this section, one is that section 162 be amended to ensure that the application for a declaration of delinquency be brought even after the two-year period where there is good cause shown. The rationale for the time bar is clearly to ensure that persons who are directors and have conducted themselves in any manner which may justify a declaration of delinquency or being placed on probation, do not avoid such consequences by simply
resigning as directors of the company in question. Many directors who fail in their fiduciary duties have been able to leave companies after wreaking havoc and moving on to other boards or companies to do the same. So, the Bill puts measures in place to bring this conduct to an abrupt end and hold directors of companies responsible for the conduct.
We believe that any amendment to the Act on the time bar should be of wider application and apply generally.
Furthermore, it should be balanced towards both the defendants and applicants taking this into regard, it is proposed that a time bar period be set at five years and that courts be allowed to extend the period in specific cases if good cause is shown. International best practice guides that the time bar period is set at three. However, the committee found that the five-year period was more appropriate, and the court will be able to exercise further discretion to determine whether there are sufficient facts to inquire as to the delinquency of director.
The Bill also amends section 77(7) of the Act, which deals with the liability of directors in prescribed offices for breaching their fiduciary duties and duties of care, skill, and diligence, as well as certain statutory duties. In other
words, directors can be held financially liable for failing in their fiduciary duties.
Hon Chairperson, everyone must be held accountable for their actions, including the private sector, hon Macpherson, and this Bill opens the avenue of accountability. Corruption has brought a lot of damage to our state-owned enterprises and most public commentary and some articulations made by members of this House would tend to overemphasize the role of the public sector in corruption and minimise the equally destructive role played by the private sector in hollowing out our state. In fact, it is the private sector that colludes with the government officials to pursue narrow selfish gains. We need to correct this one-sided and narrow narrative and hold everyone accountable for their role in state capture and corruption ... [Inaudible.] ... this House needs to support the amendments to this Bill. It is in the interest of our constitutional democracy, but most importantly, it is to preserve the development agenda, to ensure greater investment, accountability, and opportunities to eradicate the challenges of poverty, unemployment, inequality, and economic exclusion. I thank you.
The MINISTER OF TRADE, INDUSTRY AND COMPETITION: House Chair,
can I start by appreciating the number of comments that have been made in response to the two Bills. Reforms of company law by their nature, they are always controversial because company legislation balances interest very carefully and it changes that balance. Society from time to time need to do these reforms, but we will never get complete consensus. The portfolio committee had two choices. It could either do nothing because there are differences of views, or it could seek to put forward a balanced package of changes that move society forward. I believe that the committee has made a wise choice in putting forward this Bill to the House. There are several principles in the Bill that hon Hermans, hon Malematja, hon Buthelezi, and hon Ntwane have pointed to. They provide clarity in many parts of the legislation. They enable transparency in a society where we have a constitutional framework that promotes transparency, they promote accountability, a fundamental bedrock of any democracy, and they introduce flexibility in several areas of law. I want to welcome the support that several parties have given that at least to some provisions in the Bill and to recognize that there seems to be wide support for the second Bill, too.
Several concerns have been expressed. Let me deal with a few of those. The first concern is: Are you not rushing this too
quickly? And I would like to point out the history of this will show the contrary. In 2018, the first version of the Bill was published. In 2019 to 2021 - a two-year period - the Nedlac parties, business, and labour sat down and negotiated clause by clause, and word by word, their views on the Bill.
In 2021, we republished the Bill. In 2022, we took some key principles of that Bill and put it into the General Law Amendment Bill that was passed by this Parliament dealing with one aspect of what we are concerned about, know your shareholder, and dealing with issues like the evasion of responsibility that promotes money laundering and financing of terrorism. In 2023, this Parliament is considering both the Omnibus Bill, as well as the findings of the Zondo Commission. I think it shows care. It shows proper time and application, and this therefore has enhanced the provisions of the Bill.
Another concern that has been raised is that the Bill may be overtly status, that it gives government too much responsibility. A careful reading of the Bills shows the very opposite. One of the most important reforms in the Bill, which is on the disclosure of wage gaps places the responsibility in the hands of shareholders. Another important area around delinquency places the responsibility in the hands of the courts, and that is in these cases very important attempt to
balance carefully what goes into the Bill. Concerns have been expressed about will this not put a big obligation on small business. I am delighted to say that if hon members had an opportunity to read the Bill and the Act itself, you would applaud the fact that in our Act, it has something called the public interest score, and the public interest score is calculated based on the turnover of a company, the number of people it employ, and the number of shareholders it has. When your public interest score is low, in other words, you are not a large company, then many of the provisions would not apply to you. It applies to larger companies. A concern has been expressed on gender and I think hon Hermanns has made the point - strong support for gender on this issue - but we needed to make sure that we get this Bill passed by this Parliament and deal with the gender issue as part of a next reform which we are all committed to.
So, let me conclude and say that it is a balanced package. It seeks to address concerns in the public domain about income inequality. It deals with business concerns around some formulations in the current Act that can be improved, and it does deal with the Zondo Commission report and its findings. I would welcome further discussions on some of the issues that have been raised bilaterally with members, but this Bill and
this package here are a good package for Parliament to consider and vote actively on. Thank you very much.
Debate concluded.
Question put: That the Companies Amendment Bill be read a second time.
Division called.
The House divided.
The ACTING CHAIRPERSON (Mr Q R Dyantyi): Order, hon members, just before we proceed, the Speaker had determined that in accordance with the Rules, a manual voting procedure would be used and that the party Whips would conduct a headcount of members in the Chamber and on the virtual platform for the purpose of ascertaining quorum and voting. A quorum being present in terms of Rule 98(1), voting commenced.
Question put: That the Bill be read a second time.
[TAKE IN FROM MINUTES]
Question agreed to.
Companies Amendment Bill accordingly read a second time.
Question put: That the Companies Second Amendment be read a second time.
Companies Second Amendment Bill read a second time (Economic Freedom Fighters dissenting).
Agreed to.
The House adjourned at 18:18.
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