HOFMEYR HERBSTEIN & GIHWALA INC

PRIVATES CONFIDENTIAL

BY HAND

Dear Sir

PUBLIC INVESTMENT CORPORATION BILL ("the Bill"): OBJECTIONS BY

CONGRESS OF SOUTH AFRICAN TRADE UNIONS ("Cosatu")

  1. 1 We refer to our telephonic conversation of 2 August 2004 and your request for a legal opinion on the above, which we hereby provide.
  2. We summarise the questions for consideration as follows:

2.1 Cosatu, in its submission to the Portfolio Committee on Finance, raised a number of objections to the proposed Bill;

2.2 one of the objections was based on the contention that the Bill should have been presented to the National Economic, Development and Labour Council (NEDLAC) for its consideration:

2.3 the fact that the Bill was not so presented to NEDLAC results, according to Cosatu, in the process followed being flawed.

  1. The questions therefore are:
  2. 3.1 is it required that the Bill should have been referred to Nedlac for its consideration:

    3.2 if so, how does it affect the Bill?

     

    NATIONAL ECONOMIC, DEVELOPMENT AND LABOUR COUNCIL ACT, 35 OF

    1994 ("THE NEDLAC ACT")

  3. The Nedlac Act provides, inter alia, for the establishment of a consultative body.
  4. NEDLAC, membership of Nedlac, the objects, powers and functions of Nedlac and the powers and duties of the executive council of NEDLAC.

  5. Clause 5 of the NEDLAC Act provides as follows:
  6. "5(1) The Council shall -

    (a)

    (b) seek to reach consensus and conclude agreements on matters pertaining to social and economic policy;

    (c) consider all proposed labour legislation relating to labour market policy before it is introduced in Parliament;

    (d) consider all significant changes to social and economic policy before it is implemented or introduced in Parliament;

    (e) ..."

  7. In turn, "socio and economic policy" is defined as including "financial, fiscal and monetary policy, socio-economic programmes, trade and industrial policy, reconstruction and development programmes and all aspects of labour market policy, including training and human resource development;".
  8. In short, the Nedlac Act requires the Nedlac Council to, inter alia, "reach consensus" on matters pertaining to social and economic policy and to "consider" all proposed labour legislation and significant changes to social and economic policy before it is implemented or introduced in Parliament, (our emphasis) The Nedlac Act specifically does not require Nedlac to approve the matters on which it is required to reach consensus or to consider. The legislation simply requires the Nedlac Council to perform its functions as a consultative body, representative of stakeholders from business, labour and community organisations. Furthermore, the Nedlac Act also does not provide a clear (or any) sanction if its provisions are not complied with.
  9. The Constitution of the Republic of South Africa, Act 108 of 1996 ("the Constitution") clearly vests the legislative authority of the national sphere of Government in Parliament. Therefore, no other body, other than Parliament, has the Constitutional prerogative to enact legislation. Nedlac, merely a consultative body, does not have the constitutional authority to either enact legislation or to prohibit the enactment of specific legislation.
  10. The issue for consideration is whether the Bill:

9.1 is a matter "pertaining to social and economic policy on which Nedlac is to reach consensus or conclude agreement;

9.2 falls within the definition of "labour legislation" relating to labour market policy"; or

9.3 will effect "changes to social and economic policy" before it is implemented or introduced in Parliament.

  1. We submit that on the proper construction of section 5(1) of the Nedlac Act, the Bill does not meet any of the abovementioned three requirements for matters to be considered by the Nedlac Council.
  2. The Bill does not deal with social and economic policy matters; it relates to an administrative function of Government. In Akani Garden Route (Pty) Ltd vs Pinnacle Point Casino (Pty) Ltd 2001(4) SA501 (a decision of the Supreme Court of Appeal) the Court considered, inter alia, the meaning of the word "policy". It was held that the word "policy" was inherently vague and to draw a distinction between what was and what was not policy with reference to a degree of specificity was not always helpful or necessarily correct. The Court went further and held that "laws, regulations and rules are legislative instruments, whereas policy determinations are not". We submit that, taking into account the principles established in the aforementioned case, the Bill does not deal with policy matters.
  3. The Bill does not in any way affect a policy change, whether of a social and economic nature or any other nature. It merely seeks to improve an existing administrative function of Government short of effecting policy changes relating to how those activities are conducted. The fact that a new legal entity is incorporated and that the activities of the PIC will be subject to regulation by, inter alia, the Financial Services Board, etc. does not amount to a policy change. In any event, it certainly does not amount to a policy change in respect of social and economic matters.
  4. Section 5(1)(c) and (d) of the Nedlac Act contemplates the consideration by Nedlac of respectively, labour legislation and changes to social and economic policy "before it is ... introduced in Parliament". The Bill, having already been published for public comment and being under consideration by the Committee, also does not meet this requirement that matters be considered by Nedlac before it is introduced in Parliament (albeit that the Bill, in any event, does not meet the requirements of the section on other grounds mentioned above).

CONCLUSION

  1. We therefore submit that the Bill, in its current form:

14.1 is not required to be submitted to Nedlac for its consideration "before it is introduced in Parliament";

14.2 does not pertain to or effect changes to social and economic policy (as defined); and

14.3 being already under consideration by the National Assembly (in the form of its Portfolio Committee on Finance) cannot at this stage be referred to Nedlac, Parliament being vested with the Constitutional authority to enact legislation.

15 We trust you find the above of assistance.

Yours faithfully

BADIAN MAASDORP & BANZI MALINGA

HOFMEYR HERBSTEIN & GIHWALA INC

(Established in 1926)

21st Floor, 2 Long Street, Cape Town, 8001, South Africa

PO Box 1221, Cape Town, 8000, South Africa

Telephone: (021) 405-6000 International +27 21 405-6000

Docex 39 Cape Town

E-mail: info@hofmeyr.com http://www.hofmeyr.com

Our Reference BCMAASDORP/KDY4465


Mr Brian Molefe

Chief Executive Officer

Public Investment Commissioners