Draft Committee Report & Minority Report

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Meeting report

AD HOC COMMITTEE REPORT NO

AD HOC COMMITTEE REPORT NO. 13 BY THE PUBLIC PROTECTOR
28 February 2001
TABLING OF DRAFT REPORT

Chairperson: Mr AC Nel (ANC)

Documents handed out:
Drafting Committee's Draft Report
Minority Report of the Ad Hoc Committee on Report 13 of the Public Protector.

SUMMARY
The Ad Hoc Committee deliberated on the Draft Report tabled by the subcommittee (Drafting Committee). Major disagreements on some aspects of the report were noted, particularly in regard to how some of the Public Protector's recommendations were summarised and incorporated into the Drafting Committee's report. Objections were also made in connection with the use of judicial authorities outlined in the draft report. Although having noted that the Rules of Parliament do not allow the tabling of Minority Reports, the Chairperson made a ruling allowing the acceptance of a Minority Report to act as proposed amendments to the draft report.

MINUTES
The Chairperson requested Mr LT Landers (ANC), of the Drafting Committee, to introduce the Draft to the Ad Hoc Committee.

Mr Landers introduced the Draft Report, saying it has no official status and cannot be guaranteed since changes may be made to it. The media uses it at its own risk.

The Chairperson referred to the first and second pages of the Draft Report and commented that there seemed to be an agreement on that.

Adv DM Bakker (NNP) interjected and said that they had not had an opportunity to study the report as it had only been handed to the members that morning. He said that he was not in a position to agree to anything he had not had an opportunity to peruse.

Mr GG Oliphant (ANC) proposed that members agree on how a report should be presented in order to accommodate the views of all members of the Committee.

The Chairperson conceded that the document had only been tabled before the Ad Hoc Committee the morning of the meeting and that members had only a brief time to peruse the document. He said that the members should not force the issue of reaching final agreement at this stage. He proposed the document be approached as a working draft.

He said if parties felt there should be a need to consult during the day they would have an opportunity to do so.

Adv Bakker said his question related to the recommendations made in the report. He wanted to know if they were the unanimous recommendations of all members of the committee.

The Chairperson replied that as far as he understood Mr Lander's introduction there was no unanimous agreement on the recommendations. There was, however, some agreement on the general form and structure of the report.

Mr Landers said there were areas in the report where the members of the Drafting Committee agreed to disagree and that they would take the Report back to the Ad Hoc Committee where it would be further discussed.

Adv Bakker said he had been under the impression that the Draft Committee's report represented agreement on all issues.

Mr Landers said that if there had been absolute agreement he would have reported that fact to the Committee but he had only indicated that there was consensus on most of the issues.

Ms P De Lille (PAC) said that Mr Landers should take the members through the report and indicate where there were differences.

Mr DHM Gibson (DP) said he had been handed the document at 8h15 in the morning, and does not agree with the contents of the document. He said that the Drafting Committee process has been a failure and that the Draft report is a 'wimpish' attempt to get out of a difficult situation. It is an attempt to exonerate Minister Maduna. He was not going to be party to that. If the Ad Hoc Committee accepts the Draft Report then he proposes to submit a minority report.

Mr Oliphant replied that Mr Douglas is out of order because he was part of the process that agreed on the form of the report. Mr Douglas said that any disagreements on the report should be pointed out. For Mr Douglas to call it a 'wimpish' report while he was part of the drafting was unacceptable.
He recommended that the Ad Hoc Committee reconsider the original proposals and debate the issues that Mr Douglas was in disagreement about.

The Chairperson said that the meeting had begun in an unusual manner and it would be better that the meeting proceed in a positive spirit. Any matters in regard to which a disagreement was reached during the drafting process should be brought back during the plenary session and debated further.

The Chairperson proposed the Committee look at the first part of the Report.

Mr Landers said the Introduction of the Report sets out the terms of reference of the Ad Hoc Committee and how the Ad Hoc Committee was formed. The Second part deals with the Report of the Public Protector and sets out the resolution that constituted the terms of reference for the Public Protector. The Third part of the report contains the findings of the Public Protector.

Mr Gibson stressed he would not accept the recommendations and would not be persuaded they are appropriate. He said he would submit a minority report and requested a procedure how it would be tabled at the meeting or the house.

The Chairperson said that the Rules do not allow the tabling of minority reports unless the Rules specify otherwise.

Ms De Lille suggested the Committee deal first with the whole Report and then deal with the recommendations, where the trouble lies.

Mr Landers referred members to page 5 of the Report, to 3.4.6 and said that this has not been included in the Public Protector's Report and to the Recommendations of the Drafting Committee. He said the issue of Constitutional violation should be referred to the Constitutional Review Committee and the Portfolio Committee on Justice since the Ad Hoc Committee is not capable of dealing with this.

With regard to the accountability of the Minister and the appropriate sanction the Drafting Committee recommended that matters of this nature be referred to the Rules Committee and other relevant committees of parliament.

Mr Oliphant recommended that the meeting be adjourned until 12pm so that members could read through the report.

The meeting was adjourned.

Resumption of Meeting

The Chairperson asked the Ad Hoc Committee members to reconsider the decision regarding the non-distribution of the draft as the Committee had decided not to make the draft available to the members of the media.

Mr Gibson said that in the interest of openness and transparency the draft document should be handed to the press.

Ms De Lille said that some of the recommendations contained in the Public Protector's report had merely been included in a summarised form into the Drafting Committee's draft report. She also said that she does not support the findings of the Drafting Committee based on paragraph 3.4.6

Mr Gibson referred to paragraph 3.1.1 of the Draft Report, which says, "During the 1992/3 financial year, the Strategic Fuel Fund (SFF) Management decided to change the accounting policy relating to strategic oil stock that had been sold from one storage facility and replaced in another during three previous years. This change in accounting policy gave rise to a loss of R170 million loss that former Minister of Minerals and Energy Affairs, Dr Maduna, referred to in his responses to questions in Parliament. The Minister indicated that this was possibly a physical loss to the SFF."

Mr Gibson stressed that there was no loss and that the above creates a wrong impression.

The Chairperson replied that this could have been wrongly typed from the Public Protectors Report.

Mr Landers referred the Committee members to the Executive Summary of the Public Protector's Report where the above is quoted verbatim.

The Chairperson said that this is not the Ad Hoc Committee's error.

Ms De Lille said that it was wrong in the first instance to include the Public Protector's Recommendations in summarised form in the Drafting Committee's report.

The Chairperson said the Drafting Committee's report contains some extracts from the Public Protector's Report that had been briefly outlined in the Draft Report. He said that the findings in the Public Protectors report are very extensive and that to catalogue all of them in the Draft report would have increased the draft report by 30-40 pages.

Mr Oliphant added there are factual differences between the Public Protector's report and the Drafting Committee's report.

Adv Holomisa said that if it so be that members of the Committee feel that there are factual differences between the two reports they should be indicated so that the meeting could proceed.

Mr Landers said that the role of the Ad Hoc Committee is not to investigate what the Minister did.

Mr Gibson referred to a section of the Drafting Committee's report which refers to certain allegations, in particular the diversion of funds from the SFF for political purposes, that the Committee is not satisfied were isolated incidents. The Committee is of the view that a forensic investigation into such matters would have been in the public interest. He asked how the Committee reached that conclusion.

Mr Mokaba replied that the Committee arrived at this view because it was felt that the context is important. This happened within the context, hence the suggestion.

Ms De Lille referred to the portion of the Drafting Committee's report stipulating that "the Public Protector finds that the Minister violated the spirit of the Constitution by not upholding the principles and prescripts contained particularly in the quoted sections of the Constitution". Her concern was that the Drafting Committee's report did not specifically refer to the Minister having violated sections 181(4) of the Constitution. She said that this must be phrased in a manner consistent with the Public Protector's findings.

Mr Landers replied by referring Ms De Lille to the Public Protector's report which says "the Minister violated the spirit of the Constitution".

Ms De Lille acknowledged this but said she was merely linking the draft report with the proposal that she had made.

Mr Gibson thereafter handed out a minority report that he said had been signed by five political parties. He said that the report represents his views and that of the other parties and then asked to be excused from the meeting.

Adv Holomisa objected to the tabling of the minority report.

Mr Oliphant added that Mr Gibson makes certain allegations and leaves the meeting before other members have had an opportunity to respond.

Mr Gibson replied it was unfair to criticise his conduct and said that he acted perfectly in a civil manner as he had explained that he had an appointment for which he was already late by more than half an hour. He criticised the Committee for having wasted time in excess of a year to produce a report and thereafter subjecting other members of the Committee to unreasonable pressure in attempting to produce a report. He said that the Committee was the one to blame for the delay. He excused himself and left.

The Chair asked if the Committee could proceed.

Ms De Lille asked to what extent were the Public Protectors recommendations summarised and included in the Drafting Committee's report.

The Chairperson replied they were summarised by exact paraphrasing, and that the Drafting Committee's report reflects the Public Protector's recommendations.

Ms De Lille said that she wouldn't accept the Drafting Committee's recommendations.

The Chairperson replied that it would be wrong to ignore the recommendations.

Mr Landers said the Ad Hoc Committee was not constituted as a disciplinary committee to inquire into the Minister's conduct. A careful reading of the terms of reference should make this obvious.

Mr Oliphant added that the Minister made an apology and retracted the statement he had made. The record of this is to be found in the September 1998 Hansard.

Mr Landers said he was wondering whether that portion of the Hansard should not be made available to prove that Minister Maduna had apologised to the National Assembly. He said this record should be made part of the proceedings of the Ad Hoc Committee.

Adv Holomisa said that concurs with Mr Landers's view.

Ms De Lille asked that if the Ad Hoc Committee was not constituted as a disciplinary committee why did the Drafting Committee refer to the De Lille and Another v The Speaker of the National Assembly judgment in its report? She said this judgment had been added erroneously to the report, since the facts were not the same as in the Maduna matter. She said the essential difference lay in the fact that in this instance the Public Protector found the Minister of Parliament to have violated the Constitution. To compare this is with her matter was to convene a 'kangaroo court'.

Ms De Lille made it clear that she had not violated the Constitution and that there should be an examination of the substance of both cases. Mr Maduna's inquiry is about the violation of the Constitution and the Public Protector has confirmed that whereas the De Lille judgment only dealt with the violation of the proceedings of Parliament. The cases are different. She suggested there should be at least a reprimand and an acknowledgement by the Minister that there was a violation of the Constitution and an apology.

Mr Oliphant replied he was not sure what type of reprimand Ms De Lille was referring to because Parliament had already dealt with the matter. He expressed doubt that the Ad Hoc Committee was competent to dwell on the issue of Constitutional violation. He said the comparison between the De Lille case and the Maduna matter has to do with freedom of speech.

Ms F. Mahomed (ANC) said that the Minister had apologised and retracted his statement on 4 September 1998. She asked why it had taken Ms De Lille two years to ask for a reprimand with regard to the Minister's action and not at the time the statement was made.

Ms De Lille said that the basis of her statement about the appropriateness of the use of the De Lille case was based on the opinion of her legal representatives and suggested that a comparison not be drawn between the two cases because they are simply not comparable.

Mr Bakker said the purpose behind the heated debate by members of the majority party was to attempt to absolve their Minister from any liability for his conduct.

Mr Oliphant replied that the intention of the constitution of the Committee and the compilation of the report was not to attempt to protect Minister Maduna but to ensure that it is never repeated again. He proposed the Ad Hoc Committee accept the report and remit it to Parliament. He commended the Drafting Committee on the job it had done.

The Chairperson said that it was clear the members of the Committee differed on many issues but were of one mind in terms of reaffirming their support and respect for Chapter 9 institutions. Mechanisms must be designed to protect these institutions.

Mr Aucamp inquired about the minority report that had been submitted by Mr Gibson.

Mr Landers replied by referring Mr Aucamp to the Rules of the National Assembly which provide that no Committee may entertain minority reports. As the Rules do not provide for the tabling of minority reports there is no merit in tabling it.

The Chairperson made a ruling that he would allow the issues contained in the minority report as proposed amendments as deliberations on the Draft Report were not yet finalised. He made a suggestion that the Ad Hoc committee should meet later that afternoon to finalise the Report.

The meeting was adjourned.

Appendix 1
DRAFT REPORT OF THE AD HOC COMMITTEEE ON REPORT 13 OF THE PUBLIC PROTECTOR

1. INTRODUCTION
1.1 On ... January the Public Protector presented to Parliament "Report No 13 (Special Report): Report on the alleged irregularities with regard to the affairs and financial statements of the SFF Association, and on the relevant reports of the Auditor-General to Parliament."

1. 2 The Ad hoc Committee on Report 13 of Public Protector was established in terms of Rule 214 of the National Assembly, by decision of the Speaker, on 19 January 2000, which decision was ratified by the National Assembly on 21 January 2000. The Committee was established to consider Report 13 and to report to the National Assembly. The Committee was formally constituted on 20 January.

1.3 The Ad hoc Committee presented an interim report to the National Assembly on February 2000 in which the Committee set out what it understood to be its terms of reference and work method:

"The Committee, mindful of the fact that its terms of reference are to consider the report as a whole, proposes to deal with the report, its findings and recommendations in a comprehensive and holistic manner.

The Committee notes that the report deals with matters and makes recommendations which go beyond the terms of reference derived from the Resolution dated 21 August 1997, adopted by the National Assembly, requesting the Public Protector to investigate and report on the alleged irregularities with respect to the affairs and financial statements of the SFF Association, including, having due regard to the Report of the Minister of Minerals and Energy and to the applicable law, whether the reports of the Auditor-General to Parliament thereon were correct and proper. This adds to the complexity of the Committee's task.

In pursuance of its approach, the Committee will consider, when necessary, calling evidence on the findings and matters contained in the report and on the extent to which the recommendations contained in the Report have been implemented.

The Committee may further consider referring matters arising from the report to structures best suited to deal with them.

Mindful of the need to deal with these matters as expeditiously as possible, but also mindful of the scope, range and complexity of the matters dealt with in the Public Protector's report, the Committee is of the opinion that it will require at least three calendar months, from the date of adoption of this Report, to complete its work, provided that the Committee may need to approach the House with a view to extending this period if necessary."

1.4 The Committee has taken considerable time in completing its work both due to the complexity of these matters it was asked to deal with as well as lengthy recesses in Parliament's schedule during an election year.

1.5 The Committee has considered the Report of the Public Protector and has also considered written and oral submissions by the Public Protector presented at public hearings held on 4 and 18 April 2000.

1.6 The Committee would like to express its sincere gratitude to the Public Protector, Adv. SAM Baqwa, SC and the staff in his Office for the assistance they provided to the Committee and the very cordial and constructive manner in which we were able to interact with them.

1.7 The Committee is pleased to submit its final report to the National Assembly:

2. REPORT OF THE PUBLIC PROTECTOR
2.1 The Committee would like to express its appreciation to the Public Protector for the investigation conducted by his Office and the comprehensive report that has been submitted to Parliament.

2.2 On 21 August 1997 the National Assembly adopted the following resolution which constituted the terms of reference of the Public Protector:

"That the House resolves to request the Public Protector, in terms of section 182(1)(a) and (b) of the Constitution, 1996, to investigate, and to report to the National Assembly on the alleged irregularities with regard to the affairs and financial statements of the SFF Association including having due regard to the Report of the Minister of Minerals and Energy and to the applicable law, whether reports of the Auditor-General to Parliament thereon were correct and proper."

2.3 The investigation conducted by the Public Protector spanned an extensive period. 25 000 pages of written evidence and extensive oral evidence were presented to the Public Protector. Parties who had an interest in the investigation were represented by senior legal teams.

In his submission to the Committee the Public protector addressed the question
of the money and time spent on this investigation and indicated that the
investigation was fully justified in view of the fact that the SFF Association is a wholly owned government company worth more than R13 billion. He indicated that the money that was spent was mainly in the form of legal fees incurred by interested parties. He concluded that that he believed every cent spent was well worth it.

3. FINDINGS OF THE PUBLIC PROTECTOR
The findings of the Public Protector can be summarized as follows:

3.1 GENERALAPPROACH
The Public Protector took the following The key driving force to this investigation was to protect the public interest. When it appeared that no loss had occurred, I had to weigh whether the benefit of investigating further would be justified by the cost of the investigation. I have not proceeded to investigate matters which have been dealt with elsewhere or in other investigations. I have also not investigated matters which would not have been of practical benefit to the public.

3.1 CHANGE IN ACCOUNTING POLICY (R170 MILLION ISSUE)
3.1.l During the 1992/3 financial year, the Strategic Fuel Fund Association (SFF) Management decided to change the accounting policy relating to strategic oil stock that had been sold from one storage facility and replaced in another during the previous three years. This change in accounting policy gave rise to a loss of R170 million loss that the former Minister of Minerals and Energy Affairs, Dr Maduna, referred to in his responses to questions in Parliament. The Minister indicated that this was possibly a physical loss to the SFF.

3.1.2 During the initial hearings in June 1998, Counsel for the Minister put on record that the R170 million was not a physical loss as the Minister had indicated in his responses in Parliament, but an accounting loss caused by the change in accounting policy.

Considering and evaluating the accounting policy change was only necessary for as long as it appeared that the R170 million was a physical loss. Given that there was no physical loss associated with the change in accounting policy, the Public Protector therefore made no finding regarding the reasonableness of the change in accounting policy and its disclosure. (?)

3.2 PAYMENTS TO INTERSTATE
3.2.l The SFF contracted directly with the Egyptian General Petroleum Corporation (EGPC) to purchase Egyptian crude oil in 1992. Prior to this date, due to sanctions, the SFF had effectively purchased Egyptian crude oil through a company called Interstate, paying Interstate a margin for this service, as was normal practice at the time.

3.2.2 The SFF continued to pay Interstate a reduced margin (US $0,06 a barrel) on all oil purchased through EGPC after 1992. Interstate paid the 5FF US $0,05 a barrel if they, instead of the SFF, lifted the oil under the contract.

3.2.3 Allegations were made that the payments to Interstate were no value and were perhaps improper or fraudulent.

3.2.3 The evidence showed that the payments were made for the effective relinquishing to SFF of Interstate's Egyptian oil contract volumes with EGPC, as EGPC did not have additional oil volumes to contract with the SFF, without Interstate giving up their volumes. Interstate also provided ad hoc logistical services, but these were not the main causa for the payments to Interstate.

3.2.4 Whilst there were many deficiencies in the documentation of the contract with Interstate which gave rise to the suspicions of impropriety, the Public Protector finds that there was a valid reason or causa for the payments to Interstate. It is however equally true that the benefit received for the payments to Interstate reduced or weakened over the years as the oil procurement environment improved.

3.3 THE SALEM RECOVERY
3.3.l Allegations were also made with regard to: R1 450 million payment by SFF to the Government on April 1997; and the incorrect posting in the books of SFF of monies recovered from the Salem oil tanker incident.

3.3.2 Whilst the Public Protector needed to investigate these allegations and covered these issues in the report, he regarded it as common cause that no losses arose from these issues. As such these issues did not form the primary focus of his investigation.

THE AUDITOR-GENERAL'S REPORT TO PARLIAMENT
The audit of SFF
3.4.1 The general allegation was that the audits of the SFF by the Auditor-General and his agent Price Waterhouse should have identified the problems with regard to the contract underlying the payments to Interstate (referred to as the Six Cents Agreement) and the other alleged irregularities.

3.4.2 The Public Protector indicates that Parliament specifically requested him to look at the alleged irregularities and therefore he considered the audit process only in so far as it related to the alleged irregularities as noted above.

3.4.3 Given that he found that there was a valid causa for the Interstate payments and that the issue regarding the change in accounting policy did not cause an actual loss, he found no basis on which the audit of the SFF could be criticised for not identifying these issues.

The Auditor-General's reports
3.4.3 The main criticism of the Auditor General's reporting to Parliament was that the
1992/3 management financial statements which in previous years had not been published, were published for the first time in 1992/3 in an abridged format. The abridged financial statements summarised the management financial statements and did not separately disclose the R170 million relating to the change in the accounting policy.

3.4.4 The argument was that the secrecy provisions, which had previously restricted the publishing of crude oil information, were sufficiently relaxed to allow full publication of the financial statements. The allegations went further to imply that the abbreviation had occurred to cover up the R170 million loss.

3.4.5 Based on the evidence the Public Protector finds that it appears that the Auditor-General (who had the discretion after consultation to decide what information to publish) in fact published the SFF information much earlier than he was required to do. In addition he finds that whilst there were minor technical difficulties with the abbreviated 1992/3 financial statements they could not be said to be misleading or inappropriate.

3.4.6 The Committee accepts the findings of the Public Protector outlined above. However, the Committee wishes to draw the attention of the National Assembly to the following matters:

(a) The CEF Group and the SFF Association were instrumental in attempts by the Apartheid State to break the international oil embargo imposed by the United Nations in protest against Apartheid.

(b) As such these organizations operated behind a veil of secrecy and conducted operations that were, by definition, in contravention of international law.

(c) The structure and functioning of the SFF was such that it made political and administrative accountability difficult.

(d) There are certain allegations, in particular the diversion of funds from the
SFF for political purposes, that the Committee is not necessarily satisfied
were isolated incidents. The Committee is of the view that a forensic investigation into such matters would have been in the public interest.

(e) During the course of its work further allegations of irregularities in the operations of the SFF Association were reported.

3.5 FINDINGS REGARDING THE ACTIONS OF THE MINISTER
The Public Protector makes the following finds regarding the actions of the Minister.

3.5.1 The Public Protector finds that the Minister's statements both in Parliament and outside Parliament were tantamount to suggesting that the Office of the Auditor-General had either covered up the loss of R170 million or that he had not done his duty properly by ascertaining and disclosing that such a loss had occurred. He finds that this unfortunate impression could have been easily dispelled by an appropriate consultation with his Management Auditor or by a direct in depth discussion with the Auditor-General himself. Even though there were meetings between the Minister and the Office of the Auditor-General, it does not seem to me that they were in the spirit of section 181 or section 41(1) which provides as follows:

"(1) All spheres of government and all organs of State within each sphere must-
(a) preserve the peace, the national unity and the invisibility of the Republic;
(b) secure the well-being of the people of the Republic;
(c) provide effective, transparent, accountable and coherent government for the Republic as
a whole;
(d) be loyal to the Constitution, the republic and its people;
(e) respect the constitutional status, institutions, powers and functions of government in the other sphere;
(f) not assume any power or function except those conferred on them in terms of the Constitution;
(g) exercise their powers and perform their functions in a manner that does not encroach on the geographical, functional or institutional integrity of government in another sphere; and
(h) co-operate with one another in mutual trust and good faith by -
(i) fostering friendly relations;
(ii) assisting and supporting one another;
(iii) informing one another of; and consulting one another on matters of common interest;
(iv) co-ordinating their actions and legislation with one another;
(v) adhering to agreed procedures; and
(vi) avoiding legal proceedings against one another..

3.5.2 With regard to protection of institutions, functional or institutional integrity, fostering good relations, supporting one another, consulting one another and adhering to agreed procedures, the Public Protector finds that the Minister violated the spirit of the Constitution by not upholding the principles and prescripts contained particularly in the quoted sections of the Constitution. Adherence thereto would have led to the immediate rectification of any incorrect perception which the Minister might have had.

3.5.3 The Public Protector indicates that he has not suggested and he does not suggest that the Minister acted mala fide. None of the evidence presented before him suggested that the Minister any bone to pick with the Office of the Auditor-General prior to the reports he received which led to the Management Audit. The Public Protector finds that the Constitution can be transgressed even if the Minister's allegations were made bona fide and had been correct.

3.5.4 The Public Protector holds that the Minister is duty bound to uphold the constitutional principles and follow correct procedures at all times and that it is absolutely imperative for all South Africans, both in and outside Parliament to accept the consequences of the Constitution which is the supreme law of the land. One of those consequences is to uphold and protect the dignity, the integrity and independence of the institutions mentioned in chapter 9 of the Constitution.

3.5.5 The Public Protector points out that, neither section 181 nor section 41 provides any sanction for their transgression and that he is not possessed of any power to prescribe such sanctions. He regards this as a constitutional weakness that can only be remedied by Parliament itself. Parliament has to provide such remedy because he considers these matters to be serious enough not even to be adequately addressed by a simple apology. Parliament therefore needs to devise a mechanism with which to deal with such matters when they arise. This is necessary also to endorse not only the fact that the Constitution is a living document but also one that is effective. The public needs to be assured that the Constitution is not a document of mere words.

3.5.16 The Public Protector points out that the Minister is a member of Parliament and a member of the Cabinet and in this regard section 92 provides as follows:

"92(2) Members of the Cabinet are accountable collectively and individually to Parliament for the exercise of their powers and the performance of their functions.
(3) Members of the Cabinet must -
(a) act in accordance with the Constitution; and
(b) provide Parliament with full and regular reports concerning matters under their control.

3.5.6 The Committee is of the view that the National Assembly has already found that the Minister acted in contravention the then Rule 99 (now Rule 66) by reflecting upon the competence or honour of the Auditor-General and that the remarks were not in keeping with the spirit of the Constitution.

3.5.7 The Committee deals more extensively with matters relating to Sections 181 and
41 under paragraph 4.4.

3. RECOMMENDATIONS BY THE PUBLIC PROTECTOR
The recommendations contained in the Public Protector's Report can be summarised as follows:

3.1 With regard to the failure to record the Six Cents Agreement with Interstate in writing, and the issues raised with regard to the causa for the payments to Interstate, the Public Protector found it to be untenable that the causa of for the payments was not recorded in the facsimile of 2 July 1992 and that the term contract was not in writing in accordance with the Company Policy R02. It was found that the policy with regard to term contracts, namely that they had to be in writing, a salutary one, and that all contracts should be formalized and authorized at the appropriate levels, as a written contract would probably have gone a long way to allay the suspicions that had arisen around the US$0,06 payments to Interstate. It was also found that it is unacceptable that this matter was not addressed by internal controls such as Internal Audit, which is an indication of a material defect in the organizational structure.

It is therefore recommended that a strict application of the written contracts policy and that this has to be drawn especially to the attention of Internal Audit of SFF and specifically incorporated as one of the imperatives into the rules and regulations in terms of which they approve payments.

3.2 With regard to the absence of reference in minutes of the Board/Crude Oil Committee for 1992 and 1993 to the Six Cents Agreement with Interstate, and the fact that minutes of the Crude Oil Committee meetings were kept by a member of the crude oil department, and not by the regular Board secretary, it was noted that no relaxation or laxity of standards should be tolerated in any State entity, and in particular one which deals in billions of rands on behalf of the tax payer. The Public Protector took it that minuting is now undertaken by a competent person trained to do so. If not, it is recommend to the Board of the SFF that this be effected. It is also recommend that the Directors and Committee members, when checking minutes, ensure that they fully record the matters of importance with regard to the management of the business as well as key decisions in this regard.

3.3 With regard to the issues arising from the alleged absence of Board approval for the EGAM contract and the level of authorization needed for an evergreen contract, it was noted that contracts longer than a year should go to the Board. As an evergreen
contract is intended to last for more than a year, it is recommended that evergreen contracts also be reviewed by the Board in future.

With reference to the delay in bringing the EGAM contract to the attention of the Board, it is recommend that such delays be strongly discouraged, since it is improper not to keep the Board informed at al times.

3.4 With regard to the Ivory Coast payment it appears to have been an isolated incident representing a classic case of political manipulation of a state-owned company for political gain. It is indeed hoped that this case represents an aberration which will never again be repeated within the CEF group or any similar organization. It is a lesson about what ought never to be allowed to happen by all State institutions and para-statals.

3.5 With regard to the Salem issue, and the incorrect posting of monies received: This practice should be deprecated as inappropriate. Though it did not have any practical negative consequences, it ought not to have been done and reflects a practice that should not be repeated in the future.

3.6 With regard to the change in accounting policy, the Public Protector is of the opinion that the processes followed and the expertise utilized in considering the change and its disclosure, were reasonable. However, should there still be concerns the Public Protector states that the Minister is entitled to request the Board to review the matter further and to obtain further expert advice.

3.7 With regard to the old Company Policy R05 which was silent on whether funds for return cargoes should be retained: The new policy is explicit that the funds must be set aside from the original sale. Therefore the Public Protector has no further recommendation in this regard, other than to say that this is more desirable. As it was common cause that there was no actual cash shortage caused by these payments (cash transfers to the Government based on oil sales which had not yet occurred), and in view of the fact that the cash flow forecasts are subjective projections into the future, the Public Protector did not go into too much detail on the various cash flow forecasts prepared and the differences between them. It is recommend however, that if a cash flow shortage is forecast, even a short term one, this should be clearly communicated to the Board so that the matter can be addressed in whatever manner deemed appropriate by the Board.

3.8 With regard to company policy on whether strategic oil reserves should be held in wet or paper barrels, the Public Protector is of the opinion that Company Policy R02 was in fact not complied with, as 11 million barrels were held in paper barrels. Consequently the required reserves were below the minimum standard required at the time. At that stage (31 March 1997) the breach of the policy did not have any serious consequences for the SFF or South Africa. In saying so, he does not seek to justify the aforementioned breach, which potentially could have had serious consequences for the country. Such breaches of company policy should never be countenanced or allowed to occur in future.

3.9 With regard to the Interstate payments, the change in accounting policy and the R1450 million payment to Government, and the allegations raised by NSN that the General Manager acted without the appropriate authority and knowledge of the Board, and did not provide them with adequate information regarding the key issues:
The position would have been different had the SFF had both Executive and Non-Executive Directors, in that the flow of information would not have been open to potential limitations by one person as was alleged.

The Public Protector therefore recommends that SFF and other similar Government organizations should have a Board of Directors consisting of Executive and Non-Executive Directors, as suggested by the King Report. This would not necessarily require additional people. It would be expected that the non-executive Board would remain, but that the General Manager and Deputy General Managers be appointed Executive Directors. This would prevent the Board being dominated by an individual or individuals whilst ensuring that it is fully informed on all matters at all stages. The Chairman would however continue to be independent and non-executive.

3.10 With regard to other Corporate Governance issues: The Public Protector is of the view that State institutions should form the model for good Corporate Governance. Whilst these institutions do not always operate in the same way as a normal business, the Corporate Governance principles outlined in the King Report are still applicable. Given the highlighting of fraud in business today, it is vital that as part of this Corporate Governance fraud be specifically addressed. It is therefore recommend that all State Institutions should have a finalized fraud strategy as part of their overall strategy, which should include:

(a) How fraud risks will be assessed on an ongoing basis;

(b) An ongoing methodology for ensuring that the controls in place correctly identify, deter and prevent fraud;

(c) A fraud response plan to ensure that any fraud detected is responded to appropriately;

(d) Specific responsibilities for ensuring that the fraud strategy is implemented and followed up on an ongoing basis.


3.11 With regard to the interaction between the Minister and the Auditor-General, the Public Protector states that he found the Minister's conduct in regard to the accusations made with regard to the implied cover-up of a loss of R170 million by the Auditor-General to be unacceptable. In this regard, he recommend that not only the Minister, but all officials of the State should take heed of the prescribed relationship between institutions and organs of State as spelt out in the Constitution. Section 41(1) and section 181 of the Constitution specifically deal with this. Section 41 provides that organs of State must respect the Constitutional status, the one of the other. They must not exercise their powers in a manner that encroaches on the institutional integrity of another. It furthermore provides that organs of State should co-operate with one another with mutual trust and in good faith by consulting one another on matters of common interest, and adhering to agreed procedures. The correct channels and procedure must be followed when addressing concerns one might have about a Chapter 9 institution. The Public Protector accordingly recommends that the Speaker of the National Assembly takes the necessary steps to ensure that not only this report but also more specifically matters regarding to sections 181 and 41 of the Constitution to be raised in the Legislature with a view to a pronouncement regarding the accountability of the Minister and any possible sanction which the Legislature might consider appropriate."

4. RECOMMENDATIONS
The Committee considered the above recommendations and wishes to recommend to the National Assembly as follows:

4.1 MATTERS RELATING TO CORPORATE GOVERNANCE OF THE SFF
That the recommendations contained in paragraphs 3.1, 3.2, 3.3, 3.4, 3.5, 3.7,
3.8, 3.9 and 3.10 be referred to the Portfolio Committee on Mineral and Energy
Affairs, the Committee to consider these matters and to report to the National Assembly.

4.2 MATTERS RELATING TO CORPORATE GOVERNANCE OF PUBLIC ENTERPRISES
That the recommendations contained in paragraphs 3.4, 3.9 and 3.10 be referred to the Portfolio Committee on Public Enterprises, the Committee to consider these matters and to report to the National Assembly.

4.3 MATTERS RELATING TO PUBLIC SERVICE AND ADMINISTRATION
That the recommendations contained in paragraph 3.10 be referred to the Portfolio Committee on Public Service and Administration, the Committee to consider these matters and to report to the National Assembly.

4.4 MATTERS RELATING TO SECTIONS 181 AND 41 OF THE CONSTITUTION
4.4.1 The Public Protector points out that neither section 181 nor section 41 of the Constitution provides any sanction for their transgression. This is held to be a "constitutional weakness" that can only be remedied by Parliament itself. These
matters are considered to be serious enough not even to be adequately addressed by a simple apology.

4.4.2 The Committee concurs with the Public Protector regarding the importance of the institutions supporting democracy created in Chapter 9 of the Constitution and their role in supporting democracy and human rights and consequently the need for the independence, impartiality, dignity and effectiveness of these institutions to be protected.

4.4.3 The Committee agrees with the Public Protector that the Constitution does not provide for sanctions for the contravention of Sections 181 and 41 (1) of the Constitution. However, the Committee does not wish to express itself on whether this constitutes a "constitutional weakness" in view of the fact that Section 181 of the Constitution itself provides that "other organs of State through legislative and other measures must assist and protect these institutions to ensure the independence, impartiality, dignity and effectiveness of these institutions."

4.4.4 The Committee recommends that these matters be referred to the Constitutional Review Committee and the Portfolio Committee on Justice and Constitutional Development, the committees to consider the above matters and to report to the National Assembly.

4.5 ACCOUNTABILITY OF MINISTER AND APPROPRIATE SANCTION
4.5.1 The Public Protector recommends that Parliament make a pronouncement regarding the accountability of the Minister and any possible sanction which Parliament might consider appropriate.

4.5.2 In considering the above recommendation the Committee considered the following factors:
(a) The process of pronouncing on accountability and sanctions is a judicial or quasi-judicial one that would entail, inter alia, adherence to the principles of natural justice. This clearly fell outside the mandate of the Committee.

(b) The National Assembly has already found that the Minister acted in contravention of the then Rule 99 (now Rule 66) by reflecting on the honour and integrity of the Auditor-General other than by way of substantive motion and ordered him to withdraw his statements and to apologise. This was done on 4 September 1998. The Committee cannot concur with the assertion by the Public Protector that the Minister apologized but did not retract his statements. Hansard and the Minutes of the National Assembly reflect otherwise.

(d) The Supreme Court of Appeal stated, per Mohammed, CJ, in the matter of De
Lille and another V The Speaker of the National Assembly
(INSERT REFERENCE), that:

"This enquiry must crucially rest on the Constitution of the Republic of South Africa. It is Supreme - not Parliament. It is the ultimate source of all lawful authority in the country. No Parliament, however bona fide or eminent its membership, no President, however formidable be his reputation or scholarship and no official, however efficient or well meaning, can make any law or perform any act which is not sanctioned by the Constitution. Section 2 of the Constitution expressly provides that law or conduct inconsistent with the Constitution is invalid and the obligations imposed by it must be fulfilled. It follows that any citizen adversely affected by any decree, order or action of any official or body, which is not properly authorized by the Constitution is entitled to the protection of the Courts. No Parliament, no official and no institution is immune from Judicial scrutiny in such circumstances."

"There is therefore nothing in the "rules and orders" of the Assembly. which qualifies in anv respect relevant to the apDeal. the right to freedom of speech in the Assembly which section 58 (1) guarantees. More directly, there is nothing which provides any constitutional authority for the Assembly, to punish any member of the Assembly, for making a speech, through an order suspending such member from the proceedings of the Assembly. The right of free speech in the Assembly protected by section 58 (1) is a fundamental right crucial to representative government in a democratic society. Its tenor and spirit must

Appendix 2:
MINORITY REPORT OF THE AD HOC COMMITTEE ON REPORT 13 OF THE
PUBLIC PROTECTOR

1. We are unable to associate ourselves, or our parties, with certain of the recommendations made by the majority of the members of the ad hoc committee.

2. We are of the opinion that the Majority Report is a lamentable whitewash of Minister Maduna. It amounts to a repudiation and rejection of the recommendations of the Public Protector who was mandated by Parliament to investigate the matter.

3. The result of the Majority Report will be that Ministers, and all members, will conclude that any abuse of the Rules and any breach of the Constitution is acceptable. Any statements, however defamatory, damaging or untrue will be able to be made under the mantle of Parliamentary privilege. All that will be required is that the person should withdraw the statement when ordered by the Speaker to do so.

4. Minister Maduna made statements in Parliament, and outside of it. Those statements were untrue and unjustified. More than two years later his lawyers conceded that within days of making the statement he realised that it was not justified and that he had been wrong. It must be noted that legal costs of some R13m have been incurred as a result of Minister Maduna's statement. The taxpayers have paid those costs. Had the Minister done the proper thing and expressed sincere regret at the appropriate time those costs would not have been incurred.

5. The Majority Report creates the erroneous impression that Parliament is powerless to do anything and that it cannot do what the Public Protector says it should. As a result of an incorrect emphasis placed on the wording of the judgement in the De Lille case, together with some selective quoting out of context, the Majority Report seeks to draw an analogy between the De Lille case and that of Maduna. It must be stressed that the cases are not comparable. Minister Maduna was investigated by the Public Protector who made a finding that the Minister had violated the Constitution. In the De Lille case, she had been subjected to what may be termed 'jungle justice" by a committee of Parliament and Parliament had tried to suspend her from the proceedings of the Assembly. It was that punishment that was found to be not permissible.

6. We have applied our minds to an appropriate punishment, as suggested by the Public Protector, and we recommend that Minister Maduna should be instructed to appear in the National Assembly, there to express his apologies and his regret about violating the Constitution and to be reprimanded for his actions which have caused the public to pay R13 million in legal costs.

Dated at Cape Town this 28th day of February 2001


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