National Consumer Commission: further briefing; Co-operatives Amendment Bill: report back by subcommittee

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Trade and Industry

05 September 2012
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

National Consumer Commission
The National Consumer Commission briefed the Committee on the status of complaints received by the Commission and on matters before the Tribunal. An analysis of the complaints received showed that the most complaints were received about the motor vehicle industry followed by the retail industry. In the five month period, 1 April to 30 August, 34% of the complaints had been resolved. There were 4 382 conciliation cases which involved an alternative dispute resolution process. Of these, 1 115 consent notices and 332 compliance notices were issued with a 29% success rate in resolving conciliation cases. A summary of the work showed that the backlog of cases was increasing. Amongst the challenges identified were the lack of staff and a shortage of conciliators. There were not enough computers or fax machines.

Turning to legal matters before the
National Consumer Tribunal (NCT), the NCC said it had never referred a compliance notice to the NCT. In all cases where it appeared at the Tribunal, it was as the respondent because a party had objected to a compliance notice it had received from the NCC. Its view was that it had the right to issue a compliance notice as part of its enforcement procedures. Brief references were made to cases where the NCC had appeared before the Tribunal, the rulings of the Tribunal and the NCC’s views on the judgments. The cases involved the City of Johannesburg, Top-TV, MTN, Vodacom and Auction Alliance.

Members asked how the backlog of work was going to be addressed. Why was there no fax machine? What plans were in place to meet the challenges identified? Was the reason there were no investigations into the selling of food past its sell-by date because no complaints had been lodged? Similarly was this also the case regarding medical costs? Were the challenges budget related? Did the NCC only act on complaints or could they investigate proactively? How far did the fact that the compliance notice made reference to the National Consumer Tribunal impede the NCC’s work? Why had nothing been done about data roaming charges billed by cell phone companies? Members requested the NCC to deal with the unlawful body searches that took place in township shopping centres. Members commented that certain matters surrounding the NCC could be ascribed to growing pains and were probably applicable to the NCT as well. The NCC should publicise its enforcement actions more. Why did the NCC not conclude its investigation of the City of Johannesburg billing issue? How long had Mr. Mohamed been the Deputy Commissioner? Did the NCC have the space to re-investigate the City of Johannesburg billing issue? Could the NCC bring a class action suit? Members said the differences between the NCT and NCC had to be resolved.

The Chairperson concluded there was not a clear interpretation shared between the NCC and  NCT on the matter of compliance notices; the legislation needed to be cleaned up as Section 71 referred to Section 69(1) and 69(2), which did not exist; the adequacy of the budget and human resource capacity needed to be addressed; the NCC needed to be more proactive; the NCC had to publicise its work more. She enquired about the relationship the NCC had with provinces, as the provinces had consumer protection units and the possibility existed of sharing the work.

Deliberations on the Co-operatives Amendment Bills
The subcommittee on the Co-operatives Amendment Bills had considered definitions for a number of terms. It had visited KwaZulu-Natal and Mpumalanga where it had interacted with co-operatives from these areas.

The dti said that concerns with definitions in Chapter One of the Bill, such as “financial statements”, “independent review” and “independent reviewer” had been included in the working document which would be presented to the legal drafters working on the Bill.

The Parliamentary Legal Advisor went through some of the changes in the working draft of the Bill:
▪ “activity plan” would be defined, following legislative convention, not in Chapter One but in Clause 26 (amending Section 29) where it appeared.
▪ “Annual Accounting Report” would be termed the “Annual Report” as the former was confusing.
  “Audited Annual Accounting Report” would be termed the “Audit Report”.
▪ The dti was developing the reporting framework in consultation with the accounting and auditing bodies.
▪ The definition of the term “audit” would be re-aligned to fit in with the additional requirements of co-operatives for a management decision report and a social report.
▪ The term “board“ would be defined as the members of the board of directors as set out in Section 32. The definition would make clear where the directors would be elected (at the AGM) and what would happen should vacancies arise. In the latter case, directors would be appointed for the remaining period provided that the appointments were ratified at the next general meeting.
▪ The co-operative principles would be transferred from the Preamble to the Bill itself to ensure that co-operatives complied with these. This was still work in progress and the State Law Advisor was assisting with the wording. Section 3(1) would be amended to reflect this (see subcommittee report 29/08/12, p4 line 8).
▪ Financial statements would be aligned with the Companies Act but references to ‘equity’ would be replaced by the term ‘member shares’.
▪ The definition of “independent review” would take into account the “social report “ and the “management decision report”.
▪ The definition of “independent reviewer” would be broadened to include registered auditors, accounting professionals and accountants of close corporations as envisaged in the Close Corporations Act. The Close Corporations Act had not been repealed.
▪ The “social report” assessed the social impact in relation to the vision, mission and codes of conduct of a co-operative and was a report on its social responsibilities. The “management decision report” assessed compliance to legislative and constitutional requirements.
▪ In Clause 14(1) amending Section 15, the Minister would prescribe the threshold levels for projected annual revenue for new co-operatives and the estimated annual revenue for co-operatives, arising from its income generating activities.

The State Law Advisor said that the two Bills would be incorporated into one consolidated Bill, which would be available next week.

Meeting report

National Consumer Commission (NCC)
The Acting Commissioner, Mr Ebrahim Mohamed, briefed the Committee on the status of complaints received by the Commission and on matters before the Tribunal. The complaints handling unit was part of the enforcement and investigation division of the NCC. Complaints were referenced and registered following which they were categorised, allocated and followed up. An analysis of the complaints received showed that the most complaints were received about the motor vehicle industry followed by the retail industry. In most cases it concerned misleading information being presented. In the five month period, 1 April to 30 August 2012, 34% of the complaints had been resolved. If complaints were not resolved, a conciliation process took place. There were 4 382 conciliation cases: 856 cases involved the motor industry, 587 cases about the retail industry and 558 cases about the information and computer technology industry. The Commission had issued 1 115 consent notices and 332 compliance notices. There was a 29% success rate in resolving conciliation cases. A summary of the work (slide 26) showed that the backlog was increasing. Amongst the challenges identified were the lack of staff and a shortage of conciliators. There were also not enough computers or fax machines (slide 27).

Discussion
Mr G Hill–Lewis (DA) asked how the backlog of work was going to be addressed. Why was there no fax machine?

Mr X Mabasa (ANC) asked what plans were in place to meet the challenges identified. Was the reason there were no investigations into the selling of food past its sell-by date because no complaints had been lodged? Similarly was this also the case regarding medical costs?

Mr B Radebe (ANC) asked if the challenges were budget related. Did the NCC only act on complaints or could they investigate proactively? How far did the fact that the compliance notice made reference to the National Consumer Tribunal (NCT) impede the NCC’s work?

Mr M Ambrosini-Oriani (IFP) asked why nothing had been done about data roaming charges billed by cell phone companies.

Mr Mohamed replied that he would give a written response to most of the questions as he needed to verify information, given that he had only been appointed on Tuesday 4 September. He said there was an on-going dispute on the interpretation of compliance notices between themselves and the
National Consumer Tribunal (NCT), and currently there was such a case being heard. He said that the NCC challenges were mostly because of its budget. The previous year an investigation had been launched into medical aid schemes and that this was an on-going investigation. Proactive investigations were done by the NCC. He said “non-referral” in the presentation meant complaints that were identified as not being valid. “Consent notices” were agreements by respondents to change and “compliance notices” were orders issued when respondents persisted with illegal practices. The NCC had a staff complement of 72 currently. It had an approved establishment of 120: 34 of those positions were filled while 38 were outside of the establishment structure. The gender and race breakdown was 51% male and 49% female, 99% African and 1% Asian.
 
Mr Radebe requested the NCC deal with the unlawful body searches that took place in township shopping centres.

Turning to legal matters before the NCT, Mr Mohamed said that the NCC had never referred a compliance notice to the NCT. In all cases where it appeared at the Tribunal, it was as the respondent because a party had objected to a compliance notice it had received from the NCC. Its view was that it had the right to issue a compliance notice as part of its enforcement procedures. Brief references were made to cases where the NCC had appeared before the Tribunal, the rulings of the Tribunal and the NCC’s views on the judgments. The cases involved the City of Johannesburg, Top-TV, MTN, Vodacom, Auction Alliance, Toyota, Mercedes Benz and Tata (see slides 32-42).

Mr Ambrosini-Oriani said that the issues surrounding the NCC could be ascribed to growing pains and were probably applicable to the NCT as well. He said that the NCC should publicise its enforcement actions more.

In connection with the City of Johannesburg case, Mr W James (DA) asked why the NCC did not conclude its investigation of the billing issue.

Mr Hill-Lewis asked Mr Mohamed how long he had been the Deputy Commissioner. Did the NCC have the space to re-investigate the City of Johannesburg billing issue? Could the NCC bring a class action suit?

Mr Radebe said the differences between the NCT and the NCC had to be resolved.

Mr Mohamed said he wanted to foster better relations with the NCT, especially on the interpretation of the law. He noted the comments on publicising the work of the NCC. He would provide a written reply on the City of Johannesburg matter. He had been appointed Deputy Commissioner on 1 January 2011. Class actions could be brought by the NCC.

The Chairperson summarised the issues: There was no clear interpretation shared between the NCC and the NCT on the matter of compliance notices; the legislation needed to be cleaned up as Section 69(1) and 69(2), as referred to in Section 71, did not exist; the adequacy of the NCC budget and the human resource capacity were two issues that needed to be addressed; the NCC needed to be more proactive; the NCC had to publicise its work more. She referred to the relationship the NCC had with provinces, as the provinces had consumer protection units and the possibility existed of sharing the work with them.

Co-operatives Amendment Bills
Mr X Mabasa (ANC) reported that the subcommittee had considered definitions for a number of terms ranging from “financial statements”, “social report” and “management decision report” to “audit” and “audit report”. The subcommittee had visited KwaZulu-Natal and Mpumalanga where it had interacted with co-operatives from these areas.

Mr Jeffrey Ndumo, Chief Director of Co-Operatives in the dti, said that all issues with regards to the definitions of Chapter One of the Bill, such as “financial statements”, “independent review” and “independent reviewer” had been put together in a working document which would be presented to the legal drafters working on the Bill.

Adv Charmaine Van Der Merwe, Parliamentary Legal Advisor, said “activity plan” would be defined, following legislative convention, not in Chapter One but in Clause 26 (amending Section 29) where it appeared.

“Annual Accounting Report” would be termed the “Annual Report” as the former was deemed to be confusing.

The “Audited Annual Accounting Report” would be termed the “Audit Report”.

The dti was developing the reporting framework in consultation with the accounting and auditing bodies.

The definition of the term “audit” would be re-aligned to fit in with the additional requirements of co-operatives for a management decision report and a social report.

The term “board“ would be defined as the members of the board of directors as set out in Section 32. The definition would make clear where the directors would be elected (at the AGM) and what would happen should vacancies arise. In the latter case, directors would be appointed for the remaining period provided that the appointments were ratified at the next general meeting.

The co-operative principles would be transferred from the Preamble to the Bill itself to ensure that co-operatives complied with it. This was still a work in progress and the State Law Advisor was assisting with the wording. Consequently Section 3(1) would be amended to reflect this (see subcommittee report 29/08/12, p4 line 8).

”Financial statements” would be aligned with the Companies Act but references to “equity” would be replaced by the term “member shares”.

The definition of “independent review” would take into account the “social report “ and the “management decision report”.

The definition of “independent reviewer” would be broadened to include registered auditors, accounting professionals and accountants of close corporations as envisaged in the Close Corporations Act. The Close Corporations Act had not been repealed.

The “social report” assessed the social impact in relation to the vision, mission and codes of conduct of a co-operative and was a report on its social responsibilities. The “management decision report” assessed compliance to legislative and constitutional requirements.

In Clause 14(1) amending Section 15, the Minister would prescribe the threshold levels for projected annual revenue for new co-operatives and the estimated annual revenue for co-operatives, arising from its income generating activities.

Adv Johan Strydom, dti Legal Advisor, said that the two Bills would be incorporated into one consolidated Bill, which would be available next week.

Other
The Chairperson announced that Dr Mutua Waema, African regional director for the International Co-operative Alliance would be visiting on 12 September.

The meeting was adjourned.



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