Companies Amendment Bills: Committee Reports; Small Enterprise A/B: Negotiating Mandates & DSBD response

Meeting report

Opening Remarks
The Chairperson welcomed the Members, noting that many meetings were taking place simultaneously and that even one of the Legal Advisors had obligations in another meeting.

In respect of the Companies Amendment Bill, some administrative issues concerning its drafting had to be corrected as agreed the previous week. There were also some slight developments that Ms Ebrahim would be dealing with. The Committee Secretary would then take the Committee through the Companies Amendment Bill Report for Members to consider, and then the Committee would vote on its adoption or rejection. Thereafter, the Committee would turn its attention to the Companies Second Amendment Bill.

Legal input on the Companies Amendment Bill and the Companies Second Amendment Bill
Ms Fatima Ebrahim, Parliamentary Legal Advisor, Constitutional and Legal Services Office (CLSO), said that following the meeting of the previous week, a list of the proposed changes was sent to the Bills Office to double-check that all of the changes would constitute administrative changes, meaning that the Bills would not need to go back to the Portfolio Committee for consideration. The changes proposed were correcting a spelling error, changing some numbering to make things easier and then changing the word "refer" to "contemplated" in two or three places. The Bills Office indicated that all was in order. After the Committee had adopted the Bills and the Council then adopted them, if that did happen, the Bills Office would make those administrative corrections before the Bills were sent to the Presidency. There would not be a "Creda version", and Members would know that neither a C list nor a D Bill was produced in a section 75 process. That would mean that the Committee could adopt the Bills currently before it.

The Chairperson asked if there were any questions about the Legal Advisor's input. As there were none, he requested the Committee Secretary to take the Committee through the first Bill, the Companies Amendment Bill.

Committee Report on the Companies Amendment Bill
The Committee Secretary read the Report of the Select Committee on Trade, Economic Development, Small Business Development, Tourism, Employment and Labour on the Companies Amendment Bill [B27b 2023] dated 19 March 2024.

The Chairperson called for members' comments. As there were none, he requested that Members vote on adopting the report.

The Committee Secretary noted that five Members were in favour of the Bill:
 Mr M Rayi (ANC, Eastern Cape)
 Mr M Dangor (ANC, Gauteng)
 Ms M Mamaregane (ANC, Limpopo)
 Ms M Moshodi (ANC, Free State)
 Mr M Mmoiemang (ANC, Northern Cape)

There were no objections.

Two abstentions were noted:
Ms H Boshoff (DA, Mpumalanga)
Mr J Londt (DA, Western Cape)

Resolution: The Chairperson announced that the Committee Report on the Companies Amendment Bill was approved by five votes in favour to two abstentions, with no objections. The Committee agreed to the Report without amendments.

Read: ATC240319: Report of the Select Committee on Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour on the Companies Amendment Bill [B27B-2023] dated 19 March 2024

Committee Report on the Companies Second Amendment Bill
The Committee Secretary read the Report of the Select Committee on Trade, Economic Development, Small Business Development, Tourism, Employment and Labour on the Companies Second Amendment Bill [B26b 2023] dated 19 March 2024.

The Chairperson called for members' comments. As there were none, he requested that Members vote on adopting the report.

The Committee Secretary noted that five Members were in favour of the Bill:
 Mr M Rayi (ANC, Eastern Cape)
 Mr M Dangor (ANC, Gauteng)
 Ms M Mamaregane (ANC, Limpopo)
 Ms M Moshodi (ANC, Free State)
 Mr M Mmoiemang (ANC, Northern Cape)

There were no objections.

Two abstentions were noted:
Ms H Boshoff (DA, Mpumalanga)
Mr J Londt (DA, Western Cape)

Resolution: The Chairperson announced that the Committee Report on the Companies Second Amendment Bill was approved by five votes in favour, two abstentions, and no objections. The Committee agreed to the Report without amendments.

Read: ATC240319: Report of the Select Committee on Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour on the Companies Second Amendment Bill [B26B-2023] dated 19 March 2024

The Chairperson thanked Dr Evelyn Masotja, DDG Consumer and Corporate Regulation Division from the Department of Trade, Industry and Competition and Ms Ebrahim.

Matrix on Negotiating Mandates National Small Enterprise Amendment Bill (B16B- 2023)
Ms Telana Halley-Starkey, Parliamentary Legal Advisor, CLSO, presented a matrix of each mandate from each province and details regarding the processes followed during the commenting period, the public hearings, and the results of those public hearings. Her office had addressed only legal issues; the Department would address policy issues.

Ms Halley-Starkey alerted the Chairperson to the fact her Office had received five provincial mandates and that three more provincial mandates were received the previous evening between 7pm and 9pm. Legal Services had not applied its mind to the three mandates that had come in the previous evening.

The Chairperson stated that he would be applying to the Chairperson of the National Council of Provinces for an extension due to the late submission of mandates.

Free State Legislature Mandate
Ms Halley-Starkey stated that the input from the Free State Legislature was that it voted in favour of the Bill. The deliberation was held on 1 March 2024, and the mandate was very clear that the Portfolio Committee on Agricultural, Rural Economic Development and Small Business and Sports Arts and Culture, as designated by the Free State legislature, had voted in favour of the Bill. Several issues were raised in the Free State Legislature's report.

Clause 4.11 (2a): the legislature felt that there should be greater clarity on what constituted a transparent appointment process, and that should be included in the Bill. However, Legal Services believed the matter could be included in regulations, but it would take guidance from the Department.

Clause 4, section 11(2c): the Free State felt that the Minister should not have unilateral power to determine the remuneration of directors. Legal Services responded that it was not unilateral power; the determination was done through guidelines and in terms of market value.

Clause four, section 11(3): the legislature felt greater clarity was required on what scenarios or circumstances would warrant granting a high court order to appoint a director not recommended by the board. Ms Halley-Starkey recalled that the Committee had raised a similar question in the previous meeting. The basic answer from Legal Services was that, per the advice of the Department, as the agency would be a state-owned company, there would be a need to protect the state as a shareholder in terms of the Companies Act. When the board and the shareholders could not agree, the shareholder could apply to the board to determine any shareholder rights, including an appropriate order, which was in terms of the Companies Act.

Section 61: The Free State felt that more comprehensive qualifications should be required of board members, not broad criteria. The Free State felt that broad criteria shouldn't be included in the Act, but specific comprehensive qualifications for each board member. Legal services responded that the list of skills and knowledge should not be included in the Act as that would be too restrictive. It was understood that when reading sections 15, 16, and 17 together, the skills, knowledge, and experience required of a board would align with the functions of the board. The Department could clarify why the list of qualifying criteria was not included. However, it was the opinion of Legal Services that criteria should never be included in an Act as that limited the Act.

Clause 5, section 17F(1) - there was a suggestion that alternative appointment processes for the Ombud should be established as the current appointment processes provided the Minister with unilateral power. Once again, CLSO explained that the Minister appointed an Ombud after shortlisting and that was done by the National Assembly (NA) so the Minister did not have unilateral power. Section 17F(1) stated that the nomination process had to be transparent.

Clause five, section 17F(5) states that the remuneration of the Ombud and the Deputy Ombud should require parliamentary approval. CLSO believed that was a policy decision for the Department to respond to, and it was not in its area of expertise whether Parliament should be an approval authority.

Clause five, section 17S, regarding the regulations laid out by the Minister relating to the Ombud. The Free State legislature felt that all regulations should be submitted to Parliament for consideration before the Minister makes regulations. Legal Services stated that delegated legislation-making by Members of the Executive was an essential part of public administration and was affixed to policies set by the legislature. That opinion was confirmed in terms of the New Clicks judgment. The second issue was that the legislature should not be overwhelmed by the need to determine minor regulations, which was in line with the Justice Alliance case. Those two cases justified why CLSO felt that regulations should not be submitted to Parliament for consideration in that instance.

Clause five, section 17Y: the Free State Legislature felt that it was a vague provision and the Minister’s power to declare unfair practices required clarification. There was no response from legal services on the presentation, but Ms Halley-Starkey had updated the print version, and she would circulate that with her comments. Basically, the matter had been dealt with by the Portfolio Committee. The Bill previously contained a list of unfair practices, which was removed from the Act. The Act was currently very clear on what and how the Minister could go about declaring certain practices and fees. It was the opinion of CLSO that there was no need for further clarity and it was very clear in what instances the Minister might declare unfair trading practices. The Bill was constitutionally sound since that section had been removed.

Limpopo Legislature Mandate
The deliberations took place on 4 March 2024. The mandate was that the provincial NCOP permanent delegates were to negotiate in favour of the Bill, considering the input and comments from the public as attached to the report. The public inputs and comments did not relate to specific clauses of the Bill. The comments were on the logistics of the Office to support small businesses and raised issues regarding red tape, the lack of access to funding, the high cost of tender fees, and growing unemployment. Legal Services did not feel any legal issues had been raised; they were general policy considerations relating to small businesses.

Mpumalanga Legislature Mandate                                                                                                                Deliberations took place on 15 March 2024. The Portfolio Committee of the Premier's Office, Finance, Economic Development and Tourism, after considering the National Small Enterprises Amendment Bill [B16b 2023], conferred a mandate on permanent Members from Mpumalanga to negotiate in favour of the Bill. Most stakeholders spoke about the practical aspects of the Ombud's Office and once again provided various suggestions or alternatives regarding establishing the National Office. It also suggested that the Bill should clarify the voting rights of the CEO and the CFO on the board. They were all policy considerations or suggestions on which the Department could respond.

Section 11.2(a) – the Portfolio Committee felt that there was an interpretation issue in "the Minister appoints the board on the recommendation of the board after a truly transparent process conducted by it." The Committee felt it was confusing as the board was not yet established but needed to make recommendations to the Minister. CLSO explained that there were executive and non-executive board members, but a transitional arrangement could also be found in section 10. Section 10 supported the appointment of the board members.

Section 16 - the Committee requested clarity regarding the voting rights of the CEO and the CFO. It was a policy decision whether that should be included or not.

Section 17B—the Mpumalanga Legislature felt this was a conflict of interest as human resources members would have to nominate themselves to serve on the board. But that was standard practice and how boards and subcommittees were established in terms of section 72 of the Companies Act.

North West Legislature Mandate
Deliberations took place on 7 March 2024, and the mandate was for the North West provincial legislature to vote in favour of the Bill. All districts voted in support of the Bill. However, several questions were raised in public hearings, and most of the public comments centred around the policy and implementation and decisions taken by the Department regarding small businesses and the establishment of the Ombud. Legal Services believed that no legal issues were raised and the Department should respond to the general policy considerations relating to small businesses.

Northern Cape Legislature Mandate
Deliberations took place on 5 March 2024. The legislature voted in favour of the Bill, and no written submissions were received. Public hearings were held, and stakeholders recommended that non-governmental and non-profit organisations should also form part of a Co-operative Banks Development Agency and the Small Enterprise Development Finance Agency. Once again, Legal Services declared it was a policy matter for the Department to consider.

Ms Halley-Starkey indicated those were the negotiating mandates her Office had received so far. The negotiating mandates of Gauteng, the Western Cape and the Eastern Cape had been received the previous night. They would be considered, and she would respond to the Committee at a given time.

The Chairperson had indicated earlier that Ms Halley-Starkey would be joining another Select Committee dealing with the Electoral Amendment Bill, so he asked Members to immediately ask questions of clarity on the presentation. He requested that the presentation be flighted to facilitate questions on legal issues.

Discussion
Mr Mmoiemang said that his only question was why the parliamentary Legal Advisor had said that the Department had to provide clarity when maybe Legal Services could elaborate on the qualifications of directors.

Ms Halley-Starkey said that, when considering the Bill and the legal responsibility, her Office could understand why, logically, one would not include a list of criteria required of various board members, or a skill set for the Ombud. One would not want a closed list of skills but want to try to make the criteria as genuine as possible. If such lists were included in the Bill and at a later stage, one wanted to add something else, it would be necessary to amend the Act. If there was a different reason, then the Department could provide clarity.

Mr Londt said that he heard the Legal Advisors raising concerns, the Committees, Assistants, and Secretariats were also raising concerns, and there had been complaints from provinces on the number of Bills being pushed through the NCOP at the end of its term of office. He had seen the legal opinion that one of the Chairperson’s colleagues, Mr Dodovu, had received about legislation being done in such a rush at the end. He had sent a copy to both the Chairperson and Mr Mmoiemang. He asked that they take note of it because he had been flagging, from the beginning, that Members needed to do proper legislation and not push it through and make so many mistakes. That was the piece of legal advice to another colleague that he was sending to the Chairperson so that he could read it at his leisure and then hopefully apply the guidance to the Committee so that it did not sit in a situation where it was forcing legislation through “on number 99” and then perhaps making a mistake or two.

The Chairperson said that he had read Mr Londt’s communique and would respond after the Department’s input, but he wanted to make the point that the Committee had followed all the processes for the legislation. He asked for further comments. He knew that some of the Committee Members and those from provincial legislatures were seeing the presentation for the first time, but there would be another opportunity on 26 March 2024, when the Committee would be going through the presentation comprehensively. It would also include issues raised by the remaining provinces. If there were issues raised or proposals made, the CLSO would respond to those at the next meeting.

Ms Halley-Starkey said that CLSO would strive to include the responses to the mandates from Gauteng, Western Cape and Eastern Cape by the following day and to circulate the document before the next meeting.

The Chairperson thanked Ms Halley-Starkey and handed over to the Department of Small Business Development DG. The presentation would contain preliminary responses; the Committee would expect comprehensive responses on 26 March 2024.

Presentation by the Department of Small Business Development (DSBD)
Ms Thulisile Manzini, Acting DG, DSBD, stated that the presentation would be made by Ms Qinisile Delwa, DDG Enterprise Development, Innovation and Entrepreneurship, but she would make some opening remarks and general observations before her colleague made a formal presentation.

Ms Manzini stated that the Department had come a long way from drafting the Bill to finalising the consultation and public hearing processes. The Department had worked with the Portfolio Committee on Small Business Development, providing technical support when needed as the Bill, once tabled, was driven by the legislative arm. The latest support had come through the National Council of Provinces, where again, the Department provided technical support without dealing with the contents of the Bill. The Department had received several written comments which, apart from the comments from the South African Reserve Bank Provincial authority, were not substantive or directly related to the Bill. The Department had also responded to the Committee on the written inputs. The day before, the Department had been engaged in responding to comments and only received comments from the Western Cape provincial legislature late that day. 

She said that most oral comments did not relate to the legislative provision, but were complaints related to service delivery in the agencies, as well as the local economic development offices. Other comments were on the lack of budget allocated to the local economic development offices, the lack of access to finance, and the fact that the Small Enterprises Finance Agency (SEFA) applied the same rules as commercial banks and had high-interest rates. Comments also concerned the combination of existing SEFA offices, the reduction in the number of offices available to support small enterprises, and a lack of protection against foreign business owners. The comments complained about a lack of support from COIDA (Compensation for Occupational Injuries and Diseases Act) and a lack of support for persons with disabilities. The issue of red tape in ensuring compliance with regulatory requirements, and the high cost of tender fees and renewal fees were real concerns. The growing unemployment for youth was problematic; the level of cooperation with local government and access to safe and affordable business premises that allowed for access by clients remained unresolved problems. Crime and gangsterism were problems that were not resolved by reporting to the SA Police Service. There was a need for mutual support to ensure compliance with minimum product standards.

She added that some of the general recommendations related to the rollout of mobile offices to support small enterprises. Comments suggested that the pace at which the offices of SEDFA, the new entity, were rolled out to provinces would determine the success of the merger of the entities. Commentators called for clarity on the classification of the different size categories of small enterprises, the need for quicker turnaround on funding applications, and the conditions to fund the development needs of small enterprises, which should be lower than in banks. CIPC (Commission for Intellectual Properties and Companies) and SARS (SA Revenue Services) support should be available from Small Enterprises offices, and local government should be able to assist small enterprises to avoid the need to travel long distances to get certification for compliance and to tender. The Township and Rural Entrepreneurship Programme (TREP) should align with the needs of small enterprises, especially concerning turnaround times.

Ms Manzini assured the Committee that the Department would take the comments into consideration as it undertook its programmatic review as part of developing a strategic plan for the entity that would emerge following the NCOP concurrence on the Bill and the subsequent signing into law. She requested that the DDG make the presentation.

Several technical issues occurred during the presentation, and Committee staff blamed each other. Mr Londt and Ms Boshoff requested that the Chairperson address the problems, as they were unprofessional and wasting everyone's time. Ms Boshoff suggested that the Chairperson ensure that Committee staff had adequate technology to do their jobs.

Ms Delwa had a presentation of 60 slides but suggested that she begin on slide 35 as the DG had addressed the general comments.

The Department had previously addressed the Committee on the written comments received; the update was that the concerns raised had been addressed, so there were no longer any issues in those areas. She would go directly to the mandates from the provinces: Free State, Limpopo, North West, Mpumalanga Northern Cape and the Western Cape. The mandates for the Eastern Cape and Gauteng were only received the evening before and were not included. The KwaZulu-Natal mandate was yet to be received.

Mr Dangor stated that he had Gauteng's mandate with him and could circulate that.

The Chairperson determined that the Committee would not deal with those responses that the Department had not responded to because they were not on time. Everything, including those currently not included, would be responded to in a single document the following week.

The DDG moved to slide 39 to address the language and drafting errors in the Bill that had been raised. She said that the bill had been certified by Legal Services and that it was consistent and properly drafted in a form and style that conformed to the legislative practices. A final SEIAS report that complied with the minimum requirements was completed, and a certificate of compliance was issued. The Bill had been translated into most languages.

In Chapter 3, Small Enterprise Development Finance Agency, she addressed the question of stakeholder powers, agency powers and functions and the composition of the board and board committees. The Advisory Body was considered. Various comments and queries relating to aspects and details of the Ombud of the Bill were addressed. Chapter 3A on the Dispute Resolution Mechanism initiated many queries and comments. The DDG addressed comments on Section 15 of the Bill on the finances of SEDFA and Section 20 of the Act on Regulations.

(See Presentation)

Discussion
The Chairperson asked if Members or any of the provinces that had submitted their negotiating mandates had questions. They could ask questions to clarify the proposals made, especially the provinces of Free State, Northern Cape, Mpumalanga, Limpopo, Western Cape, and North West.

Mr Londt stated that it was always better not to consider legislation piecemeal. He said some officials had thrown the Chairperson under the bus that day. The Committee had to make sure that all legislative processes were properly structured. It was not the beginning of the term; it was the end of the term. The negotiating mandates had been submitted, and Members had heard the responses, so the information should be communicated to Members in writing so they could communicate the information to their colleagues, including those mandates that were still missing. What was the deadline for receiving the missing mandates as time ran out?

The Chairperson asked the Department whether he could receive comprehensive responses to all the provinces, including the Eastern Cape, Gauteng and KwaZulu-Natal, which had since submitted, by Thursday. 

Ms Manzini assured the Chairperson that the Department would definitely be able to do so.

The Chairperson requested the Committee Secretary to send copies of all the responses to Members and to the provinces. Ms Halley-Starkey had also made a commitment that by the following day, she would be able to provide legal input on the additional comments. Members would need time to go through those responses, compare them with the submission made by the provinces, and be in a position to engage on the Tuesday of the following week.

The Chairperson informed Mr Londt that the Committee was running the process according to the rules and the legislation. The Committee received a briefing on the Bill on 6 February 2024. After the presentation, the Minister made the opening remarks. DG Manzini took the members through the presentation and introduced the bill. Then there were questions for clarity, and the Minister and DG responded. The Committee tabled the legislative programme, after which the Committee received a letter from the Chairperson of the National Council of Provinces, written by the Speaker of the Western Cape legislature, referring to NCOP Rule 219. The Chairperson explained that Members could go to the videos of those meetings on the Parliament website and listen to what happened that day.

As a result of the letter from the Chairperson of the National Council of Provinces referring to the request from the Western Cape legislature citing NCOP Rule 219, the Committee management had considered the Rule. Generally, the legislative process for the section 76 Bills was six weeks but the rule depended on the substance of the Bill. In certain circumstances, the period for consideration of the Bill was at least eight weeks. As the Committee did not know whether a particular substance was involved, it decided to err on the side of caution and allow eight weeks for processing, which would take the process to the last week of March 2024. He was sure Members would remember that particular meeting. So the Committee revised the programme to accommodate the eight-week legislative cycle. That had been communicated to the Speaker of the Western Cape Legislature. Regarding that programme, the meeting to address the negotiating mandates was on 6 March 2024. The Portfolio Committee of the Western Cape Legislature indicated that they had to embark upon public hearings, advertising, etc. and so they would only be ready to submit the negotiating mandate on 19 March 2024. That was agreed to, and the amended programme was sent to provinces. Only the Western Cape had made a request for an extension of time. But even that extension had not allowed the Committee to complete the process, so the time had gone well beyond the eight-week legislative cycle. He had requested a further extension from the Chairperson of the Council when he observed that the Committee would not receive all the mandates, so the Committee would continue next week with the negotiating mandates. Then, members would go for the constituency period, which started on April 2 and ended on April 15, 2024. The programme was to deal with the financial mandates on 16 April 2024.

The Chairperson explained that he had been responding to Mr Londt's concern that the Committee was operating outside the rules. He said that if there were no further comments, he would release the Department and the provinces. He recalled that the DG was experiencing network challenges.

Ms Delwa confirmed that the DG had network problems. The Department had nothing to add but re-committed to supplying its responses to the outstanding provinces by Thursday that week.

The Chairperson requested that the Department supply a list of attendees before a meeting, including those requiring hosting rights, so that technicalities could be sorted out before the meeting. 

He requested the Secretary to present the set of minutes.

Consideration of the Minutes
The minutes of 12 March 2024 were read, considered and approved unanimously with no amendments.

Announcements
The Committee Secretary, Ms Solomons, stated that the secretariat had circulated a report on public comments. Perhaps Members wanted to consider it, or maybe when they returned from recess, they would have had more time to review the report.

The Chairperson stated that the report was for noting only. It was information about the processes followed. The information in that report could be available if a case were to be made against the Bill they had passed. The report covered all the processes, stakeholder proposals, the department's responses to the progress, and all the processes related to the legislative process before having it formally adopted.

The Chairperson asked the Committee Content Advisor to follow up on the issue of the monies owed to members for the visas to Germany.

Mr Bazier had followed up. He had emailed the Members' Facility and was waiting for a response. He would follow up the following day.

The meeting was adjourned.