South African Postbank Bill [B14-2010] (DOC and NT) 24 August 2010 PCC Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Delegation DOC Team Willie Vukela : Director Alf Wiltz : Director Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Delegation National Treasury Team Omega Shelembe : Acting Chief Director Jeanine Bednar-Giyose : Director Alvinah Thela Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Background During its informal deliberations on the 17 August 2010, the PCC further raised the following issues to be included in the Bill, ie. Lending, borrowing and investment powers of the Bank must be clearly provided for throughout the Act such as in the Objects of Act, Powers and duties, Funds of Company etc Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Background Postbank needs to be further differentiated from commercial bank The Bill must be revised to ensure that the Company will cater for the poor Ministerial power to intervene required The Minister’s policy making power must be subject to public consultation, concurrence of the Minister of Finance and involvement of the National Assembly Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Definition A definition has been inserted for family member due to its use in clause 16. "family member" in relation to any person, means his or her parent, siblings, child, including an adopted child, or spouse (whether by statutory, customary or religious law), including a person living with that person as if they were married to each other Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Definition The definition of “business of a bank” has been re-inserted since it is used in clause 2(a). This amendment follows the concession by National Treasury that reference to the Banks Act is in order at this stage Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Object of the Act Clause 2(a) has been amended to replace “banking business” with “the business of a bank”. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Object of the Act “2. The object of this Act is to provide for the incorporation of the Postbank Division of the Post Office as a legal person with the aim of— (a) conducting the business of a bank that will encourage and attract savings amongst the people of the Republic;” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Lending Clause 4(4) has been further amended to change the requirement that the Company shall not “expand its current business activities” until it is registered as a bank It now provides that the Company shall not “expand the scope of its banking activities” until it is registered as a bank The former wording may prevent the Postbank from expanding ordinary business that is not intended Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Lending A new clause 2(f) on the object has been inserted to specifically provide that the aim of the Postbank includes lending to rural and lower income markets Wording for 2(f) ensuring lending to rural and lower income markets Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Lending A new clause 9(4) has been inserted to provide that the Company may only lend in accordance with policy determined by the Minister in terms of section 25(2) (re-numbered as 26(2)) 9(4) The Company may only lend in accordance with policy determined by the Minister in terms of section 26(2). Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Borrowing A new clause 9(1)(h) has been inserted to ensure that the Postbank can only borrow money subject to the approval of the Minister, with the concurrence of the Minister of Finance 9(1)(h) borrow money other than for temporary interbank borrowing, subject to the approval of the Minister, with the concurrence of the Minister of Finance Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Investment Clause 9(1)(e) has been amended to ensure that the Postbank can only invest money in accordance with an investment policy approved by the Minister, with the concurrence of the Minister of Finance. 9(1)(e) subject to section 4(6), invest money in accordance with an investment policy approved by the Minister, with the concurrence of the Minister of Finance Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Investment Investing money has also been made subject to the new clause 4(6) that provides that the Postbank shall only invest the money deposited with it in liquid assets, as defined in the Banks Act, until such time that the Company is registered as a bank Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Investment Clause 4(6) 4(6) Until such time that the Company is registered as a bank, the Company shall invest the money deposited with it in liquid assets only, as defined in the Banks Act Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Amendment Differentiation from commercial bank In addition to the existing provisions in clause 2 that differentiate the Postbank from commercial banks, a new clause 2(f) has been inserted to specifically provide that the aim of the Postbank includes lending to rural and lower income markets Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Amendment The Minister’s policy making power must be subject to public consultation for a period of at least 60 days, concurrence of the Minister of Finance  and involvement of the National Assembly- The amendment has been made to clause 25(2) (re- numbered 26(2)) Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Amendment The new clause ensures that the public is consulted through a notice and comment procedure in the gazette, for at least 60 days The concurrence of the Minister of Finance is required and the policy must be submitted to the National Assembly The final policy should then be gazetted Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Amendment The new clause 25(2)(b) as previously proposed, which provides that any decision taken by the Board which is in conflict with a policy made by the Minister is of no force and effect, has been moved to clause 9(3)(b) Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Amendment Ministerial power to intervene required To enable intervention by the Minister, a new clause 25 has been inserted Clauses 26 to 30 were subsequently renumbered and cross-references corrected Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Intervention by Minister 25 (1) The Minister may, with the concurrence of the Minister of Finance, direct the Company to take any action specified by the Minister if the Company— (a) is being mismanaged; (b) fails to perform its functions effectively or efficiently (c) has acted unfairly or in a discriminatory or inequitable way towards a person to whom it owes a duty under this Act; or (d) has failed to comply with any law. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Intervention by Minister (2) A directive contemplated in subsection (1) must state— (a) the nature of the deficiency; (b) the steps which must be taken to remedy the situation; and (c) a reasonable period within which the steps contemplated in paragraph (b) must be taken Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Intervention by Minister (3) If the Company fails to remedy the situation within the stated period, the Minister may, with the concurrence of the Minister of Finance— (a) after having given the Company a reasonable opportunity to be heard; and Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Intervention by Minister (b) after having afforded the Company a hearing on any submissions received, replace the members of the Board in the same manner as the departing members have been appointed or, where circumstances so require, appoint a person as an administrator to take over the relevant function of the Company. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Intervention by Minister (4) If the Minister appoints an administrator in terms of subsection (3)— (a) the administrator may do anything which the Company might otherwise be empowered or required to do by or under this Act, to the exclusion of the Company; (b) the Board may not, while the administrator is responsible for the relevant function, exercise any of its powers or perform any of its duties relating to that function; Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Intervention by Minister (c) an employee or a contractor of the Company must comply with a directive given by the administrator (5) Once the Minister is satisfied that the Company is able to perform its functions effectively, the Minister must terminate the appointment of the administrator Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Intervention by Minister (6) (a) Notwithstanding subsection (3), the Minister may dissolve the Board if the Minister, on good cause shown, looses confidence in the ability of the Board to perform its functions effectively and efficiently. (b) The Minister may exercise the power only— (i) after having given the Board a reasonable opportunity to be heard; and (ii) after having afforded the Board a hearing on any submissions received. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Intervention by Minister (c) If the Minister dissolves the Board, the Minister— (i) may appoint an administrator to take over the functions of the Board and to do anything which the Board might otherwise be empowered or required to do by or under this Act, subject to such conditions as the Minister may determine; and (ii) must, as soon as it is feasible but not later than three months after the dissolution of the Board, replace the members of the Board in the same way as they were appointed. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Intervention by Minister (7) The costs associated with the appointment of an administrator shall be for the account of the Company Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 3 Incorporation Section 32 of the Companies Act provides that a public company must at least have seven members while the Postbank will have only one i.e. the Post Office. At the same time section 37 of the Banks Act provides that a shareholder in a bank cannot hold more than 15% of the shares, while SAPO will be the sole shareholder in the Postbank. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 3 Incorporation The PCC therefore at the request of the Post Office, agreed to include the following wording at the beginning of clause 3(2) “Notwithstanding section 32 of the Companies Act and section 37 of the Banks Act, the Post Office shall, upon incorporation of the Company, be the sole member and shareholder of the Company.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 4 Registration as Bank Clause 4(1) and 4(2) have been amended and is now the same as initially introduced in Parliament. Clause 4(3) has been amended to remove the reference to “other applicable legislation”, being the indirect reference to the Dedicated Banks Bill that is not necessary anymore. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 4 Registration as Bank “4(1) Notwithstanding section 15 of the Banks Act, the Company must be regarded as having been authorised to form a company in terms of the Companies Act. (2) The Company must be registered as a bank after it has satisfied the requirements of the Banks Act.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 4 Registration as Bank (3) Notwithstanding section 43 of the Banks Act, the Post Office is not required to register as a controlling company of the Company, and the appointment of the Board of the Post Office is not subject to the approval of the Registrar of Banks Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

New Clause 4(4)- 4(6) Registration as Bank New clauses 4(4) to 4(6) as recommended by NT have been inserted as follows:- “4(4) The Company shall not expand its current business activities until it is registered as a bank in terms of the Banks Act, and any such additional business activity is approved by the Registrar of Banks.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

New Clause 4(4)- 4(6) Registration as Bank “4(5) In approving any additional business activity as contemplated in subsection (4), the Registrar of Banks shall take into account the objects of this Act and any policy made by the Minister in terms of section 26(2). 4(6) Until such time that the Company is registered as a bank, the Company shall invest the money deposited with it in liquid assets only, as defined in the Banks Act.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

New Clause 4(4)- 4(6) Registration as Bank The wording “expand its current business activities” in clause 4(4) have subsequently been changed to “expand the scope of its current banking activities”. The reference to clause 25(2) has also changed to 26(2) due to re-numbering Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 8 Exemption from tax liability Clause 8 titled “Value of business of former Postbank for purposes of finance laws” has been deleted in its entirety. It has been replaced by a new clause titled “Exemption from tax liability”. It now provides that “The transfer of the business of the former Postbank, referred to in section 7, attracts no tax liability of whatever nature.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 12 Composition of Board Clause 12(3) has been amended to insert “non-executive” in sub-clause (a) and (b). A new sub-clause 12(3)(c) has been added to provide for continuity in the Board as follows:- “12(3)(c) The Minister must appoint at least five members of the first Board of the Company for a period not exceeding three years.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 13 Persons disqualified from membership of Board The following sub-clause 13(1)(g) has been added:- “13(1) No person may be appointed as a Board member or remain a member of the Board if he or she —(g) has any direct or indirect interest which could reasonably be expected to compromise the Board in the performance of its functions.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 13 Persons disqualified from membership of Board The following sub-clause 13(2) has been added:- “(2) A person who is subject to a disqualification contemplated in subsection 13(1)(a), 13(1)(b) or 13(1)(g) may be nominated for appointment as a Board member, but may only be appointed if at the time of such appointment he or she is no longer subject to that disqualification.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 14 Appointment of members of Board Clause 14 has been amended by the addition of sub-clause 14(8)(b) to provide for the filling of vacancies occurring in the Board and the period that a member appointed to fill a vacancy holds office, as follows:- “14(8)(b)  Any member appointed under this subsection holds office for the rest of the period of the predecessor’s term of office, unless the Minister directs that such member holds office for a longer period which may not exceed one subsequent term of up to five years.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 15 Resignation, removal from office and vacating of office Clause 15(2)(d) has been amended to replace the reference to “applicable legislation” with the “Banks Act” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 15 Resignation, removal from office and vacating of office 15(2)(d) the Registrar of Banks has, after complying with relevant provisions in the Banks Act providing for the removal of such a board member, informed the Minister that the member is no longer a fit and proper person to hold that appointment, or that it is not in the public interest that such member of the Board continues to hold such appointment; Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Interests of Board members The PCC has requested that members’ interest must be catered for to ensure the following:- disqualification if a member has a direct or indirect interest which could reasonably be expected to compromise the Board (new clause 13(1)(g)); 13(1)(g) has any direct or indirect interest which could reasonably be expected to compromise the Board in the performance of its functions. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Interests of Board members prohibition on doing business with Company (clause 16(1)(d));- 16(1)(d) a member of the Board or an organisation or enterprise in which a member of the Board has an interest contemplated in this section may not offer its goods or services to the Company or conclude any business with the Company. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Interests of Board members may not attend meetings of Board in which that member has an interest (clause 16(1)(b)) 16(1)(b) a member of the Board may not be present, or take part in, the discussion of or the taking of a decision on any matter before the Board in which that member or his or her family member, life partner, business partner or associate has a direct or indirect [financial] interest; Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Interests of Board members “Financial interest” has been amended to “any interest” in clauses 13(1)(g), 14(4)(e) and 16(1)(a),(b) and (d) respectively. 13(1)(g) has any direct or indirect interest which could reasonably be expected to compromise the Board in the performance of its functions Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Interests of Board members 14(4)(e) whether that candidate has any direct or indirect interest which could reasonably be expected to compromise the Board in the performance of its functions Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Interests of Board members 16(1)(a) A member of the Board must, upon appointment, submit to the Minister and the Board a written statement in which it is declared whether or not that member has any direct or indirect [financial] interest which could reasonably be expected to compromise the Board in the performance of its functions Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Interests of Board members 16(1)(b) a member of the Board may not be present, or take part in, the discussion of or the taking of a decision on any matter before the Board in which that member or his or her family member, life partner, business partner or associate has a direct or indirect [financial] interest Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Interests of Board members 16(1)(d) a member of the Board or an organisation or enterprise in which a member of the Board has an interest contemplated in this section may not offer its goods or services to the Company or conclude any business with the Company Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Criminalise the fiduciary duties Clause 16(2) has been amended after further discussion with National Treasury and SAPO in accordance with the presentation by the DoC on 17 August 2010, therefore only criminalising the fiduciary duties in clause 16(1)(a), (1)(b), (1)(c), (1)(e)(viii) and (1)(e)(ix). NT subsequently agreed with the DoC and SAPO to only criminalise the fiduciary duties referred to above Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Criminalise the fiduciary duties Clause 16(1)(a) A member of the Board must, upon appointment, submit to the Minister and the Board a written statement in which it is declared whether or not that member has any direct or indirect financial interest which could reasonably be expected to compromise the Board in the performance of its functions Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Criminalise the fiduciary duties Clause 16(1)(b) a member of the Board may not be present, or take part in, the discussion of or the taking of a decision on any matter before the Board in which that member or his or her family member, life partner, business partner or associate has a direct or indirect financial interest Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Criminalise the fiduciary duties Clause 16(1)(c) if a member of the Board acquires an interest that could reasonably be expected to be an interest contemplated in this section, he or she must immediately in writing declare that fact to the Board Clause 16(1)(e)(viii) not make improper use of his or her position as a member or of information acquired by virtue of his or her position as a member Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Criminalise the fiduciary duties Clause 16 (1)(e)(ix) treat any confidential matters relating to the Company, obtained in his or her capacity as a Board member, as strictly confidential and not divulge them to anyone without the authority of the Company or as required as part of that person’s official functions as a member of the Board. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 17 Procedures at meetings and committees of Board The heading of clause 17 has been amended to “Procedures at meetings and committees of Board” A new clause 17(1) has been inserted to provide that – “(a) The Board determines its procedures at meetings. (b) Seventy percent of serving members of the Board constitutes a quorum at any meeting of the Board. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 17 Procedures at meetings and committees of Board (c) a decision taken by the Board or an act performed under that decision is not invalid merely by reason of— (i) any irregularity in the appointment of a member; (ii) a vacancy in the Board; or Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 17 Procedures at meetings and committees of Board (iii) the fact that any person not entitled to sit as a member sat as such at the time when the decision was taken, provided such decision was taken by a majority of the members present at the time and entitled so to sit, and those members at the time constituted a quorum.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 20 Personnel of Company Clause 20(2) has been amended as follows:- “The Board must determine the structure/ organogram, conditions of service, remuneration and service benefits of the personnel of the Company after consultation with the managing director and with the concurrence of the Minister and the Minister of Finance.” Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 25 Regulations and Policy Subsequently renumbered 26 Clause 25(2) has been amended to require Cabinet approval of policies made by the Minister. Further amendments were, however, subsequently made to ensure public consultation, concurrence of the Minister of Finance and referral to the National Assembly. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 25 Regulations and Policy (2)The Minister may make policies on matters of national policy applicable to the Company, consistent with the objects of this Act. (3) When making a policy under subsection (2) the Minister must— (a) obtain the views of interested persons; (b) obtain the concurrence of the Minister of Finance; Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 25 Regulations and Policy (c) submit the policy to the National Assembly; and (d) publish a final version of the policy in the Gazette. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 25 Regulations and Policy (4) The Minister must, for the purposes subsection (3)(a), publish the text of the proposed policy by notice in the Gazette, together with a notice— (i) declaring his or her intention to issue the policy; (ii) inviting interested persons to submit written submissions in relation to the policy in the manner specified in such notice in not less than 60 calendar days from the date of the notice; Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Clause 25 Regulations and Policy (5) Subsection (3)(a) does not apply in respect of any amendment by the Minister of a policy contemplated in subsection (2) as a result of— (a) representations received and reviewed by him or her after publication in terms of subsection (4); or (b) consultation with the Minister of Finance in terms of subsection (3)(b). Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

Transitional provisions Clause 28(b)(renumbered 29) has been reworded to remove the requirement that the Postbank must be regarded as a legal person until it is registered as a bank. This is not necessary since the Postbank will remain a unit of the Post Office until it is corporatized Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development

THANK YOU Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development