Promotion and Protection of Investment Bill [B18-2015]: adoption; Minister on Centurion Aerospace Village & African Growth and Opportunities Act (AGOA)

Meeting report

The Chairperson noted that this Committee had successfully requested to delay its BRRR until it can interact with Minister Rob Davies. The Committee was permitted to continue its important legislative work.

She drew Members attention to the formal B version of the Bill [B18A-2015] and the Amendments Agreed To in the Bill [B18A-2015]. She noted that there are still a few minor grammatical errors in the Bill.

Adv Johan Strydom, DTI Legal Advisor, pointed to a typo in Clause 13 with a misspelling of ’expedient’ and said that the DTI is aware of this and other typos and will fix them as well as possibly adding amendments from today’s meeting.

The Chairperson began to check that the amendments in B18A-2015 appear accurately in B18A-2015.

Amendments to Clauses 1 to 5
The Committee heard no protests against amendments to these clauses.

Amendments to Clause 6
The Chairperson noted that Clause 6 on the ‘Right of Establishment’ has been rejected. The new Clause 6 is entitled ‘Fair Administrative Treatment’ and ensures both that investors will not be subjected to arbitrary or unreasonable government action and that investors will have the right to have disputes settled in courts or, where appropriate, independent tribunals.

Adv Strydom noted that the language in new Clause 6 is almost exactly as is found in Section 34 of the Constitution. Government cannot have inconsistency within a Bill; this clause may conflict with Clause 13 on Disputes. In Clause 13, investors are restricted to pursue independent tribunals ‘within the Republic’. Such language does not appear in Clause 6. Clause 6 should not be misconstrued to grant extra-territorial rights; the Constitution cannot apply outside the Republic. However, some might argue that Clause 6 grants investors the right to pursue tribunals outside the Republic; this was never the intention of the Bill. He proposed that Clause 6 include the phrase ‘subject to 13(4) of this legislation’.

The Chairperson called for comment from Members.

Mr G Hill-Lewis (DA) said that the DA is hesitant to include that because the DA supports investors having the right to go to an international body for dispute settlement.

Mr Kolako (ANC) said that the ANC supports Adv Strydom’s amendment.

The Chairperson said that this matter would come up again later.

Ms Xolelwa Mlumbi-Peter, DTI Acting Deputy Director General: International Trade and Economic Development Division, notd that the original Clause 6 was not rejected, but rather amended and had become new Clause 7.

The Chairperson asked for the State Law Advisor’s opinion on this.

Adv Allan Small, State Law Advisor, held that the rejection of old Clause 6 was rejected and the introduction of new Clause 7 is consistent with common practice.

Adv Strydom argued that the old Clause 6 dealt with an entirely different matter and thus, technically, has been rejected, though rejected is a harsh word.

The Chairperson said that it may be useful for future to standardise this sort of language. She agreed that the term ‘rejected’ is quite strong and suggested the word ‘substituted’.

Ms Phumelele Ngema, State Law Advisor, agreed with her colleagues that the old Clause 6 was rejected to allow for the new Clause 6. This process is the most smooth procedurally. This process allows the rest of the consequential amendments to flow smoothly from the edit.

The Chairperson stated that the old Clause 6 has been rejected.

Amendments to Clause 7 to 16
The Committee accepted the amendments to the new Clause 7 of the Bill on ‘Establishment’. The Chairperson noted that the numbering due to the insertion of the new Clause has been affected for the rest of the Bill. The Chairperson noted that the ‘expendient’ typo in Clause 14 has already been discussed.

The Committee accepted the amendments to Clauses 8 to 16.

Long Title, Commencement, Preamble and Arrangement
Mr Hill-Lewis noted that an instance of the word ‘investment’ in the Long Title of the Bill, should be plural.

Ms Mlumbi-Peter approved this minor amendment.

The Committee approved the Preamble of the Bill.

The Committee initially heard no protest that the Arrangement of Sections would be as follows:
Definitions
Investment
Interpretation of Act
Purpose of Act
Application of Act
Fair administrative treatment
Establishment
National treatment
Physical security of property
Legal protection of investment
Transfer of funds
Right to regulate
Dispute resolution
Regulations
Transitional Arrangements
Short title and commencement

The Chairperson said that the Committee has gone through the amendments and made a few very minor changes.

Clause 11 - further discussion
Mr B Mkongi (ANC) brought up the necessity of consistency. He noted that in Clause 11, ‘transfer of funds’ was changed to ‘repatriation of funds’ yet Clause 11 remains entitled ‘Transfer of Funds’.

The Chairperson called for comment from the DTI.

Adv Strydom said that the DTI may want to consider this from a policy point of view, but that the member has correctly pointed out that this inconsistency of terms is confusing. He pointed out that repatriation and transfer are virtually synonymous.

Ms Mlumbi-Peter agreed that the DTI is flexible about the two terms because the two terms mean the same thing here.

The Chairperson said that, in her own view, the two terms are different: transfer is far more general and overarching whereas repatriation is a very specific term. She asked for the legal advisors to check on this.

The Chairperson called for further comment on transfer versus repatriation from the DTI.

Mr Lionel October, DTI Director General, said that it was all right and consistent within the Bill for the title of Clause 11 to be general and the language within the clause to be more specific. He agreed with the Chairperson’s point that repatriation is a more specific concept.

The Chairperson moved to share Mr Alberts’ written comments which stated that the Freedom Front Plus would not support the Bill without the FF+ submission on protection for South African investors abroad. Mr Alberts requested that the legal advice on case law regarding diplomacy be submitted in writing.

Voting on Bill
The Chairperson moved to consider the Bill clause by clause. She noted that the Committee is not voting, but rather looking for motions of desirability.

Mr Hill-Lewis asked whether the call for motion of desirability should not come after the clause by clause approval of the Bill; he recalled that that has been the process in the past.

The Chairperson agreed and moved to go through the Bill first. The Chairperson proceeded to read the B18B-2015.

Mr Hill-Lewis said that the Committee moved previously to re-title the Bill ‘Protection of Investment Bill’. He asked the DTI to point him to the portions of the Bill that actually protect investment.

The Chairperson noted that the DA stance about the lack of protection. She called for a response from the Director General.

Mr October said that Clauses 8 through 11 all give significant protection. National treatment guarantees that there will not be discrimination against foreign investors. Protection of physical security will prevent infringement of an investor’s property. As for legal protection, there is constitutional protection through Clause 10 that is world class. Through Clause 11, investors can move their funds freely. The Title is appropriate.

Mr Hill-Lewis rephrased his question to ask this: what protections does this Bill provide that is not already available to investors under general South African law? All of Mr October’s examples do not answer this question.

Mr October said that this Bill aims to codify in one piece of legislation, protections for 180 countries in order to replace the system of hundreds of Bilateral Investment Treaties. Investors already invest here significantly and already have protection, this Bill merely aims to codify and make easily accessible the protections for investors. No law can ever give greater protection than the Constitution.

The Chairperson said that this matter would not be further discussed.

Title of the Bill
Mr Hill-Lewis submitted an amendment to the Bill. He moved to change the Title of the Bill to the ‘Regulation of Investment Bill’. Mr Macpherson seconded.

Mr Kolako objected to this amendment. Mr A Williams (ANC) seconded this objection.

Mr Hill-Lewis asked for a vote on the amendment. The Chairperson conducted the vote and the amendment was not accepted. The DA and IFP supported the amendment and the ANC opposed it.

Preamble and Long Title
Mr Hill-Lewis moved to change the Long Title by deleting the first clause up to the first semi-colon and replace that clause with ‘to provide for the regulation of investment’.

Mr Kolako objected to this amendment. Mr A Williams (ANC) seconded this objection.

The Chairperson called for a vote and the amendment was not accepted. The DA and IFP supported the amendment and the ANC opposed it.

Arrangement of Sections
Mr Kolako moved to accept the Arrangement of Sections. Mr B Mkongi (ANC) seconded.

Adoption of the Definitions
Mr NC Koornhof (ANC) moved to accept the Definitions. Mr Williams seconded.

Adoption of Clause 2
Mr Williams moved to accept Clause Two. Mr Mkongi seconded.

Adoption of Clause 3
Mr Williams moved to accept Clause Three. Mr Koornhof seconded.

Adoption of Clause 4
Mr Mkongi moved to accept Clause 4. Mr Kolako seconded.

Mr Hill-Lewis moved to amend Clause 4 (a). He still felt that the Bill provides no further protection to investors. He proposed the deletion of 4 (a) entirely.

The Chairperson hoped that Mr Hill-Lewis is not calling the Bill unconstitutional.

Mr Hill-Lewis said that he is not, but rather arguing that the Bill provides no further protection than the Constitution and furthermore does not clarify issues of interpretation from the Constitution.

Mr Macpherson seconded Mr Hill-Lewis’s amendment.

Mr Kolako objected to this amendment and found the DTI’s explanation sufficient.

The Chairperson put the amendment to a vote. The amendment was not passed. The DA and IFP supported the amendment and the ANC opposed it.

Adoption of Clause 5
The Committee approved the clause.

Adoption of Clause 6
Mr Koornhof asked whether a reference to Clause 13(4) is now included in Clause 6. The Chairperson said that it is.

Mr Williams moved to accept Clause 6. Mr Mkongi seconded.

Mr Hill-Lewis raised a point of procedure. He recalled that the clause by clause reading included the reading of each clause verbatim. Why is this not being done now? Has there been a rule change?

The Chairperson said that the Committee went through the amendments verbatim in the same way that the Committee did the IP Act and the Companies Act. The Committee is now working from the B18B-2015 version of this Bill.

Adoption of Clause 7
Mr Macpherson moved for the deletion of 7(2). Mr Hill-Lewis seconded.

Mr Williams objected. Mr Mkongi seconded the objection.

The Chairperson called for a vote. The amendment was not passed. The DA and IFP supported the amendment and the ANC opposed it.

Adoption of Clause 8
The Committee approved the clause.

Adoption of Clause 9
The Chairperson noted that there had been much discussion on the ‘physical security of property’ and thus she read the Clause out loud.

The Committee approved the clause.

Adoption of Clause Ten
The Chairperson also read Clause Ten aloud.

Mr Kolako moved to accept Clause Ten. Mr Williams seconded.

Mr Hill-Lewis objected. Mr Macpherson seconded.

Mr Hill-Lewis moved to make an amendment. He noted that the Committee rejected a previous version of this amendment a week ago and thus he has edited it slightly.

The Chairperson asked to have this amendment in writing due to its length. She said that perhaps the amendment could be put on the screen. She moved to return to this clause.

Adoption of Clause 11
The Chairperson read Clause 11 aloud.

The Committee approved the clause.

Adoption of Clause Twelve
The Committee approved the clause.

Adoption of Clause 13
The Chairperson noted that Dispute Resolution has been one of the most contentious clauses throughout the process, and even today. She read Clause 13 aloud.

Mr Hill-Lewis moved to amend Clause 13(5). He moved to delete the word ‘may’ and replace it with the word ‘will’ in the first line. He moved to delete all of line 57 and replace it with the word ‘investor’. Mr Macpherson seconded.

Mr Williams objected. Mr Mkongi seconded the objection.

The Chairperson called for a vote. The amendment did not pass. The DA and IFP supported the amendment and the ANC opposed it.

Mr Macpherson moved to make two amendments. He first moved to amend 13(2)(a) by deleting the word ‘may’ from line 26 and replacing it with ‘will’. Mr Hill-Lewis seconded.

Mr Williams objected. Mr Kolako seconded the objection.

The Chairperson called for a vote. The first amendment did not pass. The DA and IFP supported the amendment and the ANC opposed it.

Mr Macpherson’s second amendment was to 13(2)(c) on line 31 to replace the word ‘may’ with ‘will’. Mr Hill-Lewis seconded.

Mr Williams objected. Mr Kolako seconded the objection.

Mr Hill-Lewis asked whether the reference in Clause 13(5) to ‘section 6’ should not read ‘clause 6’.

Adv Strydom said that, in the Bill, one should use ‘clauses’, but in Acts one should use ‘sections’.

The Chairperson called for a vote on Mr Macpherson’s second amendment. The amendment did not pass. The DA and IFP supported the amendment and the ANC opposed it.

Mr Williams moved to accept Clause 13. Mr Mkongi seconded.

Mr Hill-Lewis objected. Mr Macpherson seconded the objection.

The Chairperson said that a vote should take place. Clause 13 passed. The DA and IFP opposed and the ANC supported.

Adoption of Clause 14
Mr Kolako moved to accept Clause 14. Mr Williams seconded.

Mr Hill-Lewis moved to make an amendment. The DA feels that 14(b) gives the Minister powers that are far too broad. He moved to delete 14(b). Mr Macpherson seconded.

The Chairperson called for a vote. The amendment did not pass. The DA and IFP supported the amendment and the ANC opposed it.

Mr Mkongi moved to accept Clause 14. Mr Williams seconded.

Mr Macpherson objected. Mr J Esterhuizen (IFP) seconded the objection.

The Chairperson called for a vote. Clause 14 (a) and (b) passed. The DA and the IFP opposed and the ANC supported.

Adoption of Clause 15
Mr Kolako moved to accept Clause 15. Mr Williams seconded.

Mr Hill-Lewis asked a question about Clause 15(2): what protections that are included in this Act but that are not included in general South African law will the investments mentioned in this clause be subject to?

Ms Mlumbi-Peter replied that the Constitution and general South African law provides protection before the Bill comes into force. Once this Bill comes into force, this Bill will govern investment.

Mr Hill-Lewis asked the DTI to confirm that there is absolutely no difference between general South African law and this Bill.

Ms Mlumbi-Peter confirmed this. This Bill codifies the protections and makes these protections clear for investors.

Mr October said that the bar for investor protection is already very high due to the excellent Constitution. No law can exceed the Constitution.

Mr Williams moved to accept Clause 15. Mr Kolako seconded.

Mr Hill-Lewis objected. Mr Macpherson seconded the objection.

The Chairperson called for a vote. Clause 15 passed. The DA and IFP opposed and the ANC supported.

Adoption of Clause 16
The Committee approved the clause.

Adoption of Clause 10
The Chairperson returned to Clause 10.

Mr Hill-Lewis said that there are many questions about the law around Section 25 of the Constitution that cause investor doubt. One such question is the distinction between deprivation and expropriation. The Expropriation Bill does not deal with this. The Agri-SA Constitutional Court Case calls for the codification in law of the meaning of deprivation. Section 25 is not sufficient. This is not meant to undermine the Constitution, but we must codify exactly what the Constitution means. Investors want to know that they will not be deprived of their investment. He then read his amendment:

"- The Government shall not impair by unreasonable, arbitrary, or unfair measures the management, maintenance, use, enjoyment, or disposal of lawful investments made by foreign investors in the Republic.
Investors have the right to property in terms of Section 25 of the Constitution.
- The Government will accord to investments and investors protection that is in accordance with customary international law.
- Investors shall not be arbitrarily or unreasonably deprived of all or part of their investments, either directly or indirectly, or be subjected to any measure which has the same substantial effect as deprivation.
- Sub-Section Three includes but is not limited to instances where possession does not pass to the Government of expropriating authority.
- The compensation envisioned in Section 25 shall be paid without delay and in a readily convertible currency."

Mr Hill-Lewis said that he watched last week’s meeting and heard people agree that everything in this clause can be found elsewhere in South African law. Much like the rest of the Bill, these laws should be codified here for clarity.

The Chairperson said that the Committee does now have this amendment in writing. As Mr Hill-Lewis indicated, there are a few slight changes from the previously rejected amendment.

Mr Hill-Lewis moved to table this amendment as it appears in front of the Chairperson. Mr Macpherson seconded.

Mr Mkongi objected to this amendment. Mr Williams seconded the objected.

Mr Hill-Lewis asked for the objections to be explained.

The Chairperson said that the objections have been previously explained. Mr Hill-Lewis is welcome to take this amendment to the National Assembly.

Mr Hill-Lewis said that that is not correct; he cannot raise amendments after the Bill leaves this Committee. He demanded to know from the DTI why his points about the Constitutional Court are not valid.

Mr October said that separation of powers is very important. This Bill is subordinate to the Constitution. This Bill gives absolute legal certainty. Legislation cannot tamper with the Constitution; this will only lead to more judicial disputes.

Mr Hill-Lewis said that there is not absolute certainty in law on deprivation.

The Chairperson said that the Expropriations Bill is not yet done and it would be premature to comment on whether or not it deals with deprivation.

Mr B Mashile (ANC) said that Mr Hill-Lewis’s demand that the DTI explain why they oppose an amendment was incorrect and inappropriate. The Executive can only advise Parliament.

The Chairperson said that this matter has been explored in the past extensively and has been exhausted. She moved to vote on Clause 10.

Mr Hill-Lewis asked that his specific question be answered.

The Chairperson said that his position is only an opinion. This decision falls with the legislature.

Mr Hill-Lewis again asked where the absolute legal certainty that the DG referenced is.

Mr Hill-Lewis raised a point of order. The Chairperson rejected this. She held that the Committee was in the  middle of the vote, though the DA claimed that the vote had not started. The Chairperson called for the Hansard to clear up this issue.

The Chairperson called for a vote on the amendment proposed by Mr Hill-Lewis. The amendment did not pass. The DA and IFP supported the amendment and the ANC opposed it.

Mr Hill-Lewis asked now for an answer to his question.

The Chairperson said that first the Committee must vote on Clause 10 which she read aloud.

Mr Kolako moved to adopt Clause 10. Mr Williams seconded.

Mr Macpherson objected. Mr Hill-Lewis seconded the objection.

The Chairperson called for a vote on Clause 10. The Clause passed. The DA and the IFP opposed and the ANC supported.

The Chairperson noted that the Committee has now finished the Bill.

Further Discussion on the Bill
Mr Hill-Lewis asked again for an answer to his question. The Chairperson did not recognise him. Mr Hill-Lewis suggested that it might take less time to just allow the DG to answer.

The Chairperson noted that there would be time for a debate in the House. There will not be debate now. She called for an answer from the DG.

Mr October replied that the legal advisor’s submission definitively said absolutely explicitly that this Bill cannot deal with anything to do with expropriation because the Expropriation Bill will deal with these matters. Furthermore, we have absolute legal certainty from the Constitution and the state law advisors who say that this piece of legislation is consistent with the Constitution. There will always be differences in judicial opinion, but these matters are resolved in court and through legal precedent.

Mr Hill-Lewis thanked the DG for the reply. He found the statement that the legislature is not responsible for legal statement incredible.

The Chairperson said that there are always a number of legal opinions on the law.

Mr Mkongi found it strange that the DA finds pleasure in bullying government officials. He hoped that the Chairperson would be able to stop this bullying. The matter has been debated and defeated and now they are angry. Mr Motshelele has raised this matter, saying that it is unparliamentary to demand this from government officials. These matters must be contested in the Expropriation Bill.

The Chairperson reprimanded Mr Hill-Lewis for interrupting Mr Mkongi.

Mr J Esterhuizen (IFP) felt that Committees must consider the impact of their bills and that it was very "brave" of the DG to claim that this Committee cannot deal with this very applicable issue in the Bill.

The Chairperson said that legal opinion held previously that this matter can only be considered with regards to the Expropriation Bill.

Motion of Desirability for the Bill
The Chairperson moved on to a motion of desirability.

Mr Williams moved to make a motion of desirability. Mr Kolako seconded.

Mr Hill-Lewis objected. Mr Macpherson seconded.

Mr Hill-Lewis proposed an amendment to the motion of desirability. His amendment was to move to hold this Bill in Committee in abeyance until the House adopts the Expropriation Bill.

The Chairperson noted that this amendment was simply an objection to the motion. The DA will be able to put on record a minority opinion.

Mr Hill-Lewis said that his amendment would be to include a new paragraph in the motion reading that ‘the Bill be held in abeyance by this Committee until such time as the second reading of the Expropriation Bill has been concluded by the House’. Mr Macpherson seconded this amendment.

The Chairperson called for a vote on the amendment. The amendment did not pass. The DA and IFP supported the amendment and the ANC opposed it.

The Chairperson returned to the original motion of desirability. She noted that it has already been seconded and thus called for a vote. The motion passed. The DA and the IFP opposed and the ANC supported it.

Adoption of the Formal Report on the Bill
The Chairperson read out the report on the Protection of Investment Bill 18B-2015, 3rd November 2015.
"The Committee, having considered the subject of the Promotion and Protection of Investment Bill, classified by the Joint Tagging Mechanism (JTM) as a Section 75 Bill, reports the Bill with Amendments 18A-2015."

She called for someone to move adoption of the report.

Mr Kolako moved to adopt the report. Mr Mkongi seconded.

Mr Hill-Lewis objected. Mr Macpherson seconded the objection.

The Chairperson called for a vote. The report passed. The DA and the IFP opposed and the ANC supported.

Minority Views
The Chairperson said that, in addition to the majority report, any minority member can submit a minority view.

Mr Hill-Lewis said that, firstly, the Bill does not provide any additional protection to investors beyond that which is already provided in general South African law and under the Constitution. Therefore the need or justification for the Bill is questionable.

Secondly, the Bill failed to take account of the views of the very people it was designed to attract: the global investment community. We heard in this Committee several times how the vast majority of investors in South Africa, in fact over 85% of foreign investors in the country, said that the Bill was inadequate. In fact, one huge grouping of investors singularly responsible for over R200 billion in foreign investment said that the Bill, if passed, would be another ‘nail in the coffin’ of the South African economy. The Bill failed spectacularly to address the concerns of the very constituency it was aimed at, negating the purpose of the Bill again.

Third, the Bill is in contradiction of South Africa’s international obligations under the Southern Africa Development Community Finance and Investment Protocol (SADC FIP). The Committee has received an assurance that the FIP is being amended, but the SADC FIP will take at least two years to amend and in the interim, at the admission of the Department, South Africa will be in violation of international agreements.

Fourth, the Bill is hypocritical because it fails to provide for the protection which we offer to some countries who we deem fit to sign Bilateral Investment Treaties with, for example China. China has a BIT with South Africa that provides for far greater protection than this Bill provides to other investors. There is no adequate explanation for why that is the case; if we can provide it to the world’s biggest economy and biggest country, and yet cannot provide it to everyone else, the justification of the Bill is again called into question. The second point on hypocrisy is that, despite requests, the views from the Indian and Chinese Chambers of Commerce on the Bill were not sought.

 Lastly, the DA wants a firm, strong indication from South Africa to the rest of the investment world that we welcome their investment, that we are open for business, that we want their factories, their money, here in our country. We are absolutely committed to an investment bill that would achieve that. As Mr De Gama said many times during deliberations, what is necessary is an ‘optical effect’ or a visual statement to the rest of the world that South Africa welcomes their investment and that their investments are safe in our country. With respect, this Bill fails dismally to achieve that standard. It does not provide the optical effect that we need, it does not send a message to the rest of the world that South Africa is open for business, quite the opposite. It puts a big neon sign on the front of South Africa saying ‘closed for business’.

The Chairperson asked for that to be submitted for writing. She called for other minority views.

Mr Esterhuizen (IFP) said that, when this Bill is considered with other legislation, a negative message is sent to foreign investors. The word ‘protection’ is inappropriate here; BITs provided greater protection. Government policy tends to retard economic growth and we must be careful to consider the consequences of policy.

The Chairperson asked for this also to be submitted in writing. These views will be in the Committee Report. The Committee notes the minority comments expressed by the DA and the IFP. The Report has been passed by the Committee and will be sent to the House for consideration.

Committee Business
The Chairperson announced that Minister Rob Davies can only be here for ten more minutes due to another engagement and cannot come tomorrow. The Manager from the Centurion Aerospace Village (CAV) is also here. The Minister can comment on both CAV and the African Growth and Opportunities Act (AGOA).

Mr Macpherson noted that last week Mr Hill-Lewis pointed out that today’s agenda would be more lengthy than the time the programme gives. Seven minutes is not sufficient time to deal with AGOA. He wanted to register his strongest objections to this. The DA is prepared to wait for the Minister to return at a later date.

The Chairperson said that the Committee accommodated Mr Hill-Lewis’s absence last week by allowing to speak at length on his submission today. It is unfortunate that the Minister has another scheduled engagement but we can hear him.

Minister Rob Davies said he is not responding to one party’s demand but rather a request from the Committee. He is able to stay until 14:00 instead of 13:00.

Mr Macpherson proposed that the agenda be amended as proposed by the Minister. Mr Koornhof seconded.

Mr Motshelele said that the practice of inviting officials and then saying right to their faces that we are not prepared to listen to them is incorrect. Officials are here to present hard facts and cannot defend themselves. We must watch our manners.

The Chairperson said that these comments have been noted; unfortunately, some comments cannot be shut down. There is a need in the future to not put officials in the position in which they were put today.

Centurion Aerospace Village update
Minister of Trade and Industry, Rob Davies, addressed allegations that the DTI had been presented with R95 million for the Centurion Aerospace Village (CAV) and that there is nothing to show for it except a bit of turned-over earth; in fact, a building has been built. That being said, the CAV has had some serious governance issues that resulted in the firing of the previous CEO and the referral of matters to the police. There has also been a change in the CAV Board. The investigation is ongoing; the DTI will take advice from the audit committee on whether the findings against the members of the previous Board were acts of commission or omission and what the appropriate action should be. He wanted to show the Committee today that the project is back on track after these unfortunate episodes that none of us are happy about.

In 2012, the MTEF bid for funds for the building was looked at by Treasury, who found some irregularities and referred them to the DTI. The DTI referred these findings to an internal audit. The internal audit them made a number of findings and recommended, amongst other things, a forensic investigation. While that forensic investigation was underway, a DTI employee who was the Acting CEO resigned whilst disciplinary action against him was being contemplated. The DTI referred the findings from the forensic report to the police. In 2014, the DTI appointed a team to resolve the identified issues from the finalised forensic report and this team has been implementing the recommendations from that report.

As for redacted and unredacted versions, one has to respect the rights of people who have been accused of wrongdoing but not found guilty. When we redact a report, we take out people’s names and things that reference the said person; that is all that comes out. The new CEO took office on 1 August and inherited a host of problems, including the existing building and its authorisation with the municipality of Tshwane.

The idea that there is a nest of corruption is absolutely untrue. The DTI has acted to root out these serious problems. It is also untrue that money has been spent wastefully. There are things of value in the CAV as you are about to see in the presentation. Though it has not been perfect and we are not happy about that, the CAV is an important project and we are working to fix it.

Mr Lance Schultz, CEO of CAV, thanked the Minister for clearing up those legacy issues. CAV intended to establish a facility to help defense and aerospace cooperate at one location. The DTI as lead on the project helped establish the business case. The forensic audit led to the creation of a turnaround plan for CAV and included key elements surrounding:
- Objectives to mitigate all audit findings
- Products and services
- An estimate of market potential and competition assessment
- Board composition and experienced management
- Acquisition of products and services
- Projected financial results
- Capitalisation
- Investor framework.

This plan all goes to support the five-point repositioning of CAV:
- Strategic alignment with the Aerospace Sector Development Plan
- Robust policy framework in line with applicable legislation
- Meeting all legal, zoning, and permit processes
- Achieving the requisite institutional arrangements, board composition and investment
- Strong focus on Human Capital development

The desired end state of the CAV is two-fold:
- To stimulate economic development in the sectors by creating a space that businesses will prefer
- To develop a sustainable sub-tier supplier base.

The CAV has three strategic goals:
- Maintain an integrated developmental model for the aerospace and defence cluster in CAV
- Ensure effective implementation of the Sector Development Plan with the CAV development
- Ensure excellence in business and resource management of the CAV so that the CAV never ever has an audit problem again.

Mr Schultz explained that the CAV is answerable to the DTI as well as its Board of Directors.

Discussion
Mr P Atkinson (DA) thanked the DTI for the presentation and said that he became aware of this issue during an oversight visit through the Department for Economic Development in February 2015. We attended an adjacent property and the CAV came up. After that visit, I put through a parliamentary question to ask about the progress. In the response, I was told that the CAV is a fully operational project and that the CAV has two tenants. This reply did not align at all with what I saw; I saw a piece of land that looked like a game reserve. The DA is concerned because, in presentations to both the Economic Development Committee and this Committee, the CAV has been indicated as one of the job creation success stories of the DTI. Job creation is incredibly important. To find that the CAV is a paper tiger with nothing behind it would hurt the DTI’s credibility drastically. This presentation includes references to job creation from 2017 onwards but there is nothing over the past few years. How can anyone call the CAV a job creation success?

The DA has also asked questions about the spending on this project. According to this unredacted report, R125 million has been allocated to the CAV. We are aware that about R20 million has been spent on the building. However, another R95 million was spent on various items such as bulk earthworks and other inputs. He accepted that no one stole this money, however, there were major issues with the tender and management of money; this is undoubtedly why the DTI fired the previous Board.

His grave concern is that we have been promising the people of Tshwane great things since 2008; as yet, nothing has happened. When people ask about the progress in Parliament, they are told that the CAV is a fully operational project. In response to DA comments in September 2015, the DTI claimed that the DA was telling lies and the CAV is a fully operational project with tenants. In fact, the CAV is not truly ‘fully’ operational and has no tenants. The DTI had no certificate of occupation for the land because there are no bulk earth works there. It appears that members were lied to during previous parliamentary questions, which he finds to be a huge issue.

He wrote to the Minister back in September requesting to be taken to the site; he is not sure whether the Minister got it because he has not received a response. In fact, he would like to know whether the Minister has ever been to the site himself. This matter has become controversial. This Committee should do an oversight visit to the site and monitor progress through annual oversight visits. For the people of South Africa, the creation of jobs is the most important issue that faces us. Job creation is a matter of survival of this country. The CAV is a great idea but we need to see it happen and we do not need to be lied to and told of things that are likely to happen but never do.

The Chairperson asked who lied to Mr Atkinson.

Mr Atkinson said that, during parliamentary questions, we put forward a question about the existence of the CAV and the Ministry response was that the CAV has two tenants. This is a legal impossibility because there is no occupation certificate for the site. You cannot have tenants without occupants. So, untruths have been put out and misrepresentations have been made.

Mr Schultz confirmed that the building is called ITC-2 and it does exist; his office is there. With regards to the two tenants, the primary tenant is Aerosud, although there is not a lease agreement in place and only a verbal agreement, until everything is regularised with the occupation certificate. The Chairperson of Aerosud recently purchased Ahrlac. CAV officials learned of this before even DTI officials, much less the public did. Ahrlac is also now occupying ITC-2; though the difference betwwen Ahrlac and Aerosud is semantic, there are two entities in the building. The intention of the building is to create an environment for SMMEs, incubation, and skills development to take place. Through the partnership with Ahrlac, purchased equipment has created jobs; a skills report shows this. The building cost R22 million and was effectively spent. A draft lease agreement has been prepared with Tshwane and should be done by December. With regards to the R94 million figure, this was a misrepresentation by media. Part of that money, over R60 million, is still in the bank account. Once further approval from Tshwane has been secured, more bulk earthworks will be done and a gatehouse and fencing built. The facility is out of view from outside the gate where the Member was; we would welcome an oversight visit to show you the building. As for job creation, the market changes frequently so we update our projections every three years. We originally estimated 2 800 jobs, but we are busy updating those projections and it would be unwise to speculate on the outcome of that research here. However, we expect to get to that figure within three to five years due to the market’s appetite.

Minister Davies spoke to the claim that the CAV site was a piece of undeveloped dirt. After Treasury investigated the CAV, they stopped the construction process. The money is not lost; it just has not been spent because Treasury did not authorise it to be spent due to the issues. He has been there on a number of occasions and he has been inside the building. There is a picture of the building in the presentation on page 20. Aerosud is the tenant. Despite the status of the lease agreement, Aerosud is in the building doing research. Ahrlac is also there. No one has claimed that this project is running wonderfully and is creating jobs. Though the operation is not where it should be, there is an operation.

Mr October addressed the legal opinion about tenants and occupants. There are two occupants in the building. Are they tenants? Legally, they are tenants because they are fully occupying the building and are using it every day. The city of Tshwane is busy regularising the compliance certificate for the building, but the two companies, Aerosud and Ahrlac, occupy the building and use it every day. This is not a lie. Tenancy arrangements are being finalised.

Mr Esterhuizen said that, in the media, he has read that this building is unoccupied. He was not accusing the DTI of lying, however. The chaos of this project is due to the lack of responsibility or understanding of, perhaps, the Minister himself or of the Department and the CAV Board. Treasury has cited CAV as a major threat to SA's fiscal future. We require DTI to enforce the law, but we also need clear political will to defend taxpayers from wasteful expenditure. The DTI should not hide behind the law.

The Chairperson said that this matter can be further pursued later in November. Due to time constraints, she moved to consider AGOA. However, she allowed further discussion on CAV.

Minister Davies agreed that the image out in the public was that the building was unoccupied. The DTI needs to correct that, because that is not the case. The lease agreement is a different story, and it is the fault of the previous Board that this is an issue. People are using the building for aerospace work. Let me be clear: there is no talk of bailouts or guarantees and none of us are happy with what has happened at CAV. When these issues became known, we acted and have been transparent. The unredacted report contains the names of people who are possibly innocent and have a right not to be defamed. Nothing embarrassing to the DTI has been cut out.

The Chairperson noted that the Minister would be back on 17 November.

Minister Davies said that any further discussion on 17 November would take time away from information about the WTO Mandate.

The Chairperson urged Mr Macpherson to allow the Committee to discuss AGOA and she reminded him that the matter is incomplete.

Mr Macpherson said that today’s presentation has muddied the waters and been nothing more than deflection. He tabled Mr Atkinson’s letter to the Minister and the redacted report for this Committee. He had a copy of both for every member to compare with today’s remarks. He confirmed that he previously requested the redacted report. He also requested in that letter that the Department address the Committee and table the unredacted report, which it did not do. To be clear, in his letter he did not request DTI table the redacted report. Mr Atkinson attained the redacted report through a PAIA application to the Department.

Minister Davies promised the Committee that it would not find any smoking guns in these reports and that the Committee can pursue these matters further at the cost of more important matters. The DTI is dealing with this corruption and is not complicit in it. He attended this Committee at the request of the entire Committee, not a single member.

The Chairperson said that the Committee has clearly held that the DTI acted on these matters speedily. A number of these matters are still under investigation.

Mr Hill-Lewis asked whether the picture on page 20 of the presentation was an artist’s impression.

Mr Schultz said that it is an artist’s impression though it is not intended to mislead.

The Chairperson called on the Minister to share the latest developments on AGOA.

African Growth and Opportunities Act (AGOA): update
Minister Davies said that the US Congress had approved the renewal of AGOA. South Africa will be subject to an out-of-cycle review. We have not removed the anti-dumping duty to protect local poultry industries. We have instead instituted a quota. The quota was agreed to in Paris in June and was set at 65 000 tonnes with a growth factor. South Africa is committed to the implementation of that.

One important matter is the sanitary/phyto-sanitary (SPS) issue around poultry as well as beef and pork. These issues have been discussed between the veterinary authorities (vets) of South Africa and the USA. President Obama called for strong institutions and not strong men in Africa. Our institutions must ensure that meat entering South Africa is not harmful. It is not within the DTI’s power to control the vets. It has been indicated to us at an AGOA meeting in Gabon recently and in a letter from the US Trade Representative Michael Froman that the issues at stake are fundamentally about these three meats. As for poultry, twenty US states have had issues with avian flu. They no longer have it. After 90 days, areas can be declared avian flu free, but there are suspicions of further outbreaks. There needs to be procedures in place to prevent poultry coming from places with avian flu. The vets sent their understanding of the conclusion of the process to the US last week and asked if the US agreed. If the US does not agree that these matter are concluded, we will negotiate further on one or two minor matters, because the substance of that agreement has been concluded. The same is true for pork and beef. The issue with pork has been shoulder cuts because the lymph gland is in the shoulder.

As for market authorisation and the quota, the International Trade Administration Commission (ITAC) has had a meeting to start the process of implementing the various regulatory processes around the quota. We believe that South Africa has done what it needs to do and is committed to implementing the agreements reached in Paris. Based on all indications, we have assured South Africa’s continued participation in AGOA.

Discussion
Mr Hill-Lewis appreciated the assurances but a sentiment still exists on the US side that the Department of Agriculture, Forestry and Fisheries (DAFF) has not provided prompt replies and has been unreasonable. The undertone is that DAFF is trying to delay market access as long as possible with the potential result that South Africa could be excluded by AGOA. Please assure us that this is not the case.

Mr Macpherson brought up the Private Securities Amendment Bill. The US sees Section 20 of that Bill as problematic.

Minister Davies replied that the vets are an autonomous body that does not answer to government. It has taken longer than necessary and has been frustrating. Government is committed to finding a solution and is not playing poker. It would be inappropriate for him to presume to be an expert on issues like avian flu; that must be left up to the vets. He said he would not go into the Private Securities Amendment Bill; the main issue is the three types of meat and Private Securities Amendment Bill has not come up.

Ms Elaine Alexander, DDG of Economic Development, Trade and Marketing for the Department of Agriculture, Forestry, and Fisheries(DAFF), said that the vets have dealt with the US as a priority despite having many other responsibilities. There is no intention to stop access. On pork, South Africa would like to import more. We must ensure buyer security for our own industries. We have not put higher requirements on the US. We base everything on risk and avian flu has a very high risk.

Minister Davies said that the Chief of South African vets at DAFF is president of the World Organisation for Animal Health (OIE) and that SA has SPS restrictions on white meat exports from SA to the US. We remain committed to discussing those issues in the future.

Mr Esterhuizen said that he sympathises with the Minister. The poultry industry has very little to do with AGOA and has been used as a bargaining chip. The Minister must protect the local industry. It has been a long time since the industry won that court case back in 1999. The US has been wanting to dump poultry here and that court case stopped this practice. If the US poultry market cannot reach an agreement in these negotiations, the local economy will be harmed.

Mr Hill-Lewis said that there seems to be a disjuncture between what one hears in this Committee and what the media reports as comments from the US. Nonetheless, he accepted the submission from DAFF and he urged DAFF to pursue this matter with urgency to conclude this before the end of the year. This matter should have never gotten this close to the deadline. It is clear that if the Private Securities Amendment Bill is passed, South Africa will be immediately excluded from AGOA. They are raising this point because they are batting for South Africa.

Minister Davies said that Mr Esterhuizen is correct in that we are talking about consumption patterns in the developed world where they eat white meat and have a big surplus of brown meat. There has been an anti-dumping measure since 2002. We were asked to remove this measure and we did not. The government has not been playing brinkmanship. Government’s role is to facilitate negotiations. We believe that these negotiations are done; we are waiting to hear from the US.

The Chairperson hoped that the Minister would continue to keep the Committee abreast on AGOA.

The meeting was adjourned.