International Trade and Administration Commission: Strategic Plan & 1st quarter 2010 performance report

Economic Development

09 September 2010
Chairperson: Ms E Coleman (ANC)
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Meeting Summary

The International Trade and Administration Commission of South Africa (ITAC) presented on its first quarter performance. Many of the targets which it had set itself were based on responses to requests from the industry. Historical data was used to set the targets. ITAC provided technical advice to the Department of Trade and Industry and the Department of Economic Development. ITAC also provided a business support service. It was developing an anti-dumping policy which was still a work in progress. Regulations had been finalised. ITAC was also working on countervailing and safeguarding measures. Mr Tsengiwe said that targets had been set for investigations regarding tariffs. In some cases the length of time of investigations had been reduced, but the ability to do this on an ongoing basis was subject to human resource constraints. Administration incentive schemes were in place with the motor and pharmaceutical industries. It was working on a negotiation position for trade agreements, and had reviewed customs policy. ITAC was working with other departments on import and export control. Internally, it had boosted its IT systems and established a policy and research unit. Its legal services division had contributed to legislative amendments.

Members noted that when ITAC had appeared before the Committee in the previous month, the documents presented were poorly structured, and the Strategic Plan had contained insufficient detail. They were also highly critical of the report presented at this meeting, particularly since no presentation had been prepared, the written report was in such a small font that Members battled to read it, and the budget figures were confusing. There was no quarterly breakdown of the annual budget which made it difficult for members to evaluate the Commission's performance. Members asked questions of clarity on the budget figures, the audit fee, the personnel costs and the service commission paid to Eskom. Members questioned the time frames for procedures, the length of time to fill posts, and the bursary conditions, and stressed the need to budget prudently for advertisements, particularly in light of overspending on tenders.  Members also called for clarity on the sunset reviews, green goods, the impact of policies, and pressure to reduce customs tariffs, as also a report on what was happening around dumping. They commented that although changes to the legislation were needed, ITAC would not meet the deadline for amendments. Members questioned whether ITAC should not be more proactive, seeing that it had a mandate to assist with the country’s growth and should have instituted investigations into green tariffs some time ago, and criticised the length of time taken for some investigations, pointing out that it was surely possible to speed things up. Members questioned the costs of consultants, and the fees paid to commissioners. Members expressed strong criticism of the Chief Financial Officer, saying that he should have known what was expected, that errors had been highlighted by this Committee, that the format differed from all other presentations, and they called for a corrected version of the financial statements in the following week.

Meeting report

Chairperson’s opening remarks
The Chairperson noted that this meeting was a follow-up to a meeting held jointly on 17 August with the Portfolio Committee on Trade and Industry, at which Members had been briefed by the International Trade & Administration Commission of South Africa (ITAC) on its strategic plan. However, Members had complained at that meeting that the document was poorly structured, was not clear and that the Strategic Plan had not contained enough detailed information.

The Committee had now received the first quarter report for 2010, and the Business Plan, but not the Strategic Plan. Members still wished to receive this. She stressed that reports had to be submitted to Parliament before other organisations. The focus of the current meeting would be the 1st quarter Performance Report for 2010.

International Trade and Administration Commission (ITAC): Strategic Plan follow up and presentation of 1st quarter Performance Report
Mr Siyabulela Tsengiwe, Chief Commissioner, International Trade and Administration Commission, apologised for the misunderstanding. He noted that the Commission (ITAC) had revisited its Strategic Plan. ITAC had also been requested to forward its tariff structure to the Committee. This had been done. ITAC felt the need to share more with the Committee on trade remedies. A short presentation had been prepared, but this would be shelved for the moment, in order to focus on the first quarter report.

The Chairperson interjected that the Committee had alluded to hosting a workshop for the Committee and counterparts from the Portfolio Committee on Trade and Industry, to focus on the documents. However, this was not part of the business for this meeting. She appreciated the effort made to meet Members' requests. She noted that ITAC had not prepared a presentation and asked Members for guidance on how they wished to proceed.

Mr Tsengiwe said that he could speak to the first quarter report.

Mr P Rabie (DA) said that it was a question of inadequate communication. He proposed that Mr Tsengiwe be allowed to address the Committee.

Mr Z Ntuli (ANC) agreed with Mr Rabie. He would like to hear all the presentations.

The Chairperson asked if he would like to hear the presentation on trade remedies as well. She felt that this might shift attention away from the focus of the meeting, which was the first quarter report.

Mr Tsengiwe said that he would inform the Committee about ITAC's overarching strategic plans. Measurable targets had been set. In terms of trade remedies ITAC had made an estimate of the number of investigations that it would conduct. Investigations were done in reaction to applications from the industry. Only three had been conducted during the first quarter. This was not unusual, and most of these were “sunset reviews”. He noted that another of ITAC’s focus areas was working against the dumping of goods. Once a duty had been imposed on such goods it would remain in place for a maximum of five years. The sunset review would be conducted at the end of this period.

The Chairperson noted that some Members were looking confused.

Mr Tsengiwe said that ITAC was responsible for providing technical advice. The Department of Trade and Industry (dti) was responsible for trade negotiations. ITAC provided technical support. ITAC also provided a business support service. It was developing an anti-dumping policy which was still a work in progress. Regulations had been finalised. ITAC was also working countervailing and safeguarding measures.

Mr Tsengiwe said that targets had been set for investigations regarding tariffs. There had been fourteen submissions. This had fallen short of the target, but he stressed again that ITAC did not seek the work, but depended on the industry submitting cases for ITAC to investigate. An administration incentive scheme was in place with the motor industry and a similar arrangement was also done with the pharmaceutical industry.

Mr Tsengiwe said that the targets set for the issue of certificates were based on historical data. There were variances, as the normal trend had not applied. ITAC had given technical advice to the dti. ITAC was working on a negotiation position for trade agreements. There were some highlights from engagement with the Southern African Customs Union (SACU) and Southern African Development Community (SADC). ITAC had reviewed customs policy.

Mr Tsengiwe said that in terms of import and export control, ITAC had specified targets for the number of inspections to be conducted. It had estimated that 3 250 permits would be issued but the actual number was 3 722. The target for export permits was 1 750, but 1 833 were issued. 150 inspections had been scheduled, and 183 had been conducted. ITAC was working with other departments on import and export control. There was a lot of improvement in the time taken to issue permits.

Mr Tsengiwe said that ITAC had boosted its integrated technology (IT) systems and had integrated its systems with those of the South African Revenue Service (SARS). ITAC had established a policy and research unit. It would focus on legislation and regulations. ITAC was also involved with import and export control, trade remedies and tariffs. It must take work from the dti to the Department of Economic Development (EDD). In this regard ITAC must still make a proposal to the Minister. ITAC would assist with policy work and documentation.

Mr Tsengiwe said that ITAC's Legal Services division had made a contribution to the preparation of amendments to legislation. It had assisted with review of policies and of ITAC's core business. The legal unit had provided legal advice when ITAC's decisions had been challenged in court.  A full litigation report had been prepared. ITAC took transgressors to court, but was itself also taken to court by parties aggrieved by rulings made by ITAC and the Minister..

The Chairperson remarked that Members were having some difficulty in absorbing the information in the written report.

Mr S Huang (ANC) said that it was a difficult document to follow. The font was very small. He noted that there was a budget of R2 million for legal fees. He asked if this was for internal or external legal services. The total budget was R65 million. He noted an audit fee of R1.2 million. He asked how this fee was compiled.

The Chairperson noted the use of minus figures in the document. She asked if this was due to insufficient funding. She queried the figures of R12.4 million for personnel costs and R496 million for salaries and wages. She was told that the YTD figure referred to year to date, and was used synonymously with first quarter figures. Some things were not clear. The business plan had been combined into the document. There was no projection of budget figures for each quarter of the financial year (FY), just the YTD figure. The business plan must give a breakdown of the budget for each quarter so that there could be a comparison of budget to spending.

Mr Huang queried the service commission paid to Eskom. He also expected to see quarterly projections of spending but had only seen YTD figures.

The Chairperson said that often documents that were difficult to follow were deliberately written in this way if the organisation had something to hide.

Mr Tsengiwe apologised for the small font. This had not been done deliberately.

Mr Justin Daniel, Chief Financial Officer, ITAC, took note of the comments regarding quarterly projections. This would be corrected in the next presentation.

The Chairperson said that ITAC must make the document easy to read and understandable for Members. She was inclined to dismiss the delegation at this point. She suggested that ITAC should consult with the Committee Secretary on what was expected.

Mr Daniel said that the budget was not part of the quarterly report. It had been reported to the parent Department. The total budget for the FY was displayed in the first column of the expenditure sheet. The figures were in rand, and did not represent thousands of rands. Revenue shown as with a minus figure represented the grants received.

Mr Daniel said that the R2 million in legal fees was paid to the State Attorney, who had handled 95% of ITAC's cases. Costs had been shared, where other Departments had been involved. Costs for ITAC's own legal department were part of the payroll.

Mr Daniel noted that the figure of R1.2 million for audit fees was paid to the Auditor-General (AG). The AG had conducted the external audit for ITAC. ITAC was trying to negotiate on the hours taken to complete the audit, as a reduction in hours would save costs.

Ms D Tsotetsi (ANC) noted that a procedure had been shortened from twelve to nine months. She also noted that vacant posts had been advertised. She asked how long it was taking to fill these posts. She noted that there was a remark that the costs of advertising were dependent on the size of the advertisement. She said that ITAC must budget prudently regarding tenders. There had been a lot of over-spending. She asked if there had been no quotations for goods and services supplied. She also asked if the most reasonable terms had been accepted for tenders.

Mr Daniel said that where more than one post was advertised, more space was used. However, ITAC tried to put two or three advertisements together as it was less than expensive than placing individual advertisements. The vacancies were in the human resources department. During the first quarter, ITAC had recruited two employees but had terminated the services of one. There were eleven vacancies at the end of the first quarter, which represented a vacancy rate of between 7% and 8%. The vacancies were often filled by promoting current employees. This left a gap at junior levels. He estimated that eight vacancies would be filled by the end of September 2010.

Mr Daniel admitted that there had been overspending on tenders. These were placed mainly during the first quarter but were part of the annual budget. Three tenders had been awarded for vehicles, components and labour saving devices. No more tenders would be advertised for the rest of the FY.

Ms Tsotetsi was also concerned about the bursaries awarded. She asked how many staff had applied for bursaries. She asked what terms and conditions were attached to their award. She asked what the policy was if the beneficiary failed. She asked why consultants were being used, when there was a human resources manager in place.
The Chairperson asked why staff training and bursaries were listed as separate items. She asked how many bursaries were for internal staff. She was unsure if the figure was R35 000 or R35 million. She asked at what level the bursaries were awarded.

Mr Daniel replied that ITAC had a bursary committee in place. All employees were eligible and could qualify for a bursary based on their prior academic record. There were criteria in place. Bursaries became part of staff debt. The policy was that if the student failed he or she could re-enrol for the programme at his or her own expense. If the student failed a second time then the bursary had to be repaid. There had been three applications in September. There were no costs for bursaries in the first quarter. It was more realistic to expect bursaries to be paid out during the second quarter. Bursaries were awarded for studies at tertiary institutions, while staff training was an internal process.

Ms Tsotetsti asked what the R123 000 spent on investigations had been used for.

Mr Daniel clarified that he cost of R123 000 was for investigations by the human resources department. There had been over-spending but this would be corrected during the remainder of the FY.

Mr Rabie asked about the sunset reviews. He was only familiar with the term sunset industries.

The Chairperson reminded Mr Rabie that Mr Tsengiwe was the Chief Commissioner of ITAC and not a spokesman. The strategic plan would help the Minister to analyse the tariff structure for green goods. Local manufacture of such goods would contribute towards economic growth and job creation. She asked what impact the policy was making.

Mr Tsengiwe said that sunset reviews were conducted in terms of World Trade Organisation (WTO) agreements on dumping. Duties were an intervention to prevent injury to local industries. They normally applied for a five year period. ITAC would make recommendations to the Minister. Green goods included catalytic converters, solar powered water heaters and wind turbines. ITAC would recommend that duties be placed to protect local manufacturers. The ITAC played an advisory role together with the Industrial Development Corporation (IDC). There was an investigatory process to be followed. The outcomes would affect various economic role players. There must be transparency and fairness. Tariffs had to be reasonable and fair. Applications had to be properly compiled. They would be assessed by the appropriate committee before being forwarded to the Commissioners. Finally, applications would be referred to the Minister who would publish the approvals.

Mr Tsengiwe said that final findings would be made and recommendations passed on to the Minister of Trade and Industries. He pointed out that the function of customs fell under the Minister of Finance.

The Chairperson noted that there was pressure to reduce custom tariffs. She asked for ITAC's view on this. There was also a view that trade should be made simpler, and that less should be spent on tax. There was a challenge of more imports than exports, as also around the dumping of goods in South Africa. She asked why four months had been spent on assisting vulnerable sectors by conducting tariff investigations. She asked what challenges ITAC faced in this regard and what the contributing factors were. She asked what was meant by vulnerable sectors. She asked if any amendments to the ITAC Act had been proposed.

Mr Tsengiwe replied that the amendments were still with the dti. Vulnerable sectors had been protected during the economic crisis period. There was an indication that investigations should be speeded up from six to four months. The clothing industry had required that import tariffs be increased to the maximum to protect the local industry against imported goods. The wheat farming industry was in a similar position. The Minister had launched an investigation.

The Chairperson said that the deadline for the amendments was in October.

The Chairperson questioned the budget, and said that she found it difficult to follow.

Mr Tsengiwe replied that import duties had been reduced. There was pressure from the WTO. South Africa had fulfilled its offer to reduce tariffs. There was a reduction in the average tariff. The resolutions from the Doha Round had put further pressure on tariffs. Bilateral agreements were in place. Tariffs could be amended but duties could not be increased. Reciprocal agreements had been concluded. Applications of tariffs could not be increased beyond the boundaries of the WTO.

Mr Tsengiwe admitted that ITAC would not meet the target for amendments to the ITAC Act. ITAC was engaging with the Minister and senior departmental officials. The amendments with the dti would have to be forwarded to the Minister of Economic Development, Hon Ebrahim Patel.

The Chairperson asked what was happening about dumping. She was particularly concerned about useless and outdated goods being dumped on South African markets.

Mr Tsengiwe replied that there were two kinds of dumping. The first regarded the price of a product. A company could decide to sell its goods into a foreign market at less than its cost on its domestic market. This was a highly competitive market. The company could still be making a profit. Costs could be fixed or variable. By selling at below its own domestic price, the company would be looking to create a foreign market for its goods. The WTO could only act on such practices where industries in the receiving country were suffering.

Ms Tsotetsi queried the amounts spent on flowers and gifts.

Mr Daniel replied that the costs for flowers were included in the budget. Flowers were bought to decorate the reception areas of the ITAC offices and were also sent to staff members who were hospitalised. ITAC did not give gifts to external parties without the permission of the Chief Commissioner. Small branding gifts would be given to an Egyptian delegation that would be visiting the country shortly.

Mr Huang was critical of the Chief Financial Officer’s report. While the budget should be submitted to the Department it also had to come to Parliament. The Chief Financial Officer should not have made such mistakes.

Mr Huang noted the target of processing 20 000 permits. He asked if there was a fee for these transactions. He asked if ITAC received revenue from both the dti as well as the EDD.

Mr Daniel said that there was no fee for permits.

The Chairperson asked if the need for green tariffs had been foreseen before the Minister had issued the requirements. These tariffs were only being considered now. She questioned the creativity of ITAC. She felt that it could initiate investigations without having to wait for a report. It could also analyse certain areas of its work. ITAC had a mandate to assist with the country's economic growth.

Mr Tsengiwe replied that ITAC was now only starting the tariff analysis on green goods. This industry had never existed in the private sector previously. The need had been identified by Minister Patel.

The Chairperson referred to the four month investigations in support of vulnerable sectors, she asked what the difference was to normal investigations. She asked if the normal investigations could also be done in a reduced period. Things had been done quickly in the face of the economic difficulties.

Mr Tsengiwe noted that there were some areas where proactive investigations were possible. The aluminium industry was one example. However, the majority of investigations were in response to applications from industries. Anti dumping investigations could be reduced from twelve to nine months. Although it was difficult, ITAC was committed to do this. It did face huge challenges.

The Chairperson noted that the commissioners held monthly meetings. She asked if this was required by the Act and if provision was made for extra meetings. The investigation period was a minimum of six months, but these could be done more quickly. She pointed out that in the lead-up to the Soccer World Cup, some things had been done more quickly, proving that the potential to do so was there, without compromising standards. Perhaps another economic crisis was needed to shake things up.

Mr Tsengiwe said that some investigations had been reduced from twelve to six months. In extraordinary cases the period had been cut to four months. ITAC would struggle to maintain this pace of investigation, given its human resources constraints. He confirmed that the Act did require the commissioners to meet monthly. There was provision for extra meetings.

The Chairperson sensed that the Chief Financial Officer had not put enough effort into the report. He had sat with it since the end of June, but it had taken the Committee to point out the errors. She was severely critical of the mistakes and said Mr Daniel had not checked his work. The Committee had to submit a report based on ITAC's quarterly report. Members did not want to have to review the work. ITAC must provide the Committee with a corrected budget. This should include the projections for each quarter. The Members would expect the corrected version the following week. ITAC could educate the members regarding the trade remedies in the following term of Parliament.

Mr Daniel accepted the comments on the budget. The format had been agreed upon with the Department. The numbers were correct, but he conceded that they might be misleading. It was not a deficit budget. All State entities should understand it.

The Chairperson was still not sure if should accept this explanation. Other entities had made presentations to the Committee, using a different format. She asked why ITAC used a different standard. Revenue was a credit, and should be indicated by a positive rather than a negative symbol. If this was a message from the Department then it should have gone to the other entities reporting to the EDD.

Mr Daniel said that the format used was a historical one. ITAC had previously reported to the dti but was reporting to the EDD for the first time.

Mr Tsengiwe confirmed that ITAC had historically reported to the dti. It had never had the opportunity to report directly to Parliament. He undertook to bring the report up to the standard required by the Committee.

Ms Tsotetsi requested a breakdown of the ITAC staff by gender and race. She noted that ITAC should focus on service delivery. The use of consultants was costly. Delays led to inefficiency.

Mr Daniels said that part time commissioners were remunerated according to National Treasury guidelines. They were paid for attending meetings and for their preparation time.

The Chairperson said the question was how much the commissioners were paid.

Mr Daniel said that the Chairperson of the Part-Time Commissioners was paid R3 526 per meeting for twelve meetings per year. The Chairperson was also paid R146 per hour for a maximum of five hours preparation time.

Mr Tsengiwe said that the commissioners were required to review the concluded investigations before the next meeting. This was what the preparation time was.

The Chairperson asked how ITAC could be sure that the commissioners did in fact work these hours.

Mr Daniel said that the preparation time payments were based on claims submitted and historical data. He did not have the figures for the claims available. Ordinary commissioners were paid R2 623 per meeting and R109 per hour for preparation. The organogram would be updated. The human resources investigation had been concluded in April and there would be no further costs.

Mr Tsengiwe said that he, as Chief Commissioner, and his Deputy were full time employees of ITAC. They were not paid allowances.

The Chairperson said that this had been the Committee's second engagement with ITAC. ITAC should now have gained a sense of what the Committee required. She would like to know who was on the Board of ITAC. Members might wish to visit the ITAC offices in Pretoria. This would happen in the next term. ITAC would be advised of the Committee's plans. She reminded ITAC to submit the requested documents the following week. The Committee would finalise its report in the following term. She also noted that the revised Strategic Plan had been received.

The meeting was adjourned.

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