FREEDOM OF EXPRESSION INSTITUTE’S
SUBMISSION TO THE PORTFOLIO COMMITTEE
ON TRADE AND INDUSTRY IN RESPECT OF
THE COMPANIES BILL

13 August 2008
 
INTRODUCTION:

1.    The Freedom of Expression Institute (“FXI”) thanks the Portfolio Committee on Trade and Industry (“the Committee”) for the opportunity to make its submission on the Companies Bill (“the Bill”). It should be noted at the outset that we will confine ourselves to discussing issues which directly impact on our mandate.   

2.    FXI was established in 1994 to protect and foster the rights to freedom of expression and access to information, and to oppose censorship. The FXI’s primary objectives are to fight for and defend freedom of expression; to oppose censorship; to fight for the right of equal access to information and knowledge; and to promote access to media and a free press.

3.    Its subsidiary objectives are the opposition of any limitations imposed on the freedoms aforementioned be they at the instance of the State, the private sector or civil society, through public pronouncements and litigation; provide support, solidarity and unity of purpose among those subject to censorship; Educating the public about the dangers of censorship; monitoring the effect and implementation of censorship in South Africa; network and engage in solidarity with groups opposing censorship locally and internationally; promoting access to information and knowledge and information generally and by monitoring proposed legislation that may make this possible; campaigning for the freedom and independence of all media.

4.    The FXI undertakes a wide range of activities in support of these objectives, including lobbying, education, monitoring, research, publicity and litigation and the funding of legal cases that advance these rights.

5.    In the light of this we have prepared this submission for presentation to the Committee. It should be noted that our main concerns are merely summarized, and the FXI will be more than willing to elaborate on any aspect of these concerns at the public hearing.

6.    We are in agreement that the current Companies Act No 61 of 1973 is in need of review and updating in line within the rapidly evolving business climate which the electronic age has facilitated. To the extent that a large number of changes are required to meet the needs of this rapidly changing society in the past apartheid era, we subscribe to the necessity of change.
 
7.    Our concerns as will be demonstrated below are largely to do with the honouring of the Constitution of the Republic of South Africa (“Constitution”) and the building of our fledgling democracy.

8.    The principles espoused in the Constitution must be reflected in all legislation and to this end it is vital that the Bill should advance both the spirit and the letter of the Constitution. It is particularly important that in a time of economic turmoil and investor uncertainty that due and proper consideration is given to measures that will both enhance economic performance and bolster investor confidence. As such, the Bill has a vital role to play in allaying the fears of investors and providing a proper framework for economic upliftment. At the core of this is the pre-eminent requirement that all transactions be conducted in a transparent and honest fashion. It is essential that companies recognize their obligations to the public and to that end that sufficient measures are put in place to ensure the sanctity of investor rights.


OBJECTS OF THE BILL


9.    The FXI is fully supportive of the objectives set out in the Bill with specific reference to S5 read with section S7 which provide that that the Bill must be interpreted and applied in a manner that gives effect to the purpose of the Bill, which includes the promotion of  the development of the South African economy by encouraging transparency and high standards of corporate governance given the significant role of enterprises within the social and economic life of the nation, and to balance the rights and obligations of shareholders and directors within companies.   

10.    The acknowledgement of the primacy of the provisions of the Promotion of Access to Information Act No 2 of 2000, is equally honourable.


TRANSPARENCY, FREEDOM OF EXPRESSION AND ACCESS TO INFORMATION


Freedom of Expression

11.    Section 16 of the Constitution guarantees everyone the right to freedom of expression. This includes the freedom of the press and other media and the freedom to receive and impart information and ideas.

12.    The Constitutional Court has articulated the importance of the right of the public to receive information and ideas and the role which the media plays in being the conduit through which the public receives such information. In this regard we refer you to the following cases:

12.1.    in Khumalo and Others v Holomisa  the Constitutional Court made the following statement:

“The print, broadcast and electronic media have a particular role in the protection of freedom of expression in our society. Every citizen has the right to freedom of the press and the media and the right to receive information and ideas. The media are key agents in ensuring that these aspects of the rights to freedom of information are respected. The ability of each citizen to be a responsible and effective member of our society depends upon the manner in which the media carry out our constitutional mandate…

The media thus rely on freedom of expression and must foster it. In this sense they are both bearers of rights and bearers of constitutional obligations in relation to freedom of expression.. . .

In a democratic society, then, the mass media play a role of undeniable importance. They bear an obligation to provide citizens both with information and with a platform for the exchange of ideas which is crucial to the development of a democratic culture. As primary agents of the dissemination of information and ideas, they are, inevitably, extremely powerful institutions in a democracy and they have a constitutional duty to act with vigour, courage, integrity and responsibility.


12.2.    in South African National Defence Union v Minister of Defence & Another,  the Constitutional Court stated that:

“Freedom of expression lies at the heart of democracy.  It is valuable for many reasons, including its instrumental function as a guarantor of democracy, its implicit recognition and protection of the moral agency of individuals in our society and its facilitation of the search for truth by individuals and society generally;”


12.3.    In the decision of the Constitutional Court in NM v Smith  O'Regan J stated that:

Freedom of expression is important because it is an indispensable element of a democratic society. But it is indispensable not only because it makes democracy possible, but also because of its importance to the development of individuals, for it enables them to form and share opinions and thus enhances human dignity and autonomy. Recognising the role of freedom of expression in asserting the moral autonomy of individuals demonstrates the close links between freedom of expression and other constitutional rights such as human dignity, privacy and freedom.  Underlying all these constitutional rights is the constitutional celebration of the possibility of morally autonomous human beings independently able to form opinions and act on them.

12.4.    In the case of National Media Ltd v Bogoshi  the Supreme Court of Appeal held that:

“We must not forget that it is the right, and indeed a vital function, of the press to make available to the community information and criticism about every aspect of public, political, social and economic activity and thus to contribute to the formation of public opinion …. The press and the rest of the media provide the means by which useful, and sometimes vital, information about the daily affairs of the nation is conveyed to its citizens …


13.    The importance of public interest cannot be overstated and it is the role of the media to convey information which allows matters of public interest to be fully scrutinized by the public at large. Public interest itself dictates that information which is of importance to all players in the economy, be disseminated as widely as possible.
 
14.    The distinction which is drawn between irresponsible publication and the publication of matters which are truthful and in the public interest should be the guideline for determining the rights of the media to publish information which would otherwise be in the private domain. South Africa has a well developed law of defamation which affords relief to offended persons and this exactly what should be used to delimit the bounds of information which needs to be placed before the public.

15.    The balance between what should be protected as private information must be addressed as dictated by section 36 which outlines the balancing of conflicting rights. Ideally any restriction on information being published must pass this test of constitutionality.


Access to Information:


16.     In terms of Section 32 of the Constitution provides as follows:


    “(1) Everyone has the right of access to -
(a)    any information held by the State; and
(b)    any information that is held by another person and that is required for the access or protection of any rights.
(2) National legislation must be enacted to give effect to this right, and may provide for reasonable measures to alleviate the administrative and financial burden on the state”.

17.    The Promotion of Access to Information Act 2 of 2000 ("PAIA") was promulgated to give effect to s32 of the Constitution.  The preamble to PAIA provides that PAIA has been enacted to, inter alia, "foster a culture of transparency and accountability in public and private bodies by giving effect to the right of access to information and actively promote a society in which the people of South Africa have effective access to information to enable them to more fully exercise and protect all of their rights".

18.    In terms of PAIA, a requester must be given access to a record if the procedural requirements of PAIA are complied with, and access to the record is not refused in terms of a ground of refusal set out in PAIA. There is thus established a presumption of the right to access to information held by both public and private bodies.  

19.    Furthermore, PAIA is not exhaustive of the right of access to information contained in section 32 of the Constitution.  Where PAIA is not applicable, we submit that section 32 of the Constitution may be relied upon directly to access information.

20.    The rights to freedom of expression, and access to information, are however not without limit. Any limitation must however be justifiable in terms of section with section 36 of the Constitution.

WHISTLEBLOWER RIGHTS AND THE EXTENSION THEREOF TO SUPPORT CORPORATE GOVERNANCE

21.    The protection of whistle-blowers is provided for in S159 of the Bill. FXI has engaged with the Open Democracy Centre (“ODAC”) on this specific issue and there is general consensus in respect of the issues raised in this submission, save as otherwise indicated in our oral presentation.

22.    In respect of S159 (3) (a), it is welcomed that there is a long list of people and organizations that can receive the disclosure.  We are of the view that this section should not contain an exhaustive list of persons to whom disclosures can be made.

23.    The provision should at least be amended to include trade unions, and professional bodies and the media, to maintain good governance. For ordinary individuals some of the individuals and organizations mentioned may seem too remote. The inclusion of the trade unions and professional bodies would serve the purpose of creating the potential for disclosure to bodies which are a step removed from the company. They are also most likely to be informed about the contravention by their members.  We would like to see the inclusion of trade unions and professional associations in this section given the range of potential whistleblowers concerned. The inclusion of the media would be a true acknowledgement of individual liberty and an affirmation of the right to freedom of expression.

24.    In respect of S159(3)(b), the words “reasonably believed” should be replaced by “reasonable grounds to suspect”.  The test of reasonable grounds to suspect is less onerous than reasonably believed.  The “reasonable belief” sets the threshold for protection too high.  The term “reasonable grounds to suspect” has enjoyed considerable attention by our courts.  In R v Van Heerden  1958 (3) SA 150 (T) at 152 E, Galgut AJ as he then was, stated that : “these words must be interpreted objectively and the grounds of suspicion must be those which would induce a reasonable man to have suspicion.”

25.    The “reasonable suspicion test” provides more protection for the whistleblower than the requirement of a “belief” reasonably held.  A reasonable suspicion never involves certainty as to the truth.  From its very nature a reasonable suspicion cannot result in a definite and unequivocal state of mind which excludes any other possible answer.  Since suspicion is based on conjecture it can never point unerringly and exclusively in a particular direction only (See S. v Ganyu 1977 (4) SA 810 (RA) at 813 C – E).  The test therefore encourages disclosure of concerns and supports the notion of creating a culture of openness.

26.    The Bill should provide identity protection to whistleblowers. Although S159 (7)(a) does include the word “confidentially” the Bill should include a clause which states that the recipient of the disclosure should not reveal the identity of the whistleblower without his/her written permission.

27.    We are also of the view that the courts should be able to give interdictory relief if they are satisfied that a person has taken or intends to take detrimental action against a person in reprisal for having made a protected disclosure.


CONFIDENTIAL INFORMATION:


28.    S 212 states that “When submitting information to the Commission, the Panel, the Companies Ombud, the Council, or an inspector or investigator appointed in terms of this act, a person may claim that that all or part of the information is confidential”.

29.    Our concerns in respect of this section are that there is no definition of what information constitutes confidential information provided for in the Bill. There are also no criteria upon which the determination of whether or not information should be considered confidential should be made. The said determination is left to the discretion of the information receiver, being the bodies mentioned above, and there are no provisions regulating the exercise of such discretion.

 ACCESS TO COMPANY RECORDS

30.    While s26 protects the rights of shareholders and makes it clear that such people are entitled to obtain copies of the relevant information it does not affirm the rights of investigative journalists and the public, which we believe is a serious omission.
 
31.    It is our belief that in order to promote the freedom of the media and to generally advance the cause of good governance it is desirable to include a provision which specifically states that such rights exist. The inclusion of such provision would then improve access to information and be in line with the Bills professed objectives.

CONCLUSION

32.    The FXI would like to thank the Committee for its time and engaging with us on these important issues. We reiterate that we are as always ready to engage in discussions on these matters and elucidate and matters which we have touched upon.


Melissa Moore
Head: Law Clinic
Freedom of Expression Institute