SOME TECHNICAL COMMENTS BY NATIONAL TREASURY
The proposed definition of ownership control needs to be reduced, by roving sub-point (b) on the appointment or removal of the CEO – given that this is the decision of the Board, it does not fit into the ownership control definition. This specific clause only applies to SARS, where the Commissioner has the powers rather than the Board of SARS, given the nature of the Receiver of Revenue.
A second recommendation is to change the name of the concept from "ownership control" to "effective control" as the definition of "ownership control" will differ in the PFMA and MFM Bill, and some clauses in the MFM Bill will refer to ownership control for an entity shared with the national and provincial organs of state.
Consequential amendments are necessary, as for eg, in clause 86D. However, in s86D, it is proposed that we be clearer about the fact that the private sector may have a minority share in the municipal entity – the proposed new wording does this in a very indirect way.
1. On page 2, in line 29, to omit paragraph (h) and to substitute:
(h) the substitution for the definition of "ownership control" of the following definition:
"effective control’, in relation to a private company, means the power of a shareholder in the company –
(a) to appoint or remove at least the majority of the board of directors of the company; or
(b) to control at least the majority of the voting rights at a general meeting of the company;".
2. On page 3, in line 13, to omit paragraph (g) and to substitute:
(g) the insertion after the definition of "ownership control" of the following definition:
" ‘parent municipality’ –
(a) in relation to a municipal entity which is a private company [wholly owned by] in respect of which effective control vests in a single municipality, means [the] that municipality [which wholly owns the entity];
(b) in relation to a municipal entity which is a private company [owned by more than one municipality or by one or more municipalities and one or more national or provincial organs of state] in respect of which effective control vests in two or more municipalities collectively, means [the municipality which has an interest in the company] each of those municipalities;
(c) in relation to a municipal entity which is a service utility, means the municipality which established the entity; or
(d) in relation to a municipal entity which is a multi-jurisdictional service utility, means each municipality which is a party to the agreement establishing the service utility;";
1. On page 11, in line 32, to omit subsection (2) and to substitute:
"(2) A municipality may in terms of subsection (1) (a) or (b) either acquire or hold full ownership of a company or acquire or hold a lesser interest in a company. A municipality may [only] acquire or hold [an] such a lesser interest in a private company [in terms of subsection (1)] only if –
(a) all the other interests are held by—
(i) another municipality or municipalities; [or]
(ii) a national or provincial organ of state or organs of state; or
(iii) any combination of institutions referred to in subparagraphs (i) and (ii).
(2A) A municipality may, despite subsection (2), acquire or hold
an interest in a private company in which an investor other than
another municipality or a national or provincial organ of state has an interest, but only if effective control in the company vests in that municipality, in another municipality or in that municipality and another municipality collectively.
Adv Grove believes that there are serious technical difficulties as the current scope of clause 9 is very broad. He will raise this issue in the Committee. It is also proposed that we cross-reference to the assignment provision now in the FFC Bill, particulary in clause 4.
1. On page 4, in line 46, to omit clause 3 and to substitute:
(a) comply with section …..of the Financial Fiscal Commission Act,…….; and
(b) submit to the Minister and the National Treasury a memorandum –
(i) giving at least a three year projection of the financial implications of that function or power for the municipality; and
(ii) disclosing any possible financial liabilities or risks after the three year period; and
D)_ ISSUE NO 4: TECHNICAL CORRECTIONS TO CLAUSE 86B (2) & (3)
Wording needs to be clearer for these 2 sub-clauses on allowed corporate entities
E) Does section 46(!)(c) make sense for annual performance reports, given that it will only be published 6 months into the following year. In any case, the info requested is tabled in the annual budget.