SONNENBERG HOFFMANN GALOMBIK
THE PORTFOLIO COMMITTEE ON FINANCE, PARLIAMENT OF THE RSA
THE PUBLIC INVESTMENTS CORPORATION BILL
Our Consultant if the Portfolio Committee on Finance of the Parliament of South Africa. The Portfolio Committee is currently debating the Public Investment Corporation Bill [B6-2004] as published in Government Gazette No. 26383 of 20 May 2004 ("the Bill"). We are instructed that the Congress of South African Trade Unions (COSATU) has, in a submission to the Portfolio Committee, objected to, inter alia, the legislative process that has been followed in the drafting process and in submitting the Bill to Parliament. COSATU submits, inter alia, that the Bill should have been tabled and considered at the National Economic, Development and Labour Counsel ("NEDLAC"). Consultant seeks our opinion on the following two questions:
- Does the PIC Bill represent something that should have been referred to NEDLAC in terms of the NEDLAC Act, Act 35 of 1994?
- If the answer is yes, what should Parliament do now that it has been presented with this Bill that has not first gone to NEDLAC?
Aims and Objectives of the PIC Bill
The object of the Bill is to establish a statutory corporation to be known as the Public Investment Corporation Ltd.
The Corporation will be registered as a financial services provider in terms of the Financial Advisory and Intermediary Service Act, Act No 37 of 2002 ("the FAIS Act"). The corporation will manage deposits received from government and other public institutions as well as money received from any other persons. The board of directors of the corporation will determine all policies and investment guidelines of the corporation.
The corporation is designed to replace the functions of the Public Investment Commissioners ("the Commissioners") who were appointed in terms of section 2 of the Public Investment Commissioners Act, Act No 45 of 1984 ("the PICA"). The Commissioners are responsible for the investment of certain monies received or held by, for or on behalf of the government and certain bodies, councils, funds and accounts. In the explanatory memorandum to the Bill, it is stated that PICA does not provide for the creation of any juristic body and the activities of the Commissioners are therefore curtailed.
The Public Investment Commissioners Act (Act No 45 of 1984)
In terms of section 2 of PICA, there must be not less than 3 Commissioners who are appointed by the Minister of Finance. The Commissioners are enjoined to invest amounts of money received or held by the government and other public bodies in a number of ways. One of these is any investment "which promotes social responsibility and infrastructure development", not exceeding 3,5% of the value of the assets as reflected from time to time in the audited financial statements of the Commissioners.
The Bill provides for the transfer of the rights, obligations and assets of the Commissioners to the corporation. It appears, though, that the legislative intent is to replace the vehicle for the investment of deposits received or held by, for or on behalf of the government; but not to change the policy of investment as outlined in PICA.
COSATU has outlined a number of objections to the Bill in its submission to the Portfolio Committee dated 25 June 2004. We are not instructed to provide an opinion on the substantive objections raised by COSATU, but only on the process objections as outlined above.
COSATU expresses its concern that the Bill was tabled at NEDLAC.
COSATU also expresses its concern about the timing of the tabling of the Bill. According to the COSATU submission, it occurs at a time when consensus is being reached at NEDLAC with regard to a conference of the trustees of Pension and Provident Funds to discuss the various challenges facing those Funds – including the Government Employees Pension Fund (GEPF), which is one of the Commissioners’ major clients.
COSATU also raises its concern that there is scant information as to how the investment policy of the corporation will be determined.
Apart from the substantive issues raised, the COSATU submission does not set out in any detail why the Bill should, according to it, have been referred to NEDLAC. The submission seems to be centred mainly around its concern as to the administration of the GEPF; and its "ongoing concern regarding the National Treasury’s lack of appreciating the need for rigorous debate of proposed legislation and inclusivity of stakeholders in the formulation of policy and legislation."
The Legislative Framework : The NEDLAC Act
The National Economic, Development and Labour Council Act (Act No 35 of 1994) ("the NEDLAC Act") sets out the objects, powers and functions of NEDLAC in section 5. The section is peremptory and enjoins NEDLAC to:
- strive to promote the goals of economic growth, participation in economic decision making and social equity;
- seek to reach consensus and conclude agreements on matters pertaining to social and economic policy;
- consider all proposed labour legislation relating to labour market policy before it is introduced in Parliament;
- consider all significant changes to social and economic policy before it is implemented or introduced in Parliament;
- encourage and promote the formulation of co-ordinated policy on social and economic matters.
- For the purposes of section 5(1), NEDLAC must, inter alia, continually evaluate the effectiveness of legislation and policy affecting social and economic policy; and it must work in close co-operation with departments of state, statutory bodies, programmes and other forums and non-governmental agencies engaged in the formulation and the implementation of social and economic policy.
- The definition of "social and economic policy" becomes important for the present discussion. The NEDLAC Act defines "socio and economic policy" (sic) to include "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."
- NEDLAC has four chambers, namely the labour market chamber, the trade and industry chamber, the development chamber and the public finance and monetary policy chamber. The public finance and monetary policy chamber considers "issues pertaining to the framework within which financial, fiscal, monetary and exchange rate policies are formulated; the co-ordination of fiscal and monetary policy, and related elements of macro-economic policy; and the associated institutions of delivery."
- The scope of NEDLAC is extremely broad, covering all relevant areas of social and economic policy. "Hence, NEDLAC is seen as the primary forum for reaching negotiated agreement on general socio economic policy between business, labour and capital.
- As outlined above, the scope of NEDLAC is extremely broad. COSATU may, therefore, be able to argue succinctly that:
- The Bill will affect socio-economic policy, at least insofar as the board of directors of the corporation must determine all policies and investment guidelines of the corporation, including the investment of GEPF money;
- Substantial issues surrounding the investment of GEPF money has been debated in NEDLAC, and the Bill provides for the directors of the corporation instead of the Commissioners to decide how to invest that money in the future; and
- The PIC deals broadly with matters pertaining to social and economic policy as defined in section 5 of the NEDLAC Act.
- The Labour Court has held that it is not possible to provide an all-embracing definition of the phrase "socio-economic interests of workers". In Government of the Western Cape Province v COSATU & another Mlambo J considered the phrase in the context of protest action called by COSATU and referred to NEDLAC in terms of section 77 of the Labour Relations Act, Act 66 of 1995 ("the LRA"). The LRA defines protest action – as distinct from strike action – as "the partial or complete concerted refusal to work, or the retardation or obstruction of work, for the purpose of promoting or defending the socio-economic interest of workers, but not for a purpose referred to in the definition of strikes."
- In the case referred to, COSATU called for a wide definition relating to both economic and social aspects of workers’ lives. The Labour Court held that each matter depends on its particular circumstances. "It should generally be sufficient for a party to place a demand or matter giving rise to the protest action squarely within the ambit of the social status and economic position of workers in general."
- In the earlier case of Business SA v COSATU the Labour Appeal Court also considered the provisions of section 77 of the LRA but refrained from giving content to the phrase "socio-economic interests". The court did refer to the findings and recommendations of the Freedom of Association Committee of the governing body of the International Labour Organisation (ILO) and its committee of experts, and expressed the view that the right to withhold labour in order to promote economic and social interests falls within the scope of the right to freedom of association as expressed in ILO Convention 87, rather than within the right to strike. The court commented: "In a nutshell: the purpose of [the LRA] does not necessarily require an expansive or liberal interpretation of section 77, in the sense that the exercise of the right to protest action must be restricted as little as possible".
- The ILO Committee of Experts has considered the issue of socio-economic policy (and the socio-economic interests of workers) in the context of protest strikes. It is of the view that "…organisations responsible for defending workers’ socio-economic and occupational interests should, in principle, be able to use strike action to support their position in the search for solutions to problems posed by major social and economic policy trends which have a direct impact on their members and workers in general, in particular as regards employment, social protection and the standard of living."
- Despite the vagueness of the phrase "socio-economic interests" and our courts’ reluctance to give content to that phrase, it is our opinion that the concept of "socio-economic interests" as defined in section 213 (read with section 77) of the LRA is a wider concept than that of "social and economic policy" or "socio and economic policy" as used in section 5 of the NEDLAC Act and defined in section 1 of the NEDLAC Act. Government decides on its social and economic policy and may enact legislation to give effect to that policy. The social and economic interests of workers (of whom many are represented by COSATU) go much wider than those matters pertaining to social and economic policy that are entrenched in legislation, and permeate every aspect of their lives. It could not have been the intention of the legislature that all legislation impacting on the socio-economic interests of workers must first be referred to NEDLAC.
- There is also a distinction to be drawn between matters pertaining to social and economic policy and those relating to labour market policy in the context of the NEDLAC Act.
- In terms of section 5(b) of the NEDLAC Act, NEDLAC must seek to reach consensus and conclude agreement on matters pertaining to social and economic policy. In terms of section 5(d), it must also consider all significant changes to social and economic policy before it is implemented or introduced in Parliament (our underlining). On the other hand, NEDLAC must consider all proposed labour legislation relating to labour market policy before it is introduced in Parliament (section 5(1)(c); our underlining).
- It is therefore peremptory for NEDLAC to consider all proposed labour legislation relating to labour market policy before it is introduced in Parliament. This peremptory provision relating specifically to labour legislation is distinct from the general obligations relating to matters pertaining to social and economic policy generally. More specifically, the NEDLAC Act does not impose the obligation on NEDLAC to consider all legislation relating to social and economic policy before it is introduced in Parliament, but only significant changes to social and economic policy.
- One aspect of the Bill remains unclear. All "assets, liabilities, rights and obligations" of the Commissioners will be transferred to the corporation. PICA is to be repealed. What is not clear, is whether these "obligations" include the obligations of the commissioners to invest in certain stocks and financial instruments in terms of s 6 of PICA (to be repealed) – including investment "which promotes social responsibility and infrastructure development" in terms of s 6(h). The same obligations are not outlined in the Bill. Should the board of the corporation not have the same obligations under the Bill, that may amount to a change in investment policy that will affect the socio-economic interests of the majority of the population.
- In our view, though, the Bill does not introduce significant changes to social and economic policy. Although the Bill seeks to change the vehicle tasked with investing public money, the role of the corporation in making policy will be minimal – although the board of directors is tasked with the investment of public money, the policy underlying those investments appears to remain unchanged.
- The Bill introduces a new vehicle for the investment of public money, namely a corporation that will be governed by the provisions of the FAIS Act, instead of the current Commissioners. The Bill does not significantly change the social and economic policy underlying the existence, role or function of the Commissioners or the corporation.
- We are, therefore, of the view that the Bill need not be referred to NEDLAC in terms of the NEDLAC Act.
- In the circumstances, the question raised in paragraph 1.2 above does not arise.
Anton Steenkamp and Zimisele Majamane
Sonnenberg Hoffmann Galombik
11 August 2004