National Consumer Commission: briefing on quarterly financial and non-financial performance

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Trade and Industry

07 August 2012
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

A state legal advisor briefed the Committee on judgements on the judgements passed on National Consumer Commission (NCC) cases at the National Consumer Tribunal (NCT), and summarised the judgements.   The NCT had been concerned that the NCC had exceeded its mandate, which was a serious allegation. Secondly, the NCT had been concerned with the quality of the NCC’s pleadings and the contemptuous attitude of the Commission’s counsel to opposing counsel, representing companies. A third concern was that the Commissioner had usurped the Minister’s powers by issuing notices in the Government Gazette. In one case, the Tribunal had found that a publication by the Commissioner, and not the Minister, had no legal standing. Fourthly, there was concern that the Commission was impugning the dignity of other state institutions and undermining the Tribunal.

A researcher attached to the Standing Committee on Public Accounts gave input on a research report based on the Auditor General’s (AG) internal audit report and two dashboard reports, for the quarters ending 31 January 2011 and 31 March 2012. The main findings revolved around supply chain management, asset management and employee payroll costs. 
Members said they were concerned that the Auditor General might give the Commission a qualified audit report, and asked who had commissioned the report, for what purpose and when it had been commissioned.  The Commissioner of the NCC said the Auditor General had given the Commission a clean bill of health which had met performance requirements, and that it had received an unqualified financial audit.

The key issues for the NCC were to raise awareness of the NCC and consumer rights, the handling of complaints and the manner in which matters were resolved. The NCC had set a target of reaching 10 million consumers and had in fact reached 22 million. It had done 15 educational workshops but had not reached all the provinces due to financial constraints. The NCC wanted to set up a Standing Advisory Committee for business in the light of recent concerns that the NCC was not giving enough of a hearing to business.  Despite a meagre staff, it had processed close to 74 000 calls to the NCC and received 16 831 complaints. A total of 374 compliance notices had been issued and there had been 2 900 consent agreements issued.  
The Commission had demonstrated that it had dealt with a wide range of complaints. The investigative unit had investigated the medical and pharmaceutical, information and computer technology, and the retail and manufacturing sectors.

The Head of Legal Affairs at the NCC said that the NCC complaints notices to the City of Johannesburg had been set aside, but a change in attitude had been noticed. The cases involving the mobile industry had all been referred to the NCT and defended. Some judgements were still outstanding. The South African National Roads Agency Limited (SANRAL) case was before the Constitutional Court. The NCC had worked with SANRAL to develop its terms and conditions in accordance with the Consumer Protection Act. The Commission had stopped outsourcing its legal work and had been doing it internally.

A challenge for the NCC was that it appeared as if there were contradictions between it and the NCT, which believed that the Commission did not have the power to issue compliance notices. This would hamper enforcement and without that power the Commission might as well shut down. The NCC needed certainty on the interpretation of the Consumer Protection Act. The NCT also did not believe the Commission had the power to file an interim relief order on behalf of the consumer. 

Members responded that the NCT did not say that the Commission did not have the power to issue compliance notices, but rather that it was not following the correct procedures. They raised concerns about the reported attitude of the NCC towards other government agencies, and asked why the NCC’s racial profile did not include whites. Other issues raised were what remedial acts the Commission intended implementing to prevent procedural trip-ups, and whether the NCC found the press to be biased against it. Members said the NCC needed to develop a working relationship with the NCT, and recommended that the Commission and the Tribunal be recalled to a meeting where both bodies were present.

Meeting report

 

National Consumer Commission briefing
Advocate Charmaine van der Merwe, State Legal Advisor, briefed the Committee on the judgements passed on National Consumer Commission (NCC) cases at the National Consumer Tribunal (NCT), and summarised the judgements. Of the 58 orders which had been made, 30 dealt with consumer protection. Five of the 58 had been taken on review and one had been overturned on a point of law.

She took cognisance of a Tribunal report which initially had been confidential, but because the Commission had attached it as a document in a court case, it had become a matter of the public record.  In this report, the NCT had been concerned that the NCC had exceeded its mandate, which was a serious allegation. Secondly, the NCT had been concerned with the quality of the NCC’s pleadings and the contemptuous attitude of the Commission’s counsel to opposing counsel, representing companies. Thirdly, the NCT was concerned that the Commissioner had usurped the Minister’s powers by issuing notices in the Government Gazette. In one case, the Tribunal had found that a publication by the Commissioner, and not the Minister, had no legal standing. Fourthly, there was concern that the Commission was impugning the dignity of other state institutions and undermining the Tribunal.

On the City of Johannesburg judgement, she noted that the Commissioner had not followed procedure. The City had not been given the opportunity to make representations. The compliance notice itself was defective because the incorrect section of the Act had been used. 

In the case of the Multichoice Africa judgement, the Act required that the Commissioner consult with the Regulator. The Commission only had a meeting, not a consultation, with the Independent Communications Authority of South Africa (ICASA). It needed to present its findings and what needed to be done to remedy the situation, and to allow time for its implementation.  Therefore correct procedure had not been followed. 

In the case of Vodacom and Another, a complaint had been lodged regarding the terms of a contract. There had been talks between Vodacom and the Commission.  Vodacom had subsequently amended the terms, yet the Commission had issued a compliance notice without consulting ICASA.  The view of the Tribunal was that the Commission had not issued a notice based on a transgression allowed in the Act, but rather on the signing of a consent order. This was not lawful, unreasonable and unfair.

In the case of Hyginique Toilet Hire, the Tribunal had found that Hyginique had co-operated with the Commission but despite this, a compliance notice had been issued. However, an objection form, which should have accompanied the notice, had not been attached to the notice. When the owner of Hyginique had investigated further, the owner had been told that there was no objection form. The Tribunal had found that no investigation had been conducted and the notice had been issued in terms of the wrong section of the Act.

In the case of Auction Alliance, the Tribunal expressed concern about a ten-page media statement issued by the Commission. Compliance notices had been issued against the liquidators and Auction Alliance and no notice could be given to the liquidators as no complaint had been lodged against them and no investigation against them had been undertaken. The Tribunal noted that the notice sought to nullify the auction, while compliance notices were meant to address future actions. The notice was therefore set aside.

A researcher attached to the Standing Committee on Public Accounts gave input on a research report based on the
Auditor General’s internal audit report and two dashboard reports, for the quarters ending 31 January 2011 and 31 March 2012. The main findings revolved around supply chain management, asset management and employee payroll costs. The report had found that on supply chain management there was a lack of procurement thresholds, inadequate control over order forms, and the Commission did not request proof of banking details. The payroll was not certified by a senior manager and there were no internal controls over the payroll. There were no termination policies in place. There was no fixed asset register and there were inadequate controls over the issuing of assets and the movement of assets.

Discussion
Mr B Radebe (ANC) said he was concerned that the Auditor General might give the Commission a qualified audit report.

Ms S van der Merwe (ANC) asked who had commissioned the report, for what purpose and when it had been commissioned.

The Chairperson replied that the Committee commissioned the report in March, and had then received the Auditor General’s report prior to a scheduled meeting on 27 July with the Commission.  She said the first Auditor General report had raised many issues, but the second report had reflected improvements with some outstanding issues. She said the Committee needed to look at the budget and how it had been allocated, and review expenditure to see whether the spending had achieved its purpose, whether it had been well spent and what the challenges were, if any.

The researcher said that that the review had looked at whether the Commission had complied with applicable laws and regulations. She added that the Auditor General’s comment of “in progress” meant that interventions had been instituted, but not necessarily that there was complete compliance.

NCC financial and non-financial performance
Ms Mamodupi Mohlala, Commissioner of the NCC, said the presentation would be based on the Annual Report of 2011/12. She was pleased to report that the Auditor General had given a clean bill of health to the Commission, which had met performance requirements, and that it had received an unqualified financial audit.

The key issues for the Commission were to raise awareness of the Commission and consumer rights, the handling of complaints and the manner in which the matters were resolved.

The Commission had set a target of reaching 10 million consumers and had reached 22 million. This was also reflected in the number of complaints received. It had created a lot of educational material to simplify the Consumer Protection Act for consumers. It had done 15 educational workshops, but had not reached all the provinces due to financial constraints.

Ms Phumeza Mlungu, Division Head: Education, Compliance and Advocacy of the NCC, said that the Commission’s awareness campaigns had paid attention to rural areas and senior citizens by means of  imbizos.  Complaints around high food prices, and the sale of foodstuffs which were beyond their expiry date, had been received from rural areas. The NCC wanted to develop more sustained contact with government workers, and in urban areas had set up exhibition stands in malls.

Ms Mohlala said the NCC wanted to set up a Standing Advisory Committee for business in the light of recent concerns that the Commission was not giving enough of a hearing to business.  It had engaged with Business Unity of South Africa and asked them for nominations to the committee. On the second issue around the handling of complaints, she said that despite a meagre staff, it had processed close to 74 000 calls to the NCC and had received 16 831 complaints. A total of 374 compliance notices had been issued, while there had been 2 900 consent agreements issued, with 206 referrals, 410 withdrawals, 725 duplications and 1 706 reformulations.

A staff member of the Commission noted that the nature of the complaints ranged from motor vehicle defects and misleading advertising of cars, which ranked highest, to the second highest ranking, with complaints concerning refunds and exchanges for defective goods in the retail sector. Provincial and local government departments were another noticeable sector, where complaints concerned electricity cut-offs and incorrect billing.  

Ms Mohlala said the Commission had demonstrated that it had dealt with a wide range of complaints. The investigative unit had investigated the medical and pharmaceutical, information and computer technology, and the retail and manufacturing sectors.

Mr Oatlhotse Thupayatlase, the Head of Legal Affairs at the Commission, said that the Commission’s complaints notices to the City of Johannesburg had been set aside, but that it had seen a change in attitude at the City of Johannesburg. The cases involving the mobile industry had all been referred to the Tribunal and defended. Some judgements were still outstanding.

The South African National Roads Agency Limited (SANRAL) case was a matter before the Constitutional Court. The NCC had worked with SANRAL to develop its terms and conditions in accordance with the Consumer Protection Act.  In the matter of Auction Alliance, the NCC said it had pursued the matter vigorously and arising from this was the discovery of a “rot” in the industry. There had subsequently been an increase in consumer complaints. The challenge for the Commission was that big companies had the financial resources to contest and muddy the waters. The Commission had stopped outsourcing its legal work and had been doing it internally.

A further challenge was that it appeared as if there were contradictions between the NCC and the Tribunal, which believed that the Commission did not have the power to issue compliance notices. This would hamper enforcement and without that power, the Commission might as well shut down. The NCC needed certainty in the interpretation of the Consumer Protection Act, even a declaratory order from a high court. The Tribunal also did not believe the NCC had the power to file an interim relief order on behalf of the consumer. 

Discussion
Mr G Hill-Lewis (DA) said that the Tribunal had not said that the Commission did not have the power to issue compliance notices, but rather that the Commission was not following the correct procedures.

Ms Van der Merwe raised concern about the reported attitude of the Commission towards other government agencies.

Mr Radebe asked why the Commission’s racial profile did not include whites.

Mr A Alberts (FF+) asked what remedial acts the Commission intended implementing to prevent procedural trip-ups. He asked if the Commission found the press to be biased against it.

Mr G Selau (ANC) said the Commission needed to develop a working relationship with the Tribunal.

Ms Mohlala said the real issue was the suggestion that the Tribunal needed to be contacted before the Commission could issue a compliance notice. If this procedure were to be followed, consumers would have to wait double the time.

On the question of the Commission exceeding its mandate and that their arguments were poorly drafted, she said the Commission took serious offence, as this would be usurping the powers of the Minister.

On the question of being unconstitutional and combative, the Commission said that it had a file of the correspondence it had sent to the Tribunal and that it had been regularly turned away by the Tribunal. The conduct of the Tribunal had been very surprising, as a report had been compiled which, had it been for an Annual Report, would have occurred in March and the Commission was concerned at how the report had landed in the media. The Commission’s actions were not combative, it was a last resort. It was not a territorial fight. The Auction Alliance matter had been summarily dismissed by the Tribunal without the matter even being heard and soon thereafter, the report had appeared in the media.

Regarding the issuing of notices in the Government Gazette, she said any entity that required information from the public in execution of its mandate had to publish in the Government Gazette and notify the Minister. It had been doing this since April last year but this was the first time issue had been taken.   

Mr Thupayatlase said that the Tribunal had never ruled that the Commission had exceeded its mandate. On the issue of poor drafting of arguments, he said the allegation was not specific. He said no senior counsel representing companies had ever complained that he had treated them with disrespect, nor had the matter been raised with professional bodies of which he was a member. On the issue of usurping the powers of the Minister, he said that the Commission followed the guidelines in the publication of notices in the Government Gazette. 

Mr Radebe recommended that the Commission and the Tribunal be recalled to a meeting where both bodies were present.

Mr Hill-Lewis requested that the Commission presentation be improved to facilitate a better understanding of its service delivery.

The meeting was adjourned.

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