Incentive Schemes; National Consumer Commission follow-up report; Committee Report on Intellectual Property Laws Amendment Bill

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Trade and Industry

18 October 2011
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The National Consumer Commission briefed the Committee on the NCC’s capacity to fulfil its duties, its plans for public awareness programs, the status of complaints received, information technology and finance. The NCC had held workshops and interacted with all forms of media which in particular had a big appetite for the NCC’s work. It had surveyed 28 organisations across the country for state of readiness of non-governmental organisations to establish Consumer Protection Groups. This survey report would be out at the end of October. Budget constraints, high cost of reaching rural consumers, human resources and the compromised establishment of standing advisory committees were identified as challenges.

The top three categories of complaints received were about the Motor Vehicle, Retail and Telecoms sectors. The call centre received 7800 calls on average per month. Responses from suppliers to the NCC stood at 85% but the resolution of complaints stood at a low 10%.  Challenges were that the call centre needed extra staff and there was a need for trained conciliators because the current staff of two meant that the work proceeded slowly and there was a need for extra attorneys to draft legal documents. In addition there was a shortage of office equipment and vehicles.

The NCC was focussing its investigations on the retail and manufacturing sectors and had published the Consumer Product Safety Recall Guideline. It was investigating price disclosure and working on a pro forma compliance notice. In addition it had investigated the ICT sector and issued compliance notices to MTN, CellC, Vodacom, Telkom and MultiChoice. It was investigating the medical and pharmaceutical industry.  A challenge was the shortage of staff competent in consumer law.

The NCC had 48 permanent posts filled and 41 contract workers while 83 posts were vacant.  A challenge was that NEHAWU had lodged a dispute with the Department.

The total budget of ICT projects was R15.2 million. Challenges were the computers inherited from the Department which had passwords and security utilities that lead to breakdowns and malfunctioning, the email system which led to the loss of two weeks of NCC emails while less than half the staff had email connectivity, software licences where it was currently using trial versions, an opt-out register and the NCC website over which it has no control.

The Department had transferred R19.7 million in August and the balance of R13.3 million would occur in the third quarter. The NCC felt that, notwithstanding the fact that funds had been transferred to them and that they could now make payments, it still needed the financial assistance of a sweeper account. A proposed budget requesting a total budget of R98 million had been sent to Treasury and the Department for incorporation into the MTEF budget. This was R65 million more than the current budget.

Members asked why the NCC chose to lease equipment; could legislation be changed to allow class actions suits; about the
NCC relying on donor funding; about outreach in rural areas and if it had capacity to assist rural groups and informal settlements; why its budget request was not supported by the Department; if there was a Memorandum of Understanding with the Health Department on customer service; if it had a contingency budget for litigation; and if the NCC had receive funding for the full set-up costs. Members commented that the small budget of the NCC exposed weak planning by the Department. The Chairperson said the Committee wanted to engage further with the NCC and they should return on 26 October.

The Committee discussed the rule for including a minority report in a
Committee Report, specifically the one on the Intellectual Property Laws Amendment Bill. The rule was it was up to the Committee to decide.
Some Members pointed out it was part of democracy to accept the majority view and Members did have the opportunity to express their views in the National Assembly during the debate on the Bill. The Committee Report was adopted with the IFP, DA and COPE voting against it. It contained a short minority report.

The Enterprise Organisation gave a follow-up report on incentive scheme instruments answering questions the Committee had posed in July. The schemes included the Black Business Supplier Development Programme, the Cooperatives Incentive Scheme, the Manufacturing Investment Programme,
the
Services Investment Cluster, Export Marketing and Investment Assistance, Capital Projects Feasibility programme. Due to time constraints, a further meeting would be scheduled for a proper engagement.

Meeting report

National Consumer Commission (NCC) presentation
Ms Mamodupi Mohlala, NCC Commissioner, said the presentation would be limited to a progress report on the NCC’s capacity to fulfil its duties, its plans on public awareness programmes, the status of complaints received, information technology and finance.

Advocacy Education and Awareness
Ms Phumeza Mlungu, Director of Stakeholder Management at the NCC, said that an application for donor funding to USAid had been unsuccessful. The NCC had held two stokvel workshops reaching 255 people and held a three-day workshop with the Department of Public Works reaching 233 government officials. Two constituency workshops were held in Diepkloof which 155 people attended. The media had a big appetite for the NCC’s work and the NCC had conducted interviews and prepared responses to almost all the titles in all forms of media; print, radio and television. The NCC had surveyed 28 organisations across the country about the state of readiness of non government organisations to establish Consumer Protection Groups (CPGs). A report would be out at the end of October. Budget constraints, the high cost of reaching rural consumers, human resources and the compromised establishment of standing advisory committees were identified as challenges.

Complaints
Ms Prudence Moilwa, Head of Enforcement and Investigation at the NCC, said that figures on complaints were split into three streams: receiving the complaint, handling the complaint and the third stream was where an amicable settlement had been reached. The top three categories were the Motor Vehicle, Retail and Telecoms sectors. The call centre received 7 800 calls per month. Responses from suppliers to the NCC stood at 85% but the resolution of complaints stood at a low 10%. The current status of complaints was that 7 086 complaints were received of which 1 160 resulted in consent agreements, 191 had compliance notices issued and 1 631 were referred to conciliation.  Challenges were that the call centre needed extra staff and there was a need for trained conciliators because the current staff of two meant that the work proceeded slowly and there was a need for extra attorneys to draft legal documents. In addition there was a shortage of office equipment and vehicles.

Investigations
This was focussing on the retail and manufacturing sectors and it had published the Consumer Product Safety Recall Guideline. It was investigating price disclosure and working on a pro forma compliance notice.
In addition it had investigated the ICT sector and issued compliance notices to MTN, CellC, Vodacom, Telkom and MultiChoice.  In the third and fourth quarters it would focus on cell phone costs, roaming costs, the bundling of goods and pre-paid data costs as well as transportation. It was investigating the medical and pharmaceutical industry. It had met with medical schemes and inspected clinics and hospitals.  A challenge was the shortage of staff competent in consumer law.

Human resources
Mr Itani Ndou, NCC HR Director, said the NCC had 48 permanent posts filled and 41 contract workers while 83 posts were vacant. It had identified the special skills required in the organisation. The critical posts had been filled.  A challenge was that NEHAWU had lodged a dispute with the Department.

Information and Communication Technology
Mr Ntseileni Netshitoboni, Director of Information and Communication Technology at the NCC, said the ICT total budget was R15.2 million and they had chosen to take the leasing option for copiers and printers. Challenges were the computers inherited from the Department which had passwords and security utilities that lead to breakdowns and malfunctioning, the email system wherein the NCC lost two weeks’ worth of emails while less than half the staff had email connectivity, software licences where it was currently using trial versions, an opt out register and the NCC website over which it has no control.

Finance
Mr Kgabo Mantsho, CFO, said there had been a transfer of R19.7 million in August and the balance of R13.3 million would occur in the third quarter. Up to this point the Department had been processing all payments on behalf of the NCC through a sweeper account. The NCC felt that, notwithstanding the fact that funds had been transferred to them and that they could now make payments, it still needed the financial assistance of the sweeper account. A proposed budget of R98 million had been sent to Treasury and the Department for incorporation into the MTEF budget. This was R65 million more than the current budget.

Discussion
Mr M Ambrosini-Oriani (IFP) said it was important for the Department to go through the budget with the NCC. Could the NCC clarify why they chose to lease equipment instead of buying it? He suggested that possible changes to legislation to allow class actions suits to be brought would empower people into being effective consumer groups.

Mr B Radebe (ANC) said the NCC should not rely on donor funding as it would then be ceding its power to foreign governments. He pointed out that the outreach was mainly in urban areas and it should focus more on the rural areas where it was ultimately needed. The projection that the NCC needed two vehicles to cover the whole country was not realistic as it had a responsibility to 50 million people. Why was the budget not supported by the Department?

Mr J Smalle said the small budget of the NCC exposed weak planning by the Department. Did the NCC receive the full set-up costs? The NCC should not expect money lenders to advise their clients about their rights. Was there an MOU with the Health Department on customer service? He said the NCC should anticipate litigation, had they planned for that contingency?

The Chairperson asked what the strength of consumer groups were.

Mr G Selau said he would like to know what was found in public hospitals.  What did ADR stand for?

Mr X Mabasa (ANC) felt that the NCC needed mobile offices to be closer to their clients. Did they have the capacity to assist rural groups and informal settlements?

The Commissioner replied they had not received the full allocation of money, to date only R19.7 million.

Mr Mantsho replied that the balance of funds was still outstanding and that the Department wanted to see how they spent the first tranche of funds. The NCC sweeper account was originally for R15.1 million to assist in its start-up costs and to make the public aware of the Commission. It had not spent the whole of that amount and the NCC was motivating for that amount also to be made available to it.

Ms Pumeza said the NCC had identified a programme where it would use ten graduates in each of the provinces who would move around the regions promoting the NCC as the rural areas were regarded as a key priority. She said funding and capacity building was required to build up consumer groups.

The Commissioner said that a lot of the workshops were as a result of invitations to the NCC. They had held imbizos in the Free State and Gauteng with the provincial authorities. She said ADR stood for Alternative Dispute Resolution agencies. There were bodies that did provide consumer advice whilst operating a money lending service at the same time. The money lending service was there to provide an income to cover their costs.

The Chairperson said that the Committee wanted to engage further with the NCC and that they should return on 26 October

Mr Lionel October, Director General of the Department of Trade and Industry, said the late transfer was because the Public Finance Management Act regulations strictly allowed transfers only to take place only when adequate staff and IT systems were in place. An agency needed to have a CFO in place. Only when the Commissioner confirmed these requirements were in place could transfers be made. The sweep fund was used for the sector wide transfer of funds. The funds were EU donor funds which the government could decide to whom it would disburse them. It was used for start-up costs.  Government funds were allocated based on need and in the midterm a re-allocation could occur but generally speaking once the MTEF was decided, entities had to live within their means. In future, with well-motivated plans, the department would fully support increases.

Ms Zodwa Ntuli,
Deputy Director-General: Consumer and Corporate Regulation, said the Department had indicated that they would not give the full amount initially as spending had not been established. She impressed upon the NCC to use the allocated funds and apply for a top up. Treasury took into account that the provinces would also allocate funds but the provinces did not have a proper budget or human resources. The government was battling to fund critical areas.

Committee Report on the on Intellectual Property Laws Amendment Bill
The Chairperson said she had looked at the rules on whether a minority report could be included in a Committee Report after a concern had been raised by the IFP member on the Committee. She said the Committee might include in the report the views of minorities. If this were to be the case then it was recommended that the Committee make a final decision whether to include or exclude the minority views in the report.

Mr M Ambrosini-Oriani (IFP) argued that too little time had been allowed for debate in the Committee and he had wanted to move a number of amendments on the day of voting on the Bill. He had agreed not to do this on the basis that his views (of not more than one page) be incorporated into the Committee Report on the Bill. In addition, he said that the majority could not decide on which views of the minority parties were relevant. In a democracy the majority did not have the power to silence the views of the minority. He said he could only read into the silencing of minority views the fear of the majority’s own convictions.

Mr Smalle (DA) said that the DA had forwarded a submission on the amendments it did not agree with and asked that it be put in the minority report.

Mr Radebe (ANC) commented that he did not agree with Mr Ambrosini as he was seeking only the minority view, not the view of the whole Committee. The rules were clear: the Committee Report could include or exclude the minority views. Part of democracy was to accept the majority’s views. The Committee was not stifling the members’ ability to express their views as they had the opportunity to do so in the National Assembly.

Mr X Mabasa said care had to be taken not to set new precedents which would affect Parliament.

Mr G Mackintosh (COPE) said that minority parties were entitled to express their views and that these should be incorporated in the interests of democracy.

The Chairperson presented the Committee Report for adoption. The report was adopted with the IFP, DA and COPE voting against it. The Committee Report contained the following on minority views:

B.         Minority views were expressed on the following aspects contained in this report:
 
1.             JTM Classification of Bill
The Committee was of the opinion that the Bill was correctly classified as a section 75 Bill. The IFP disagreed and was of the opinion that the Bill should have been classified as a section 77 (money) Bill.
 
2.         Non-referral to National House of Traditional Leaders
Included in the decision on classification by the JTM was the view that the Bill did not have to be referred to the National House of Traditional Leaders (NHTL). The Committee agreed with this view. The DA, IFP and FF Plus disagreed, and were of the view that the Bill should have been referred to the NHTL in terms of section 18(1) of the Traditional Leadership and Governance Framework Act, 2003 (Act No. 41 of 2003).

Department's Briefing on Incentive Schemes
The Enterprise Organisation of the Department briefed the Committee on the Department’s incentive schemes (see document). The Director General, Mr Lionel October, referred to the high cost of capital for one of the reason for the incentive schemes. Mr Tumelo Chipfupa, Deputy Director General at TEO, said the briefing would be reporting on actual jobs created up to the first quarter of the financial year, the provincial spread, as well as the issues raised by the Committee in July which were:
(a) the years/months since implementation
(b) the number of projects approved (per Province)
(c) the value of projects approved
(d) the total cost to the fiscus = amount/claims paid
(e) the number of direct jobs created as a result of the incentive programmes (projected/actual)
(f)  the cost per job.
The schemes included the Black Business Supplier Development Programme, the Cooperatives Incentive Scheme, the Manufacturing Investment Programme, the Services Investment Cluster, Export Marketing and Investment Assistance, Capital Projects Feasibility programme.

The Black Business Supplier Development Programme gave R300 million rands in incentives to 10 000 projects.  Gauteng at 54% had the highest percentage of the funds with the remaining provinces all at less than 11%.  R92 million was paid via the Co-operative Incentive Scheme to 455 projects. A Cooperative Incentive Scheme study was undertaken to find out why cooperatives performed so poorly.  Based on the recommendations of the study, part of the grant would be used to improve training, mentoring and the administration of the schemes. Successful co-operatives were co-operatives involved with bottled water, compost production and bread making.

In the Manufacturing Investment cluster, 826 projects had been approved creating 23 000 jobs. A macro-economic impact assessment study was done which estimated that R68.4 billion in GDP would be generated. The Automotive Incentive Scheme approved 36 projects and committed R2 billion, of which R249 million had been paid which had supported 15000 jobs. 40 Strategic Industrial Projects (SIP) were approved for which R6.9 billion of funds were committed, supporting 7 977 jobs. Amongst the key findings of a study on the SIP and its incentives showed that the level of awareness of the SIP programme and its incentives was low, th
e extra tax revenue enabled by the SIP incentive would more than pay for the cost of the incentive and the long time taken to process applications.

In the Services Investment cluster: there was a focus on Business Process Outsourcing in which 18 projects at a cost of R260 million were approved and 7200 jobs created. Under the Film and TV Programme, 169 films were approved at a cost of R377 million. Films included Spud, Jock of the Bushveld, Invictus and Oh Shucks. In the Tourism Programme, 401 projects were approved at a cost of R64 million, creating 283 jobs.

In the
Competitiveness Investment cluster, Export Marketing and Investment Assistance (EMIA) was looking at smaller crafters to expose them to export markets.  Over 7 000 projects were approved at a cost of R350 million creating 10 500 jobs. The Capital Projects Feasibility programme (CPFP) totalled 22 in number and at a cost of R32 million.

The Infrastructure Support cluster contained the Critical Infrastructure Programme which supported 42 projects valued at R1.1 billion supporting 31 700 jobs. Projects included Kgalagardi Manganese and the four Industrial Development Zones (IDZs) of East London, Coega, Richards Bay and OR Tambo. Saldanha could potentially become another IDZ. The Department was working on a new IDZ policy

Discussion
Mr G Mackintosh asked what relationship the Small Business Development Agency now called Business Partners had with the Department.

Mr October replied that the Department still had a 20% stake in Business Partners and was expanding them throughout the regions.

Mr Selau wanted to know how effective incentives were at creating jobs when compared to retrenchments where jobs were lost. Were they balancing each other out? Was one forging ahead of the other? How many jobs had been created by incentives? What impact had the rising oil price and the weakening of the rand on the incentive schemes.

Mr October replied that the industry was facing a mixture of the two. The country was facing job losses in the tyre, rubber, plastics, and glass and leather industries.

Mr Smalle said that transparency and accountability was important. Were there ways of monitoring the schemes on a monthly basis? Were the incentives bailouts?

Mr October replied that the projects were monitored.  9.2 % of projects that were approved did not start and do not get disbursements. He said PG Glass for example was not a bailout instead it was facing a short term threat which it could not beat without the support of the incentive. The country was spending more than it earned hence the trade deficit.

Ms S Van Der Merwe asked what the situation was regarding Coega. Had the downstream impact been quantified?  What was the situation regarding wind farms in the Northern Cape.

Mr October replied that he was cautiously optimistic on the future for Coega. The issue was getting the private sector to put down roots there. The Department was fighting to get the energy sector moving. The REFIT tariff and tenders were happening and announcements would be made by November.   He said developments at Coega would go faster and that it was being promoted as a hub port.

The Chairperson said that because of time constraints there had not been enough time for a proper engagement and a further meeting with the Department would be scheduled.

She added that she had finally received comment from WIPO on 18 October about her correspondence sent on 11 August.

The meeting was adjourned.



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