1. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development South African Post Office SOC Ltd Bill Dept of Communications 07 September 2011 Select Committee on Labour & Public Enterprises 1

2. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development Introduction  The Department gave a presentation on the Bill to the Select Committee on Labour and Public Enterprises on 31 August 2011  The honourable Committee raised a number of questions for response today  The Department will endeavour to respond and clarify the relevant questions in this presentation 2

3. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development QUESTION 1  Is the Minister of Finance involved in any way in this Bill?  The Minister of Finance is referred to in the following clauses  Clause 3(5) The memorandum of incorporation of the Post Office must inter alia provide that the Post Office—  (b) shall not have the power to perform the following acts without the approval of the Minister granted after consultation with the Minister of Finance  (c) shall not issue any shares except as approved by the Minister after consultation with the Minister of Finance 3

4. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development QUESTION 1 CONTINUES  Clause 7(3) The payment of financial support is subject to the appropriation made by Parliament and must be for such purposes and periods and subject to such conditions as the Minister may determine, after consultation with the Minister of Finance.  Clause 7(4) (a) The Post Office and its subsidiaries may not borrow money without the prior written approval of the Minister, granted after consultation with the Minister of Finance. 4

5. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development QUESTION 1 CONTINUES  Clause 17(5) The chief executive officer, chief financial officer and chief operating officer are entitled to a remuneration package determined by the Board with the concurrence of the Minister, the Minister acting after consultation with the Minister of Finance  Clause 21(1) (a) The Board must determine the structure or organogram of the Post Office and the conditions of service, remuneration and service benefits of the personnel of the Post Office after consultation with the chief executive officer and with the concurrence of the Minister, the Minister acting after consultation with the Minister of Finance 5

6. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development QUESTION 1 CONTINUES  Clause 22(3)(b) The Minister may, subject to section 51(1) (g) of the Public Finance Management Act, after consideration of the feasibility study and business plan and after consultation with the Minister of Finance, approve the establishment of the subsidiary or revival of the dormant subsidiary, as the case may be  Clause 23(4)The Board must submit such other accounts, reports and statements as the Minister or the Minister of Finance, or both, may require. 6

7. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development QUESTION 2  Section 11(1)(b) refers to inviting trade unions to nominate non-executives of the Board. If there is more than one trade union, which trade union will be invited to submit names?  The Bill makes reference to recognised trade unions. Two trade unions are currently recognized, CWU and SAPWU. 7

8. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development QUESTION 3  Why does the Bill only refer to the National Assembly and not Parliament?  Three amendments were suggested by the Portfolio Committee on Communications that include a reference to the National Assembly i.e. the tabling of a feasibility study and business plan for new subsidiaries in clause 22(3)(c), the tabling of policies made by the Minister in clause 29(3)(b) and the tabling of the findings of an administrator appointed under clause 25. 8

9. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development QUESTION 4  Who has the power to change the Postbank into a private bank?  The ownership of the Postbank is determined in the South African Postbank Limited Act, 2010. The Post Office is the sole member and shareholder of the Postbank (s.3). Government, in turn is the sole member and shareholder of the Post Office. Any amendment of this position will have to be approved by the legislature, Parliament. 9

10. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development QUESTION 5  Why is the role of Parliament not clearly defined except in respect of annual reports?  The following role is given to Parliament in the Bill:  Clause 7: The payment of financial support to SAPO is subject to an appropriation approved by Parliament;  Clause 23(3): The Minister must table in Parliament the annual report and financial statements of the Post Office and its subsidiaries. 10

11. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development QUESTION 6  The Bill makes reference to the PFMA but the application of the PFMA is not clear? Does the Bill not contradict the PFMA on the role of Parliament in respect of financial oversight?  Clause 23(1) provides that the PFMA is applicable to the Post Office. Clause 23 then goes further by highlighting two provisions in the PFMA that are of particular importance i.e. section 52 on the submission of the annual budget and corporate plan and section 55 on the annual reporting on financial affairs. Section 3 of the PFMA provides that it prevails in the case of any inconsistency with another Act such as the current Bill. 11

12. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development QUESTION 6 CONTINUES  Clause 23(3)(a) of the Bill and section 55(3) of the PFMA that deal with the submission of annual reports and financial statements to Parliament are aligned and therefore there is no contradiction 12

13. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development QUESTION 7  Why does the Bill provide a 70% quorum in clause 14(1)(b) but then requires a resolution by 75% of members in clause 15(1) for certain decisions?  Section 14 of the Bill requires 70% of serving members to constitute a quorum at any meeting of the Board. A higher standard is set when it comes to delegation of the functions of the Board in clause 15. This requirement is necessary to ensure that the Board only delegate its powers and duties when a sufficient number of Board members, i.e. 75% of members, are present. SAPO also raised this concern before but the 75% as suggested by the PCC was ultimately approved 13

14. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development QUESTION 8  Why does the Bill provide for approval by the Minister when the Board appoints executive members of the Board in clause 16(1) but only requires concurrence when terminating such employment in clause 18(1)?  Concurrence means ‘to agree’ or approve, and therefore both clauses require approval of the Minister. 14

15. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development QUESTION 9  What was the rationale for changing the title of the Bill to South African Post Office SOC Ltd Bill?  The South African Post Office is a public company and therefore its name includes the word ‘Limited’. The Bill should have been introduced with the word ‘Limited’ in the title. This oversight was corrected after introduction into Parliament 15

16. QUESTION 10  The Postbank Act involves the Minister of Finance extensively. Is such a role for the Minister of Finance necessary in this Bill since it seems to be micromanagement?  The Postbank Act and matters affecting the Postbank may result in significant financial implications for the State. The approval of the Minister of Finance is necessary in a number of respects in that Act. The current Bill does not require the same standard and in a number of respects only require consultation with the Minister of Finance. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development 16

17. QUESTION 11  How was the consultation process on the Bill conducted?  Members of the public were invited to partake in the public consultations through electronic and print media. Advertisements were placed in the national newspapers. Radio stations were also used in this regard.  Provinces visited include the Free State; Bloemfontein; Western Cape, Gugulethu; Kwa-Zulu Natal, Mtubatuba; North West, Mafikeng; Eastern Cape, NewBrighton; Limpopo,Polokwane and Mpumalanga, Mbangwane Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development 17

18. QUESTION 11 CONTINUES  The stakeholders consulted include: South Africa Post Office Limited (SAPO), National Treasury, Industrial Strategy Focus Group, Department of Cooperative Governance and Traditional Affairs, Government Communication and Information System (GCIS), Department of Trade and Industry (DTI), Department of Public Enterprises (DPE), Department of Social Development (DSD), Department of Science and Technology (DST), Independent Communications Authority of South Africa (ICASA), Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development 18

19. QUESTION 11 CONTINUES  South African Social Security Agency (SASSA), all nine provincial departments of local government, Communications Workers Union, National House of Traditional Leaders, Eastern Cape House of Traditional Leaders, North West House of Traditional Leaders Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development 19

20. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development QUESTION 12  What is the relationship between SAPO as the holding company and the Postbank as subsidiary, how autonomous is the subsidiary?  The new Companies Act defines a group of companies as two or more companies that share a holding company or subsidiary relationship. A holding company in relation to the subsidiary is defined as a juristic person or undertaking that controls a subsidiary. Therefore the determination of whether a company is a holding company depends on one of the following:  the ability of the holding company to directly or indirectly exercise, or control the exercise of, a majority of the general voting rights at a general meeting, or 20

21. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development QUESTION 12 CONTINUES  the right to appoint or elect, or control the appointment or election of, directors of that company who would control a majority of the votes at a board meeting, or  all the general voting rights associated with issued securities of the company are held or controlled by persons contemplated in (1) and (2)  Subsidiaries are separate, distinct legal entities  The Post Office is the sole member and shareholder of the Postbank (s.3 of the Postbank Act, 2010). The Postbank is controlled by its own Board. The Board is appointed by the Minister with the approval of the Minister of Finance and the Post Office. 21

22. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development QUESTION 12 CONTINUES  The Postbank will therefore qualify as a subsidiary under the Companies Act. The Postbank Act and the SAPO Bill also state the holding company - subsidiary relationship  In terms of company law, a subsidiary reports to its holding company. The Postbank Act however provides specific responsibilities of the Postbank towards the Minister such as –  notification to Minister of anything materially affecting Postbank (s. 11 (d)(e));  provision of the Annual report (s. 21);  right to inspect financial and other documents (s. 23); 22

23. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development QUESTION 12 CONTINUES  intervention by Minister (s.25);  regulations (s. 26).  These are only limited provisions in line with the Minister’s oversight responsibility.  The Postbank Act applies in parallel with company law and the Protocol on Corporate Governance in the Public Sector.  The following requirements in the Protocol on Corporate Governance in the Public Sector are relevant:  “Paragraph 15.1.15.2 The directors of a wholly owned SOE are required to keep the Executive Authority informed of the operations of the SOE and its subsidiaries, 23

24. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development QUESTION 12 CONTINUES  and to give the Executive Authority such information in relation to those operations as the Executive Authority may require from time to time,…”  “Par 5.2.5.4 Subsidiaries should submit a separate budget”  “Par 5.2.5.8 Cognisance should be taken of, inter alia, the following issues in the development of the Corporate Plan: if the SOE has subsidiaries, the plan should cover both the SOE and its subsidiaries.”  “Par 5.2.13.4. The annual report and the financial statement of the SOE must:…. include particulars of:…..a financial statement of any subsidiaries;” 24

25. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development QUESTION 12 CONTINUES  “Par 5.2.13.5. Financial statements of SOEs and their subsidiaries or interim reports, must be audited, or reported on, by the Auditor-General….”  Therefore, the holding and subsidiary companies are separate, distinct legal entities. The Postbank is autonomous in that sense. However autonomy is affected by for example the ability of the holding company to directly or indirectly exercise, or control the exercise of, a majority of the general voting rights at a general meeting, or the right to appoint or elect, or control the appointment or election of, directors of that company who would control a majority of the votes at a board meeting 25

26. Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development THANK YOU 26