Economic Regulation of Transport Bill: deliberations

Meeting report

The Chairperson accepted apologies from Minister and Deputy Minister of Transport and Director-General of the Department of Transport (DoT). The Committee would continue clause-by-clause deliberations on the Economic Regulation of Transport Bill

Chapter 3 Economic Regulation of Transport Facilities and Services
Part B: Economic Oversight of Regulated Entities
Adv Alma Nel, Committee Content Advisor, recalled that there had been several public comments on clause 13 on information the Regulator could request from regulated entities. For example, the Gautrain Management Agency (GMA) had expressed a concern about the disclosure of confidential trade information. It would also be important to ensure that this clause was aligned with the Promotion of Access to Information Act (PAIA) and the Protection of Private Information Act (POPIA). For example, what information would the public be allowed to request from the Regulator? Clause 15 on complaints against regulated entities was relevant to concerns about the purview of the Regulator with respect to the Competition Commission.

Mr L Mangcu (ANC) thought it would be prudent to ensure that STER regulations be made accessible to the public. Did PAIA provide for this?

Adv Nel confirmed that it did.

Mr L McDonald (ANC) sought clarity on proprietary or confidential trade information that might be held by the Regulator. How would the requirement of clause 13(3) to maintain confidentiality interact with the obligation imposed by PAIA to disclose?

Ms Thiloshini Gangen, Parliamentary Legal Advisor, drew attention to clause 60 which provided for comprehensive engagement between the Regulator and a regulated entity about confidential information. She proposed that a clause should be added to the Bill to indicate its deference to PAIA and POPIA, which were Acts derived from the Constitution.

Ms Raksha Haricharan, State Law Advisor, agreed and suggested that clause 60 could be amended to indicate the relationship of the Bill to PAIA and POPIA. She drew attention to Section 63 of PAIA which provides for the mandatory protection of the privacy of a third party who is a natural person.

Mr Moeketsi Sikhudo, STER Project Manager, DoT, said that the issue of confidentiality had been discussed extensively by the Department. [The remainder of his comment was inaudible due to a bad connection].

Chapter 3 Part C: Complaint Investigations by Regulator
Adv Nel summarised Part C drawing attention to the question of who could refer complaints to the Transport Economic Council (TEC) and the allowance for appealing a decision of the Council. DoT should indicate whether the list in clause 18 of actions that may be taken by the Regulator in response to an investigation was a closed list. She recalled public submissions querying clause 21(4), which the capped the penalty for contravening regulations at 10% of an entity’s annual turnover.

Mr Sikhudo experienced connection problems and was unable to make a comment.

Adv Nel referred to the Department’s earlier comments on clause 21(4), which had explained that the 10% limit was intended to prevent the penalty from leading to bankruptcy or disruption of business.

Mr McDonald was concerned that the requirement of clause 16 that the Council must conduct a hearing on each matter referred to it would overburden it. He suggested that there should be a mechanism for sifting through complaints to determine which ones necessitated a hearing.

Mr Mangcu observed that there did not seem to be a mention of a mechanism for processing complaints by the public against the Regulator. He suggested the addition of a clause to protect the public and industry against the Regulator.

Mr K Sithole (IFP) asked if the Regulator or the Council would have the final say in a dispute between them.

Mr M Chabangu (EFF) asked how disagreements between the Regulator and Council would be handled. He asked if the Council would sign a code of confidentiality to ensure information disclosed to it was not revealed.

Mr Sikhudo replied that the Department’s intention was that the Regulator and the Council should operate separately and that decisions of the Council should be final.

Adv Adam Masombuka, DoT Chief Director: Legal Services, explained that a confidentiality clause was a standard part of all employment contracts. He suggested that clause 16(3) could be rephrased to allow for the Council to decide whether or not to conduct a hearing and for some complaints to be resolved by a simple administrative process.

Mr Mangcu did not agree with this suggestion. Clause 16(3) protected aggrieved parties. Changing it according to Adv Masombuka’s suggestion would give the Council too much power to dismiss legitimate grievances against the Regulator without proper investigation.

The Chairperson observed that there were conflicting demands that needed to be resolved.

Chapter 3 Part D: Review of Regulator’s Decisions and Part E: Hearing Procedures
Adv Nel drew attention to clause 22 which provided for complaints against the Regulator by regulated entities and members of the public. She was doubtful that the Council would be able to avoid holding a hearing on a complaint, but noted that it did not necessarily have to be a face-to-face hearing. Public submissions had raised questions about clause 25 on the Council’s powers of investigation and subpoena. She pointed out that the Memorandum on the Objects of the Bill discussed the relationship between the Regulator and Council but it would be important to ensure the intended relationship was captured in the Bill itself.

Mr Mangcu appreciated that the intent of the Bill was for the Council to be independent, but questioned how genuinely independent it could be, given that its members would be appointed by the Minister of Transport. This was especially important as the oversight role of Parliament was currently being scrutinised at the Judicial Commission of Inquiry into Allegations of State Capture (the Zondo Commission). He recognised the intent to provide a “pre-court” means of resolving disputes, but felt that there was not enough in the Bill to protect the public from possible collusion between the Regulator and the Council.

Adv Nel suggested looking at legal precedents to strengthen the provisions for protecting the public.

Chapter 4 Establishment of Institutions
Part A: Transport Economic Regulator
Adv Nel recalled the public submissions on the qualifications and required experience of STER board members. She drew attention to the number of board members which was six not including the Chief Executive Officer. The term of appointment was four years for the CEO and five for non-executive board members. Clarity was needed on whether the term could be renewed indefinitely or only for a second term. A code of confidentiality for the Council could perhaps be incorporated into clause 40. Clause 43 was relevant to the question of the relationship between the Regulator and the Competition Commission (CC), in particular the question of what would happen if a person lodged a dispute with both at the same time.

Mr Sithole suggested reducing the term of board members to three years to reduce the risk of corruption, and increasing the number of board members to seven.

Mr Mangcu called on the Committee to be bold and insist on Parliament being involved in the appointment of the board. The mistake that had been made at the Passenger Rail Agency of South Africa (Prasa), where Parliament had played no role in board appointments must not be repeated. Instead, the Bill should follow the precedent of Section 13 of the Broadcasting Act where the SABC board was appointed by the President on the advice of the National Assembly. The Bill would have a huge impact on the ease and cost of doing business in South Africa and had already been highlighted by the President and the Minister of Finance.

On the frequency of board meetings in clause 30(12), Mr Mangcu noted that the entities of some boards met very frequently, at great expense, and called on Parliament to take charge of legislation to prevent this. Clauses 43(1)a, 43(2) and 45(1) which dealt with the relationship between the Regulator and the CC, needed to be clarified. For example, the Committee had been told that they had different jurisdictions, but clause 43(2)a allowed the Regulator to request the CC to consider questions of competition on its behalf. He wondered if clause 43(1)b on liaison with entities involved with safety was not misplaced, given that the Regulator was an economic and not a safety regulator.

Mr Chabangu wondered why board members were always senior citizens. Was it because of the need for experience, or was it to reward civil servants who had served with dignity? This might indicate the reason some entities were not performing optimally. Board members should be paid according to performance. If they did not perform in a given year they should not be paid.

Mr McDonald agreed on the need for Parliament to be involved in board appointments. He agreed on the need for clarity on the jurisdiction of the Regulator with respect to the CC. The way it was currently phrased, the CC would be doing the work of the Regulator. The Bill did not provide for the appointment of an interim board. What would happen if there was a vacancy?

The Chairperson asked the Department to comment on the mechanisms in place for mitigating job losses resulting from the transition to a single transport economic regulator.

Mr Sikhudo replied that the human resources plan would be part of the second phase of the transition. During the first phase, the board of the Ports Regulator would function as the board of the single regulator. He made some comments about board terms [01:49 inaudible]. DoT had however estimated that the number of employees in the initial stages (78) would be greater than the number currently employed at the entities that would be replaced (65). [Mr Sikhudo experienced a bad connection and parts of his contribution could not be heard].

Ms Gangen agreed with Mr Mangcu that clauses 43(2) and 45(1) did not make complete sense, notwithstanding the requirement of an agreement between the Regulator and CC on their relative jurisdictions. She agreed that the clauses on the appointment of the board could be amended to require that the Minister’s appointments were made in consultation with Parliament. The Bill did contain a clause dealing with board vacancies.

The Chairperson asked if the Committee agreed with amending the Bill to require the Minister to consult with Parliament on board appointments.

Mr T Mabhena (DA) wondered if the Bill should not perhaps make specific reference to the Portfolio Committee rather than referring to Parliament in general.

Mr Mangcu explained that he was not calling for the Minister to merely consult with Parliament, but for Parliament to invite and interview candidates and recommend board appointments to the President, according to the Broadcasting Act precedent.

Mr C Hunsinger (DA) added support for following the Broadcasting Act precedent. The Portfolio Committee should interview the candidates to ensure the independence of the board.

Ms Haricharan asked for time to get further instruction from the Department on the board appointment procedure, after which she could report back to the Committee.

Adv Nel noted that Section 13(1) of the Broadcasting Act directed the President to appoint the SABC board on the advice of the National Assembly, which was normal phrasing for statutory appointments. On the other hand none of the statutory board appointments currently made by the Minister of Transport required the input of Parliament, so it would be uncharted territory. Input from the State Law Advisor would be valuable given the importance of the Bill. She asked the Department to expand on its remarks made at the previous day's deliberations on the jurisdiction of the Regulator with respect to the CC.

Mr Sikhudo reported that the clauses dealing with the relationship of the Regulator and the CC had been extensively discussed by the Department with the CC. The latter had expressed satisfaction with the wording of the Bill. The view of the Department was that, while the CC would support the Regulator, it would not be involved in ex ante regulatory matters and it would focus on post facto economic regulation. This model had local and international precedents. He did agree that the relevant clauses could be clarified, however.

Part B: Transport Economic Council
Adv Nel drew attention to clause 46, according to which the Council was established as an organ of state but outside the public service. She requested clarity on whether it was advisable to require Council members to have experience in all of law, economics, accounting and the transportation industry, rather than just one, as it might not be easy to find candidates with experience in all these fields. Council members could be full-time or part-time appointees, unlike the STER board members who were all part-time, and their term could be renewed once. Clauses 48(2) and 48(3) would need to be amended if the Committee decided to allow the Council discretion on the holding of hearings, that 48(3)a required at least one member of the Council to have legal training, and that 48(4) was somewhat unusual insofar as it granted the Council discretion on whether a contested decision of the Regulator was suspended while the Council was considering the matter.

Mr Mangcu said that the definition of a “related” person in clause 31(2)c, referred to in clause 47(4), should be made specific, as was done in the Municipal and Public Finance Management Acts. Definitions of “office of trust” and “competent authority” in 31(2)(h) should be included in the Bill. Would this clause prevent a recently removed Prasa board member from becoming a Regulator or Council board member? Clause 48(3)a implied that at least one Council member had legal training. How would the Council chairperson ensure this?

Adv Nel said that clause 47(3) could be amended to ensure that at least one Council member had legal training. She sought the opinion of the Parliamentary Legal Advisor on the implications of replacing “and” with “or” in the list of required qualifications.

Ms Gangen replied that this could be looked at.

Mr Hunsinger asked if the fact that the Council was established outside the public service implied that it would fall outside the ambit of the Public Finance Management Act (PFMA). The “term” of a Council member should be defined, in case a Council member resigned immediately before the end of the contract and then became eligible for a new term. He asked what referrals were contemplated in clause 48(1) and by whom these referrals were made.

Mr McDonald was concerned that the Council would not be able to get through its work if many of its members were part-time appointees, and suggested that they all be appointed on a full-time basis.

Ms Gangen replied that this was an important point in light of the Council’s expected workload. She said that the PFMA would apply to the Council but undertook to double-check this.

Mr Sikhudo also thought that the PFMA would apply to the Council. He understood that the referrals contemplated in clause 48 were referrals by the Council to the Regulator, a complainant or an appellant. This clause should be read with clauses 16 and 19. He expected that the Council’s workload would not be high enough to justify a full complement of full-time staff at the initial stages [parts of Mr Sikhudo’s response were inaudible].

Mr McDonald recalled that the Department had claimed that there would not be job losses as a result of the transition to the single regulator. However, going from a full-time to a part-time position would affect employees financially.

Ms Haricharan drew attention to clause 1, where the definition of “related” referred to the definition in the Companies Act.

Mr Mangcu understood that the board of directors could be appointed in terms of the Companies Act, but could the Council be?

Adv Nel asked if the legal advisors could return to this question at the next meeting. She noted that full-time employment was not the same as permanent employment and this would need to be looked at. The point about the Council case load was valid. What was the case load of the current Ports Regulator Tribunal?

The Chairperson noted deliberations would continue at the next meeting and the meeting was adjourned.