International Trade Administration Commission of South Africa & Competition Tribunal on their 2013/14 Annual Reports

Meeting report

Mr M Cele (ANC) chaired the meeting in the absence of the Chairperson, Ms E Coleman (ANC) who was reportedly not well.

The Acting Chairperson remarked that the International Trade Administration of South Africa (ITAC) was running late and therefore the Competition Tribunal would present first. He welcomed the delegation and asked that they proceed with the meeting as they were already running late.

Briefing by the Competition Tribunal
Mr Norman Manoim, the Chairperson of the Competition Tribunal presented the annual report to the Committee. He said the Tribunal had developed a new way of reporting which was called integrated reporting which encompassed moving away from the silo approach of reporting. He said they would now use real cases to convey what they were talking about, he said this would include cases like that of Telkom which would illustrate clearly how each of their functions add value as well as the construction case which was able to illustrate the difference in costs of settlement and costs of prosecution. He also said the Aston Canning, concrete pipes cartel and momentum/metropolitan cases look back on 15 years of adjudication as well as their impact on the food chain over 15 years.

Mr Manoim said the Tribunal was one of three institutions set up to administer the Competition Act 89 of 1998. In addition to investigating and prosecuting, the Tribunal adjudicated mergers ad anti-competitive conduct and currently nine judges serve as a pool of judges in the Competition Appeal Court which hears appeals from Tribunal cases.
He made an example of the Telkom case which had Telkom admitting to contravening the Act and agreeing to a penalty of 200 million and more importantly agreed to change their pricing behavior. The Tribunal also heard settlements between the Commission and fifteen construction companies with the total penalty amounting to R1.46 billion and confirmed all settlement agreements. He also added that they approved the Aspen Nutritionals/ Pfizer Nutrition merger after a weeklong hearing maintaining competition for popular baby milk products. He said the Tribunal had dismissed a Competition Commission complaint against SAB due to the fact that they found there was not sufficient evidence to prosecute them on the grounds of unfair competition because the Commission only focused on 10% of SAB's distribution methods. He also added that the number of cases fluctuated over time and they had busy periods as well as periods that were not so busy. He added that the years 2008/2009, 2011/2012 as well as 2013/14 had very high numbers of cases with 2013/14 having the most number of cases.

The Tribunal also underwent restructuring where they benchmarked their structure with comparable organisations and continued to create the positions of chief operation officer, procurement officer, human resources officer as well as a knowledge manager, he said.  He also added that they formalized intern and consultant positions and introduced levels of seniority in the case management department. He said all the latter changes were implemented except for the knowledge manager position and that they were yielding positive results. He said a review process of the Tribunal would take place to review and asses its position since its restructure in late 2014.

With regards to their audit opinion, the tribunal received a clean unqualified audit opinion and on fruitless and wasteful expenditure they had an amount of R84 141.68 which he said pertained to penalties paid to SARS with disclosure related to incorrect application of perks tax. He said the Tribunal had a total budget of 33.8 million and spent a total of 33.54 million which amounted to a total percentage of 101.39%. He added that their difficulties included the fact that tribunal Members were not permanent and that they had made a proposal to the department to make them permanent and furthermore alleviate their problem of space as well as the fact that their rent had gone up.

Briefing by the International Trade Administration Commission (ITAC)
Mr Siyabulela Tsengiwe the Chief Commissioner of ITAC told the Committee that producers of industrial and agricultural goods would continue to experience cost pressures as well as global market distortions. He said ITAC support needed to be complemented by measures that sought to address competitiveness constraints and promoted exports. He said the year preceding the period under review saw the highest number of tariff increases but that there was now a downward trend. He said the global economy was recovering but it was not yet robust which had a weakening effect on exports. He said this made it necessary to make domestic challenges a priority. He said the commission took a developmental approach to tarrif setting for both industrial and agricultural goods and their recommendations are evidence-based and conducted on a case by case basis. He said they took a pragmatic approach that focused on the outcomes of domestic production, investment, job retention and creation as well as international competitiveness. He conveyed to the Committee that they had a number of tariff increases as well investigations thereto that informed the increases the recommended.

He added that in terms of their administration policy they developed the APDP which replaced the MIDP. He said this was to create an enabling environment for the domestic industry to significantly grow production volumes and local value addition leading to the creation of additional employment opportunities across the value chain. he said this was to elevate the MIDP which was export oriented. He added that the Minister issued a policy directive to regulate scrap metal exports so as to create scrap metal beneficiation as well as to prevent the decline in the particular industry.

Mr Zanoxolo Koyana, ITAC Chief Financial Officer said ITAC did not incur any fruitful and wasteful expenditure in 2013/14 but had accumulated irregular expenditure of R391 621. 00. He added that ITAC had received an unqualified audit opinion in the financial year under review and that they would be implementing the recommendations by the Auditor General. He said ITAC has a sound financial position as its assets were more than its liabilities. He said their total revenue amounted to R82 million and total expenditure amounted to R22.9 million with a deficit of R890 163 where the expenses above budget were financed from approved retained surplus.

Discussion
The Acting Chairperson thanked the entities for their presentations and opened the floor for Members to engage on the presentations.

Mr S Marais (DA) asked whether Competition Tribunal had taken into account increased cost or available funds given the fact that they had spent 8.1% of their budget. He added that in the past two years they had spent less than their budget and that 2013/14 was the first financial year where they had spent more than their budget. He asked what caused this change.

Mr P Aatkinson (DA) asked whether the part time tribunal Members got remuneration.

Ms Z Rantho (ANC) apologised for arriving late and said the entities should have more focus on IT so as to improve their work and make it more efficient by using the latest technology. She enquired whether they had used the grant given to the by the Department of Trade and Industry given the fact that they had gone over budget.

Mr S Tleane (ANC) said the Tribunal was generally performing well and that the office space issue was not unique to them and asked if they had referred the matter to the Minister. He also asked if their assessments on different sectors of the economy were adding value and whether there was stakeholder awareness. He also asked if they made all their cases and outcomes thereof public.

Ms Janeen de Klerk, Competition Tribunal Chief Operating Officer said when the Tribunal was starting off they received funds from the Department of Trade and Industry and that in this, merger charges were not anticipated. She said the surpluses they incurred were operating surpluses and had a request from Treasury to maintain them. She said the Tribunal had an IT and budget strategy in place to mainly maintain the current systems. She said they were to compare and see that there was an operating deficit and that they had budgeted for a board of full time Members.

Ms Nandi Mokoena, the Communications Officer for the Competition Tribunal said all decisions of the cases they had were made public in the form of Government Gazettes and their website. She said this was to ensure that South Africans knew the work of the Tribunal and it was also to ascertain the livelihood of communities after mergers take place. she made an example of the Ashton case where they had gone on the ground after a merger and made sure that it was for the benefit of the whole community

Mr Manoim said the Tribunal had an appointment of a 5th person on the board and that it was well within their budget. He said that their space problem would be solved by writing to the Minister.

The Acting Chairperson asked whether penalties to entities such as Telkom were good enough for them not to repeat their offences. He also enquired on how the Tribunal could improve the Impact Assessment Unit. He suggested that the Tribunal should strengthen its communication line with the Department of Trade and Industry so as to alleviate some of their problems such as space.

Mr Manoim said their penalties were adequate and that the second time an offence was committed the penalties had a possibility of increasing. He said a more drastic measure was taken when an offense was repeated.

Ms Mokoena added that the Department of Trade and Industry had seen a need to consolidate a communications effort to speak about the work of organisations and thanked the Chairperson for the suggestion.

Mr Marais asked ITAC how they could go about supporting local business and what measures they could take to intensify import and export control so as to avoid things such as copper being maliciously stolen.

Ms C Mantsimbi (ANC) enquired about how the issue if irregular expenditure would be addressed

Mr I Pikinini (ANC) asked whether the report was deliberately made to be technical because it was very thin in volume.

The Acting Chairperson remarked that the amount of irregular expenditure was alarming and that it needed to be addressed. He commended them for not having any fruitless and wasteful expenditure.

Mr Zolani Koyana said they would address the issue of irregular expenditure by implementing the recommendations set out by the Auditor General as per their set out Action Plan. he said the irregular expenditure was a result of proper accounting procedures not being followed and that the matter would be addressed accordingly.

Mr Tsengiwe said he apologised for the report being perceived to be too technical but that that was not their intention and they would fix that in future presentations to the Committee. He said they welcomed the advice and constructive criticism from the Committee and that they would bear all that they heard in mind so as to improve their work

The Acting Chairperson thanked the entities for their presentations and said they appreciated them travelling on the day of the meeting because they were adhering to government's plea to save money. He said the Committee had learnt a lot and they appreciated the honesty in their presentations.

The meeting was adjourned.