Public Investment Corporation (PIC) Amendment Bills; FFC referral to Committee; Committee Report on Carbon Tax Bill

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Finance Standing Committee

06 February 2019
Chairperson: Mr Y Carrim (ANC)
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Meeting Summary

Relevant document: Draft Report on PIC Bills; Committee Report on Carbon Tax [available under Tabled Committee Reports once adopted]

The Committee met to deliberate on the two Public Investment Corporation (PIC) Bills as well as the Financial and Fiscal Commission (FFC) referral. The Report on the Carbon Tax Bill was also adopted.

During deliberations on the two PIC Bills (the Committee Bill and Mr D Maynier’s (DA Private Members’ Bill), the Chairperson said the final version of the Committee Bill had tried to achieve some balance between those wanting very specific investment criteria on one hand, and those arguing that the interests of depositors should override all else on the other. There were no longer prescriptions on PIC investments, only guidelines. This was consistent with what the PIC was doing anyway and what the GEPF required them to do. The majority believed it is important to have these guidelines because of all the allegations that money has been invested in projects that do not serve the interests of either the depositors or the needs of the country as a whole. This was another way of reducing the prospect of wrongdoing by the PIC. On representation on the PIC board (Clause 2- amendment of section 6). There was a lot of debate about having politicians or at least trade union representatives in the GEPF and PIC boards. Some Members were initially unhappy about this. It was subsequently clarified that trade unions would appoint people with the necessary skills into the PIC board to serve and protect their interests. Such appointees did not necessarily have to be senior political office bearers. Members would want to vote on the Bill in the House within the first week of plenary sittings. The Committee would vote on the PIC Bill next Tuesday. On the Report on the PIC Bill, it would state that following allegations of wrongdoing at PIC and concerns raised by trade unions and stakeholders that the PIC was making questionable investments, the Committee arranged several briefings with major parties concerned in 2017 and subsequently adopted a resolution to effect amendments that would seek to address these concerns. Mr Maynier also came up with a Private Member Bill covering essentially the same areas as the said Committee resolution. There were discussions with Mr Maynier to merge his Bill with the Committee one but there was no agreement on this and thus the Committee decided on processing both Bills concurrently. The Committee discussed at length whether to postpone processing the PIC Bills before it in view of the commission of inquiry into the allegations of impropriety regarding the PIC. However, for a variety of reasons, the Committee decided to proceed with the Bills- foremost being, the Committee had done extensive work on these Bills and many of its current Members may not be in this Committee for the next parliamentary term. It may well mean the next Committee would need to cover the very same ground again that has been largely covered by the current, and the value of the process would be largely lost. Whereas the Committee would do a motion of desirability and write a report on Mr Maynier’s Bill, the Committee Bill would be reported on to the House.

COSATU was happy with the Committee’s PIC Bill. It was one of the most important Bills of this parliamentary term. COSATU was quite pleased with the Bill’s contents as all of its concerns had been covered. The Bill was important as currently there is no trust between fund managers and public sector employees. This trust should be rebuilt. Lastly, workers were pleased there was commitment to pass the Bill before the end of the term.   

In deliberating on FFC remuneration, the Committee needed to consider the redetermination of FFC remuneration then report back whether it agrees in part or in whole, or if it is rejected. Members said presumably whoever made the proposals had background information to work with. The Committee was expected to take a decision without any motivation on how the redetermination was arrived at. It would thus be difficult to make an informed decision. The FFC matter would be discussed further during the next meeting.

The Committee briefly deliberated and voted on the Report on the Carbon Tax Bill. A DA Member said the report should be amended to reflect that the call for ring-fencing of the carbon tax revenue was not a DA position but was raised by stakeholders during public hearings. There were many stakeholders who believed the carbon tax is only acceptable if used for a specific purpose- the carbon tax should not be going to the general revenue fund. The Chairperson pointed out National Treasury’s argument against ring-fencing has always been that in an event a surplus is realised, ring-fenced revenue could not be used for other purposes. However, the amendment as suggested by the DA Member would be effected. The Report was adopted with amendments. The DA reserved its position.

Meeting report

Adoption of Report on the Carbon Tax Bill
The Chairperson welcomed everyone and indicated voting on the Report on the Carbon Tax Bill was deferred to today following deliberations the previous day. He highlighted the contents of the report as Members had received it prior to the meeting for perusal. He asked if there were any comments on policy and ideological grounds.
 
Mr A Lees (DA) said bullet three of the report should be amended to reflect that the call for ring-fencing of the carbon tax revenue was not a DA position but was raised by stakeholders during public hearings. There were many stakeholders who believed the carbon tax is only acceptable if used for a specific purpose. The carbon tax should not be going to the general revenue fund.
 
The Chairperson pointed out that National Treasury’s argument against ring-fencing has always been that lessons learnt since 1994 indicate that in an event a surplus is realised, ring-fenced revenue could not be used for other purposes. However, the amendment as suggested by the Mr Lees would be effected. He put the report up for adoption with amendments.
 
The Report on the Carbon Tax Bill was adopted.
 
The DA reserved its position on the report.
 
Deliberations on PIC Bills
The Chairperson said the Committee would deal with subsequent amendments to policy issues before going through the Bill clause by clause. He highlighted the Committee programme for the term and indicated the programming committee was seeking to shorten the term by a week, from 26 to 20 March.
 
Mr Lees expressed concern that the Committee might go on a long recess without any oversight into the PIC, particularly following the revelations in the public domain. He was wondering if the Committee could squeeze in a briefing with the PIC into this term’s programme.
 
The Chairperson agreed the PIC matter was one big issue and it would be wrong of the Committee not to take it seriously. He pointed out there is a commission currently inquiring into the PIC. The Committee might have to explore the possibility of receiving some sort of an interim overview on what has emerged so far, without recommendations, from the PIC commission of inquiry. He would see if this could be negotiated. Members should give consideration to the proposal. There were two PIC Bills before the Committee, the Private Members’ Bill from Mr D Maynier (DA) as well as the Committee one. In terms of the latest version of the Committee Bill (clause 4- amendment of section 10 of Act), the PIC must invest in projects that will benefit depositors and must act in accordance with their instructions while it must seek to invest in projects that further the developmental objectives of the country.
 
Mr Lees commented on the latest amendments to the Committee Bill. There certainly has been an attempt to deal with conflicts that may arise between what PIC clients would provide as a mandate and what the PIC Act says. This was appreciated. However, the DA did not believe that sort of prescription (clause 4) should be there. Despite the good efforts made, there might be problems with this.
 
Ms T Tobias (ANC) said there might not be any prescriptions in a normal corporate environment because the shareholder compact would provide clear investment mandates. However in the PIC context, a balance had to be found because the entity is partly government-owned hence people would need to have a say on its investment strategies and how the entity conducts its business.
 
The Chairperson said the final version of the Committee Bill had tried to achieve some balance between those wanting very specific investment criteria on one hand, and those arguing that the interests of depositors should override all else on the other. There were no longer prescriptions on PIC investments, only guidelines. This was consistent with what the PIC was doing anyway and what the GEPF required them to do. The majority believed it is important to have these guidelines because of all the allegations that money has been invested in projects that do not serve the interests of either the depositors or the needs of the country as a whole. This was another way of reducing the prospect of wrongdoing by the PIC.
 
The Chairperson commented on representation on the PIC board (Clause 2- amendment of section 6). There was a lot of debate about having politicians or at least trade union representatives on the GEPF and PIC boards. Some Members, even from the ANC, were initially unhappy about this. It was subsequently clarified that trade unions would appoint people with the necessary skills onto the PIC board to serve and protect their interests. Such appointees did not necessarily have to be senior political office bearers. Further, the Committee majority had proposed that the Minister of Finance must chair the PIC board. Parliamentary legal advisory had however advised this could not be done in law. He asked for clarity on this.
 
Adv Frank Jenkins, Senior Parliamentary Legal Advisor, said the motivation was that with the Minister of Finance currently being the executive authority of the PIC, conflicts of interests might arise. Clearly, the Minister must then designate his/her deputy to chair the board. However, if perhaps at a later date the PIC gets moved to a different Ministry, the Minister of Finance could then be the PIC board chairperson. However this might not be the case in future.
 
Mr N Nhleko (ANC) pointed out that the Deputy Minister would be representing government as the PIC board chairperson. The sense he got was the Deputy Minister was being taken as a standalone individual, not a government representative. The emphasis should be that the Minister of Finance would subsequently designate his/her deputy to represent the shareholder (government). It was probably reasonable to leave it at that as it would not be possible to construct an entirely adequate and fool-proof piece of legislation.
 
The Chairperson said the aforementioned provision should read: the Minister must designate the Deputy Minister of Finance or another Deputy Minister in a portfolio that deals with economic and financial matters. This clause should be looked into and be fine-tuned. Members would want to vote on the Bill in the House within the first week of plenary sittings. The Committee would vote on the PIC Bill next Tuesday. On the Report on the PIC Bill, it would state that following allegations of wrongdoing at PIC and concerns raised by trade unions and stakeholders that the PIC was making questionable investments, the Committee arranged several briefings with major parties concerned in 2017 and subsequently adopted a resolution to effect amendments that would seek to address these concerns. Mr Maynier also came up with a Private Member Bill covering essentially the same areas as the said Committee resolution. There were discussions with Mr Maynier to merge his Bill with the Committee one but there was no agreement on this and thus the Committee decided on processing both Bills concurrently. The Committee discussed at length whether to postpone processing the PIC Bills before it in view of the commission of inquiry into the allegations of impropriety regarding the PIC. However, for a variety of reasons, the Committee decided to proceed with the Bills- foremost being, the Committee had done extensive work on these Bills and many of its current Members may not be in this Committee for the next parliamentary term. It may well mean the next Committee would need to cover the very same ground again that has been largely covered by the current, and the value of the process would be largely lost. Bills left from a previous term could lapse even though there is no obligation on the part of the next Committee to process them further.
 
The Chairperson highlighted the differences between the Committee and the Private Member Bill. The latter required the National Assembly to follow up with a public nomination process to recommend to the Minister a person to be appointed as chairperson of the PIC board. Other members of the board were to be appointed by the Minister in consultation with cabinet. Furthermore, the Private Member Bill did not provide any guidelines that the PIC should seek to take into account when implementing depositors’ instructions. More so, the Committee majority decided that the Minister or Deputy Minister should chair the board. This was mindful of the fact that public sector employees have a defined benefit such that if the PIC makes losses that would reduce employees’ pension benefits, it is the national fiscus that would have to make up for this.
 
Mr Lees added the DA was opposed to the Committee Bill because it prescribed that in following the instructions of depositors, the PIC would have to take several factors into account. The DA opposed these prescriptions on the grounds that only the depositors could mandate the PIC what to do with their funds.
 
The Chairperson invited brief comments from stakeholders and trade unions present.  
 
Mr Matthew Parks, Parliamentary Coordinator, COSATU, said COSATU was happy with the Committee’s PIC Bill. It was one of the most important Bills of this parliamentary term. COSATU was quite pleased with the Bill’s contents as all of its concerns had been covered. The Bill was important as currently there is no trust between fund managers and public sector employees. This trust should be rebuilt. Lastly, workers were pleased there was commitment to pass the Bill before the end of the term.    
 
The Chairperson said the Committee would do a motion of desirability and write a report on Mr Maynier’s Bill. The Committee Bill would be reported on to the House.
 
Deliberations on FFC remuneration
The Chairperson said the Committee needed to consider the re-determination of FFC remuneration then report back whether it agrees in part or in whole, or if it is rejected.
 
Mr Lees said presumably whoever made the proposals had background information to work with. The Committee was expected to take a decision without any motivation on how the re-determination was arrived at. It would thus be difficult to make an informed decision.
 
Adv Jenkins said when dealing with the re-determination of remuneration for public office bearers, there is a methodology that was used. The said methodology is largely driven by the need to close the pay gap between the top and bottom rungs. The issue of backdating would be determined by considering when FFC personnel last had a redetermination of their remuneration comparable to other people of similar commissions. This information could be put together.
 
The Chairperson asked if the Committee had the relevant expertise to judge whether FFC remunerations were appropriate or otherwise. He could not understand why this matter was meant to be dealt with by the Committee, not the Standing Committee on Appropriations.
 
Adv Jenkins said the matter was referred to the Committee because the FFC reports to it annually on its performance. This Committee would therefore be in a position to determine whether its performance justifies adjustments in remuneration.
 
Mr Nhleko said the Committee could have the FFC furnishing it with relevant motivation for the salary increase. A decision could then be taken subsequently.
 
The Chairperson said the FFC matter would be discussed further during the next meeting. He thanked everyone for the engagements.
 
The meeting was adjourned.
 

 

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