PRIVATE MEMBERS LEGISLATIVE PROPOSAL REGARDING THE APPOINTMENT OF THE BOARD OF THE LAND AND AGRICULTURAL DEVELOPMENT BA

1. PRIVATE MEMBERS� LEGISLATIVE PROPOSAL REGARDING THE APPOINTMENT OF THE BOARD OF THE LAND AND AGRICULTURAL DEVELOPMENT BANK

2. PURPOSE To provide a briefing to the Committee on Private Members� Legislative and Special Petitions (�the Committee�) regarding a Private Member�s Legislative Proposal (�the Legislative Proposal�) in respect of the appointment of the Board of the Land and Agricultural Development Bank (�the Land Bank�).

3. CONCERNS Decision- making must carry with it the relevant powers and authority. For effective oversight, the Minister, as the Executive Authority who is responsible for the Land Bank, must have the power to appoint the Board. Taking away or diminishing this power undermines the effective control of the Land Bank�s direction by the Minister. It would be inappropriate for the Minister to be restricted to appointing Board Members from an approved shortlist.

4. CONCERNS As far as possible, the Board must be responsible only to one authority. The proposed significant involvement in the appointment of the Board by any other authority than the Executive Authority would result in two centres of power, which would make it difficult for effective control by the Minister as the responsible Executive Authority over the activities of the Land Bank. This would also effectively undermine the accountability of the Minister in respect of the Land Bank. The restriction of the oversight role by the Minister of Finance to appointing Board Members from an approved shortlist would reduce the effectiveness of his role in the oversight of the Bank.

5. CONCERNS The principles of corporate governance also require that oversight control be detached from implementation. If Parliament is substantially involved in the appointment of the Board, it would, in fact, undermine its effective oversight over the Land Bank. The arising interactions with the Board would become a de-facto involvement in the direction of the Board and the Land Bank. This would mean that the failures of the Board and the Land Bank would become the failures of Parliament itself, and it would be difficult for Parliament to divorce itself from such failures, thereby making its oversight control completely ineffectual.

6. CONCERNS The Minister would find it extremely difficult to effectively exercise his powers as Executive Authority over the Land Bank and to fulfil his duty to represent the major shareholder of the Land Bank if he does not have sufficient authority and discretion to appoint the Board. If Parliament has significantly greater involvement in the appointment of the Board than is currently the case, the Board members may view their appointments as being politically mandated. The Board may then choose to ignore the Minister when he seeks to exercise effective oversight over the Board. Section 6 of the Act provides that the Board members are individually and collectively responsible to the Minister. It would be problematic if the Minister did not have sufficient authority and discretion regarding the appointment of the Board which is responsible to him. 6

7. PROVISION FOR COMMITTEE INVOLVEMENT IN THE APPOINTMENT PROCESS Section 4(2) of the Act currently provides that parliamentary committees must be invited, in writing, to provide nominations to fill vacancies on the Board. Committees have an opportunity to propose nominees, should they wish to. Therefore, there is currently provision for committee participation in the nomination process for Board members.

8. RATIONALE FOR THE CURRENT RELATIONSHIP BETWEEN THE MINISTER AND BOARD There was a rationale for the manner in which the Act was crafted, in order to provide for an appropriate relationship between the Minister of Finance and the Board. In her address to the NCOP on 4 June 2002, on the occasion of the Debate on the Land and Agricultural Development Bank Bill in the NCOP, then Land Affairs Minister Thoko Didiza stated as follows: �It [the Bill] also clearly defines the powers of the Minister and that of the Board of Directors in line with our co-operative governance principles. It allows the Minister to give broad policy guidelines and the Board to ensure that these are taken into consideration in the preparation of the business plan and operations by the institution.�

9. COMPARISON WITH APPOINTMENTS OF OTHER BOARDS Unlike what is currently provided for in section 4(2) of the Act, Parliament and its Committees play no role in respect of the appointment of the Boards of other financial sector institutions that fall under the auspices of the National Treasury. DBSA Reserve Bank PIC SASRIA

10. CONCLUDING SUBMISSIONS The Legislative Proposal, if implemented, would radically and negatively alter the relationship between the Minister and the Board as it is currently provided in the Act, by substantially restricting the discretion and role of the Minister in the appointment of the Board. The powers of appointment of the Board by the Minister, and the relationship between the Minister and the Board as are currently provided in the Act are appropriate, and it is not necessary to make any amendments to section 4 of the Act. Effective oversight can be exercised by Parliament over the Land Bank, without the necessity of increasing the involvement of the parliamentary committee responsible for the Land Bank and the National Assembly in respect of the appointment of Board Members.

11. RECOMMENDATION It is recommended that the Legislative Proposal not be approved by the Committee.