PRESENTATION%20TO%20THE%20STANDING%20COMMITTEE%20ON%20PUBLIC%20ACCOUNTS%20(SCOPA)%2022%20MARCH%202006

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PRESENTATIONTO THE STANDING COMMITTEE ON
PUBLIC ACCOUNTS(SCOPA)22 MARCH 2006
2
AGENDA

• PFMA exemptions
• Reasons for providing PFMA exemptions
• Other regulatory measures
• Companies Act
• JSE Listing Requirements
• Way forward

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ENTITIES EXEMPT FROM PROVISIONS OF THE PFMA

• Telkom is listed as a Schedule 2 Public Entity.
• Telkom was listed in 200? On the JSE and NYSE.
• Compliance with the PFMA would imply
  non-compliance with JSE and NYSE listing
  requirements.
• Non-compliance would have prevented Telkom from
  listing on both these exchanges.
• In 2001, Telkom was granted certain exemptions
  from the PFMA Treasury Regulations in terms of
  Section 92 of the PFMA.

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ENTITIES EXEMPT FROM PROVISIONS OF THE PFMA

• Telkom was exempted from certain provisions
  6(2)(e) 6(2)(f) 7(2) 7(4) 49 50(1)(c )
  51(1)(d) 51(1)(b)(ii) 51(1)(f) 51(1)(g) 52
  54(1)54(2) 54(4) 55 56 58 59 60 61 62
  66(1) 66(3) 66(6) 66(7) 68 76(4) 83 and
  86.
• Telkom is the only entity that has been granted
  an exemption from submitting an Annual Report.
• Section 92 of the PFMA - the Minister of Finance
  may exempt any institution to which this Act
  applies, from any specific provisions of this
  Act, for a period determined by notice in the
  Government Gazette.

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ENTITIES EXEMPT FROM PROVISIONS OF THE PFMA

• The Minister of Communications concurred with the
  initial exemption granted in 2001.
• The exemptions were originally granted for a
  period of 3 years, and expired in November 2004.
  
• During November 2004,an extension of the
  exemption was granted for a further period of 3
  years, ending on 31 October 2007.

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OBJECTIVES OF LISTING REQUIREMENTS

• Fair and equal treatment of all shareholders
• Simultaneous release of sensitive information to
  all
• shareholders and the public
• Shareholders best interests to be promoted by
• directors
• Best practice corporate governance followed and
• The Insider Trading Act makes it an offence for
  any person in possession of inside information to
  disseminate price sensitive information.

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THE COMPANIES ACT

• DISCLOSURE OF PERIODIC FINANCIAL INFORMATION
• Section 179 The company has a duty to prepare
  annual financial statements and to present them
  at the annual general meeting.
• Section 304 Every public company shall send an
  interim report to every shareholder and debenture
  holder.

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THE COMPANIES ACT

• MEMBERS RIGHTS
• Section 67 A company shall send to every
  member at his request a copy of its memorandum
  and of its articles.
• Section 252 Any member of a Company that
  complains of unjust/unfair treatment of the
  affairs of the Company can apply to the Court for
  an order under this Section.

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JSE LISTING REQUIREMENTS

• DISCLOSURE OF INFORMATION
• Para 3.4
• A company must from time to time, promptly
  release a public announcement giving details of
  
• Circumstances or events that have or are likely
  to have a material effect on its financial
  results, financial position or cashflow
• Any new developments in its sphere of activity
  that are not public knowledge, that may lead to
  material movements in its share price
• Para 3.5
• Prohibits the release of information in para3.4
  to any 3rd party until it has been released
  publicly.

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JSE LISTING REQUIREMENTS

• DISCLOSURE OF PERIODIC FINANCIAL INFORMATION
• Para 3.15
• Reporting Interim reports shall be published
  and distributed distributed to shareholders after
  the expiration of the first 6 month period of a
  financial year, by not later than 3 months after
  that date.
• Interim reports must comply with Statements of
  GAAP or IFRS
• Para 3.17
• Non- compliance results in a listing suspension

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JSE LISTING REQUIREMENTS

• DISCLOSURE OF PERIODIC FINANCIAL INFORMATION
• Para 3.19
• Every issuer shall within six months after the
  end of each financial year, distribute the annual
  financial statements for the relevant financial
  year to all holders of securities
• Company must submit 200 copies to the JSE
• Publish the financial results in the press
• Para 3.23
• Non- compliance results in a listing suspension
  and possible termination of listing

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JSE LISTING REQUIREMENTS

• RIGHTS BETWEEN HOLDERS OF SECURITIES
• Para 3.27
• A company must ensure that all holders of any
  class of its securities that are in the same
  position, receive fair and equal treatment.
• Para 3.29
• Securities in each class must rank pari passu in
  respect of all rights i.e. shares are in all
  respects identical.

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JSE LISTING REQUIREMENTS

• COMMUNICATION WITH HOLDERS OF SECURITIES
• Para 3.44
• A company must ensure that all the necessary
  facilities and information are available to
  enable holders of securities to exercise their
  rights.
• A company must
• (a) inform holders of securities of the
  holding of meetings that they are entitled to
  attend
• (b) enable shareholders to exercise their
  right to vote, where applicable and
• (c) release announcements and distribute
  circulars in terms of the Listing Requirements.
  

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PUBLIC vs PRIVATE INTEREST

• PUBLIC INTEREST
• Financial Returns
• Social Returns
• Public Good

• PRIVATE INTERESTS
• Financial Returns

• Government does not have outright control of
  Telkom and is not able to demand social returns
• Government can use negative control to pursue its
  interests

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WAY FORWARD

• Section 3 of the proposed Amendment Bill to the
  PFMA, proposes that government business
  enterprises listed on the JSE be exempted from
  the PFMA.
• The intention of the Bill is to ultimately delist
  all the government business enterprises upon
  listing on JSE Bill has not as yet been enacted.