National Consumer Commission; National Regulator for Compulsory Specifications & National Credit Regulator on their 2014/15 Annual Reports; NCR 1st Quarter 2015/6 performance

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Trade, Industry and Competition

12 October 2015
Chairperson: Mr M Kalako (ANC) (Acting)
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Meeting Summary

The Committee first heard the Annual Report and First Quarter Report from the National Consumer Commission (NCC). Though problems relating to irregular expenditures lingered from previous years, the NCC had received an unqualified opinion from the Auditor General (AG) for the second year in a row. The five-year lease agreement for the building housing the NCC had caused many of the budget and audit issues, and would expire in September 2016. The NCC highlighted its education and awareness campaigns, and statistics showed that there were now more black complainants than whites. The Committee pursued further information on the NCC’s information technology (IT) struggles, its procedures for processing complaints, the increase in first quarter complaints, and the lengthy process for National Credit Tribunal (NCT) trials.

 

The Committee next heard the Annual Report and First Quarter Report from the National Credit Regulator (NCR). The NCR said it had received a clean audit and described the various raids and investigations it had conducted in the past year. It had also conducted various workshops and interviews to promote awareness of its services. The Committee asked about the decrease in fees, which the NCR attributed in part to the implementation of new regulations hampering registrations. Members also asked about insurance caps and labour relations, and urged the NCR to strive to complete more investigations in the future.

 

The Committee finally heard the Annual Report and First Quarter Report from the National Regulator for Compulsory Specifications (NRCS). The NRCS detailed its work in creating compulsory specifications, granting Letters of Authority, and doing inspections on products from the automotive, chemical, material, mechanical, electro-technical, food, legal metrology and building regulation industries. In general, it had been able to process Letter of Authority requests within 120 working days, though both the Committee and the Minister had called for this processing time to be significantly reduced.

 

The NRCS highlighted efforts pursued in conjunction with the NCC to ensure that paraffin stoves for winter weather were safe, and were safely used. Though it had reduced the number from six audit qualifications two years ago, and presented its efforts to remedy the situation, the NRCS was the only entity in the Department of Trade and Industry (DTI) with a qualification related to revenue issues from the Auditor General. 

Meeting report

National Consumer Commission Annual Report

Mr Ebrahim Mohamed, Commissioner: National Consumer Commission (NCC) said the NCC had become aware yesterday that it was also required to present its first quarterly report. The office had managed to get the presentation together, though most of the delegation was already here. The annual report presentation had been done.

 

The NCC had received an unqualified audit opinion for the second year in a row. Prior qualified opinions had predated his appointment. The accreditation of The Motor Industry Code had gone through, and the Code was being launched today. There had also been accreditation of the Consumer Goods and Services code, and the Portfolio Committee’s Chairperson, Ms Joan Fubbs, had attended the launch. There had been various product recalls, including tyres and medical equipment. The NCC had done inspections to address many issues, such as unsafe cooking practices with paraffin stoves. Since efforts to mitigate the danger of paraffin stoves had been so successful, the Minister had requested that these efforts be taken to all nine provinces.

 

The NCC had done investigations into unfair contract terms in relation to Timeshare. This had been a hotly contested legal issue -- the industry already had senior counsel, and there would be a tribunal soon. The NCC had also been attempting to crack down on pyramid schemes. Nine specific cases were currently being investigated to determine whether or not the practices constitute a pyramid scheme. The NCC had been regularly featured on TV, radio, and in print media, and had also hosted Mozambican and Zimbabwean consumer protection delegations. Zimbabwe had said that, when forming its own legislation, it would largely follow South African practices, thanks to the efforts of the NCC.

 

Statistics should highlight areas that needed further attention. The NCC had received 5 242 consumer complaints, of which 2 007 (38%) were from females and 3 235 (62%) from males. 1 826 (35%) of complainants were 18-35 years old, 1 519 (29%) were 36-45, 1 499 (29%) were 46-60, and 398 (8%) were over 60. Whites lodged the highest number of complaints, with 2 406 (45.9%), followed by Africans with 2 107 (40.2%). Indians and Coloureds had lodged 729 complaints combined (13.9%). Types of complaints included defective goods, poor service delivery, contract cancellation, unconscionable conduct, incorrect billing, unauthorised deductions, and misrepresentation. The NCC was investigating whether the cell phone industry needed to conform better to the Consumer Protection Act (CPA).

 

The NCC had two strategic objectives. These were to promote compliance with the CPA and to be a well governed and capacitated organisation. Within the NCC, 53 of the 82 officials were involved in operations. The NCC had 14 indicators and 18 targets. It had fully achieved 16 targets, and project planning principles were being introduced to address unachieved areas. There had been 27 minor findings by the Auditor General in 2014/15, mainly relating to information technology (IT) issues. This number of findings was down from the past, and the Commission hoped to achieve a fully clean audit in the future. Irregular expenditure issues from the past were being managed. Each division had introduced standard operating procedures.

 

The Chairperson noted that the report had been previously tabled and the Committee had engaged in the past.

 

Mr Anton van der Merwe, Head of Corporate Services: NCC said that 63% of the NCC budget had been spent on employee compensation. The NCC had an approved budget of R53 million. Its total expenditure had been R51 million, so there had been an under-spending of R2 million (3.6%). The NCC had under-spent R1.7 million on goods and services, mainly due to savings on legal fees and leases.

 

R37 million had been classified as irregular expenditure. However, R30 million related to previous years and had been condoned due to the value received. It was likely that the remaining R7 million will be condoned once value for money had been confirmed. Increased controls over financial processes had been implemented to prevent future irregular expenditure.

 

R3 million had been classified as fruitless expenditure, based on assets ordered and not received, incorrectly calculated VAT, and wasteful costs. All had been investigated and legal opinions obtained. Any irrecoverable amounts would be considered for condonement.

 

The Auditor General had given an unqualified audit. Its report expressed concern that unspent budget money would be wasted. The NCC had submitted a rollover request for these funds. The report was also concerned that the NCC’s efforts to prevent irregular expenditure were not effective and that management did not implement proper record keeping in order to keep information accessible. The NCC had addressed these issues, and felt that that the report had very few complaints compared to the past.

 

Mr Mohamed said that as of 31 March, the NCC had 83 funded posts, of which eight were vacant. Seven had since been filled. The NCC would undertake a formal and full restructuring process soon, during which many vacant or unfunded posts would be abandoned. It was apparent that the NCC had a major skills shortage. Limited funding hampered training to address this issue. The NCC would need the assistance of outside service providers. He reminded the Committee that the bulk of irregular expenditures arose from the lease for NCC accommodation, which lasted for five years, starting in 2011 and was not feasible to exit. The lease had been entered into improperly. Irregular expenditure in the amount of R30 million had been condoned in 2014. Plans to move the location in 2016 would be costly.

 

Discussion

Mr A Williams (ANC) asked what the NCC was doing to prevent future irregular expenditure, bearing in mind that by the end of June 2015, the NCC already had R1.6 million in irregular expenditure. It seemed like an ongoing problem. What would be done to make the reported performance information more reliable? The IT section was quite concerning. Would an external contractor be a short term or long term solution?

 

Mr N Koornhof (ANC) asked how the NCC processed complaints. If he complained about a motor vehicle, what was the Commission’s modus operandi for this situation? What were the steps? How many complainants were happy with the NCC’s resolution? If one was happy with the resolution, one would tell fellow citizens about it. What was the percentage of positive outcomes after lodged complaints? Advertising had risen by 923%. That was a big jump. Had this been foreseen and budgeted for? Why was a 300% jump for catering and computers necessary? Groceries had also gone up by 200%, and stationery had gone up by 170%. Had these expenses been budgeted for?

 

Mr Mohamed said that an external contractor for IT had already been appointed for 12 months. His contract ended in September 2016. There was a major project under way with a project team at the NCC.

 

Mr Van der Merwe said that those posing irregular expenditure questions should remember that many of these problems dated back to 2011. The lease contract issue was that it had been falsely advertised, and this contract comprised 74% of irregular expenditures. This contract and a few others had a profound carry-through effect from year to year. Next year, this contract could be terminated, but not until then. The NCC reviewed each case and determined whether the NCC got value for money. Financial statements reflected the value added.

 

For the 2014/15 year, the NCC had found only one new instance of irregular expenditure. This showed that the NCC’s new preventative procedures were working. As for the large increases in various costs, both advertising and catering related to an awareness campaign earlier this year to reach previously uneducated consumers. As for stationery, the NCC had had to increase its stockpiles, as well as provide each individual with stationery. A large single purchase had been approved. The ICT situation had been approved. For example, the NCC website was now available almost 100% of the time, and the same applied to e-mail and internet services. The NCC Contact Centre had been approved to address past issues, where consumers could not reach the NCC. The server environment would also be stabilised soon. There would be dedicated efforts to transfer skills so as to make the NCC self-sufficient on IT matters.

 

Ms Thezi Mabuza, Deputy Commissioner: NCC said that the NCC received 95% of complaints through e-mail. Thus, due to past ICT issues with the server failing, disruptions had led to increased waiting times for the reception of complaints, because the complaints were lying in the server and could not be downloaded and be stamped ‘received’. This was no longer an issue, as Mr Van der Merwe had explained. Along with IT improvements, there was now a new standing operating procedure. The NCC had stamps for each point in the value chain and had appointed a manager for the value chain. Last year, staff had been trained on basic Word and Excel to improve efficiency for data entry. Employees could now use formulas through Excel. There were two processes for referable complaints and non-referable complaints wherein the NCC lacked jurisdiction. The NCC would provide the Committee percentages on complainants’ satisfaction at a later stage.

 

The Chairperson noted that the NCC was undertaking a formal restructuring. Did this mean the Commission was saying that this post in 2010? Was this why it was restructuring -- to reduce the numbers? The NCC had been performing, despite the issues raised by the Auditor General.

 

Mr Mohamed said there was a history to the establishment of the structure of the NCC. The original structure had 132 staff. There had been issues with the appointments at the time. In 2010, 38 people had been appointed outside the structure. Prior to the departure of the former Commissioner, she had made these positions permanent staff. The Minister had indicated then that no staff would lose their jobs. In order to legitimise the structure, the NCC had expanded the structure to include these administrative support personnel. Not all of these posts had been necessary, and during restructuring some of these posts would be abandoned.

 

Ms Jodi Scholtz, Chief Operating Officer: DTI said that the Department itself had also followed a similar process of looking at its vacancies. These posts were largely unfunded. It had had to reduce the number of these vacancies. As for funding and lease issues, there was a broader government funding process that was happening. The DTI was awaiting a response from the National Treasury to its submissions.

 

The Chairperson called for a presentation from the NCC on its first quarter report.

 

NCC First Quarter Report

Mr Mohamed said that investigations on paraffin stoves had continued. The NCC was working to launch a nationwide winter safety programme. There had been recalls, for example, of alcohol due to the discovery of small shards of glass in the alcohol. The NCC was a national body with a small staff; and with the launch of the Consumer Goods and Services Code, the Ombud had been most significant in helping. Provinces also dealt with consumer protection issues. The Code had the force of law, and this enabled the NCC to monitor disputes.

 

During the first quarter, 56 articles related to the NCC had been published. The NCC had done 20 radio and TV interviews. There had been 1 752 complaints in the first quarter. 37% were from women and 63% from men. Africans had lodged 46% of complaints, and whites had lodged 41%. This showed a shift. Complaints most commonly addressed involved the ICT and the retail sectors.

 

The NCC had fully achieved seven out of 17 milestones in this quarter. The NCC would meet all of its targets by the end of the year, Progress was tracked on a monthly basis.

 

Mr Van der Merwe presented tables that showed the NCC’s surpluses for the first quarter. The NCC still has about 15% under-spending. As for progress on the Auditor General’s findings, 80% of the necessary action plans had been fully implemented.

 

Discussion

Mr Koornhof said that although he did not have last year’s numbers, it appeared that there had been more complaints this year. Was this because of the NCC’s increased advertising? Also, why was the Coloured community not participating? Their complaints were minimal, and had actually decreased.

 

Mr G Hill-Lewis (DA) noted that there had been a decrease in National Credit Tribunal (NCT) activity that had impacted the NCC budget, with the decrease in money spent on legal fees. The length of time to deal with some of the big cases was concerning. The NCC was not an Alternative Dispute Resolution (ADR) mechanism. In that case, one needed to focus on the precedent-setting cases that could affect consumers across the country. It had been two years since the holiday clubs issue had started. Had it even been set down for a date at the NCT yet? It was over a year since the NCC had referred the money line issue to the NCT, and that had definitely not been set down for a date yet. The Committee hardly ever saw the NCT. Could the NCC give the Committee some indication as to why these matters were taking so long to be finalised?

 

Ms Mabuza said that both increased awareness and processes could have contributed to the increase in complaints. Both media advertising and publicised recalls led to a surge in complaints. These figures needed to be cross-referenced with the South African Revenue Service (SARS). The Commission wanted to reach all demographics. Stores were meant to keep a register of all complaints. The Ombud helped the NCC to collect these complaints. The NCC did not have full control over this. As for the NCT, the NCC had filed many cases with them on procedural fairness. It had studied how to eliminate the issue of procedural fairness. These processes took a long time. On the holiday club issue, the case could not be filed as a single issue. The industry had complained about the length of the matter. The Univision matter has been set down for 9-11 November; there had been a pre-hearing session on 1 October. The holiday club matter, with 27 respondents, had been set down for 19 October. There had been an issue with the serving of the respondents. The NCC wanted the process of filing to become more efficient.

 

Mr Hill-Lewis asked whether the money line had been set down.

 

Ms Mabuza said that it had not.

 

The Chairperson said that the Committee should try to interact with the NCT before the second quarter. He called on the National Credit Regulator (NCR) to make its presentation.

 

National Credit Regulator: Annual Report and First Quarter Report

Ms Nomsa Motshegare, Chief Executive Officer: National Credit Regulator, said the NCR’s strategic objectives were to promote increased access to credit through responsible credit granting, to protect consumers from abuse and unfair practices in the consumer credit market and address over-indebtedness, and to ensure effective implementation of the National Credit Amendment Act (NCAA).

 

The NCR had met 12 of its 13 goals. It had established the Credit Industry Forum, which included various industry representatives. It had worked closely with other regulators and the World Bank. The NCR had hosted a meeting through the African Consumer Protection Dialogue alongside US representatives in order to collaborate on mutual interests and encourage capacity building. It had also hosted a delegation from Ghana, Swaziland, and Tanzania.

 

The NCR had received a clean audit opinion. Though the NCR was proud of this, it recognised that it must continue to provide great service. It had referred three banks to the NCT for a Satinsky’s R699 vehicle scheme - Absa, Nedbank, and Standard Bank. Other NCT referrals had been for over-charging on credit life insurance, reckless lending, and mis-selling of credit life insurance. The NCR had referred 48 cases to the NCT. 17 cases had been finalized, with R3 million in fines. It had also addressed illegal advertising by engaging with newspaper editors and the SA Standards Authority.

 

The NCR had raided 27 entities in Gauteng, 20 in North West, and 27 in the Eastern Cape and Mpumalanga respectively. In these raids, 17 people had been arrested and R1.4 million in cash seized by the SA Police Service (SAPS). 969 bank cards, 2 891 South African Social Security Agency (SASSA) cards, 189 ID books and cell phones were also collected.

 

In the first quarter, the NCR had held one workshop in the North West Province and carried out one monitoring visit to Gauteng. It had conducted three investigations to increase compliance with the total cost of credit and had also conducted three investigations to act against reckless lending. It had referred two credit bureaus to the NCT. It had conducted nine workshops and ten interviews to improve awareness and ensure effective implementation of the NCAA. Planning and information gathering for future raids had also been done.

 

Ms Ayanda Mafuleka, CFO: NCR pointed out an error in the printed copies of the financial information. The 2014/15 actual expenditure was not R121 739 499, but rather R117 421 479. There had been few findings, and those that had occurred were related to housekeeping. There were no compliance issues. The NCR had stayed within the allocated budget. It had overspent by about R4 million due to issues with income collection.

 

In the first quarter from April to June 2015, the NCR had under-collected on fees from registrants by 22%. It had over-spent under operating expenditure by 6%. In the first quarter, the it had spent 36% of its budgeted capital expenditure.

 

Discussion

Mr Williams congratulated the NCR on being one of the better performing entities. The AG had highlighted the lack of IT security management and service continuity. Had steps been taken to address this situation? Many entities seemed to have serious IT problems.

 

Mr Koornhof asked why the NCR’s fees had decreased by 22%.

 

The Chairperson asked for the current status of the country’s credit market. How had it been influenced by the programmes that NCR had tabled to the Committee? It had conducted two workshops on affordability this quarter that had not been done last year. What was the status of those workshops?

 

Mr Hill-Lewis recalled that at the last meeting, the Committee had encouraged the NCR to raise its targets and goals. Its goals and achievements were very modest. Its annual targets could be lifted significantly. Only three investigations in the first quarter was quite modest. He urged it to increase its expectations for outcomes, especially for busting illegal operators and protecting consumers. The function of the NCR was both to protect consumers now by closing down the illegal space, and by improving the regulatory space. Though regulation was a legislative issue, the process had taken extraordinarily long.

 

He asked about the progress on insurance caps. Although this was not the Regulator’s primary task, there must be some coordination with other departments to get these issues handled quickly. One could not let the insurance industry dictate what it was going to charge poor South Africans forever. There must be a timeline. What was the progress on interest rates? What was the progress on emolument attachment orders? These issues had been outstanding for a long time now.

 

The Chairperson asked for an explanation of cases of misconduct and disciplinary actions in relation to labour.

 

Ms Motshegare said that the NCR wanted to develop a new IT system, as the current one was far too old. This system had been inherited from the predecessor agency. The NCR had found problems with a system provided by a service provider, and this has made it cautious about updating the system too fast in case problems arose. There were eight sub-systems in need of development, and in order to do it right, the NCR may have to do only one sub-system a year. In the meantime, it would use the old current system.

 

Fees were down so much because the NCR had expected more registrations from new entities. The regulations had been finalised only in March 2015. It hoped to start seeing funds from registrations coming in soon. It had explored other sources of income. Certificates now had expiry dates, and this included window decals. The NCR wanted to increase registration fees. The credit industry was worth R1.6 trillion. There were 23 million active credit consumers. The percentage of impaired consumers was at about 45% -- a level which had not been seen since 2012. The NCR did need to review its targets. Numbers around investigations were low. Regulations had become effective only in March, and this had hampered its ability to conduct workshops.

 

The NCR had the support of the Minister of Finance to introduce credit life insurance caps. The DTI had said that this would be submitted for public comment soon. The process was in its final stages. Information would be provided later on the emolument attachment order issue. There have been two labour relations cases. One employee was going through a disciplinary committee, while the other matter was with the Commission for Conciliation, Mediation and Arbitration (CCMA).

 

The Chairperson thanked the NCR and welcomed the National Regulator for Compulsory Specifications (NRCS).

 

National Regulator for Compulsory Specifications: Annual Report

Mr Asogan Moodley, CEO: NRCS said the NRCS regulated the automotive, chemical, material, mechanical, electro-technical, food, legal metrology and building regulation industries, with various services provided to each industry.

 

The NRCS had been able to move to the source of products in order to prevent goods from entering the market. R548 million worth of products had been removed from the market in 2014/15 alone. It had confiscated more than two million incandescent lamps, for example. It had improved relationships with China and the Russian Federation.

 

The NRCS had developed seven out of twelve compulsory specifications. These had been submitted for Ministerial approval, and addressed hydraulic brake fluid, passenger tyres, commercial tyres, earth leakage devices, circuit breakers, safety footwear and disinfectants.

 

In the automotive sector, a total of 4 511 inspections had been conducted, which exceeded the target of 4 000. It had processed 3 615 Letter of Authority (LOA) applications, and over 99% of these had been completed within 120 days. The NRCS would meet later this month to better define ‘in-scope’ vs ‘out of scope’ inspections.

 

In the Chemicals, Materials, and Mechanicals (CMM) sector, a total of 5 649 inspections had been conducted, which had exceeded the target of 5 600. The NRCS had processed 589 LOA applications, and over 64% of these had been completed within 120 days.

 

In the Electro-Technical sector, a total of 5 438 inspections had been conducted. This had exceeded the target of 4 400. The NRCS had processed 7 705 LOA applications. Over 94% of these had been completed within 120 days.

 

In the Legal Metrology sector, a total of 7 366 inspections had been conducted, which exceeded the target of 5 189. The NRCS had processed 766 gaming equipment LOA applications; 95% had been finalised within 21 working days. It had also processed all 166 Type Approval applications within 120 working days.

 

In the food sector, it had inspected 100% of all declared locally produced canned fish and meat products, and conducted 1 034 frozen fish inspections. It had inspected all declared imported and exported canned fish, meat, and frozen fish products. It had also conducted 1 074 processing factory and vessel inspections.

 

In order to spread awareness and education, the NRCS had distributed ten internal electronic publications and conducted 13 consumer education events and campaigns.

 

As for human resources, the NRCS had addressed vacancy-filling issues by appointing a senior manager and a manager for HR. The vacancy rate had been reduced by over 7%.

 

As for Information Communication Technology (ICT), the system had been 98% available during the financial year.

 

Ms Reshma Mathura, CFO: NRCS pointed out the improvements from 2014, when the NRCS had had six qualifications. The NRCS was the only DTI entity still sitting under a qualification. It had solved the four qualifications related to the payroll, and HR and had made progress on revenue qualifications. It had to recalculate the entire payroll in order to address the issues from the past audit.

 

The NRCS received revenue from four core areas. The biggest was levies, which contributed half of its revenue. There was also core funding, services, and other income. Revenues had grown unexpectedly by 19%. Controls that had been put in place to address the revenue qualifications had actually increased the revenue. ‘Other income’ had declined.

 

Graphs showed that both income and expenditure had grown over the past seven years. The NRCS found itself in a surplus position -- it had a 2015 surplus of R52 million. This would be used to revitalise capital structures, like ICT.

 

A levy was paid to the NRCS when a company imported or manufactured a product. It had conducted over 50 000 inspections and over 11 000 approvals in the past year. It dealt with so many transactions that these numbers needed to be reconciled every quarter. Systems within the NRCS used to be un-integrated and silo-ed. The environment was uncertain, and the levy model was complex. Trying to predict as little as six months in advance was impossible. The NRCS relied heavily on the market and companies to determine levies via levy declarations. The separation of the NRCS from the South African Bureau of Standards (SABS) had been difficult.

 

Despite these difficulties, the NRCS had made progress and now had only one qualification. It now did manual reconciliations between inspections and financial data. Inspectors now followed up on non-declarations. The NRCS had improved its manual controls and partially implemented Customer Relationship Management (CRM). The NRCS was still trying to fix the revenue qualification. It was preparing to apply to Treasury for a GRAP 23 exemption, with support from the DTI. However, this had been a contentious issue.

 

The NRCS was looking at implementing:

  • E-billing;

  • Punitive measures for non-declaration of levies;

  • A legislative review process;

  • Appointment of a debt collection agency that had summons power;

  • An integrated Enterprise Resource Planning (ERP) system;

  • The automation of the reconciliation between inspection, LOA and financial data;

  • The alignment of inspection planning with outstanding levy returns;

  • An investigation into alternative revenue models.

 

The NRCS had rectified issues of material impairments. It had completely redone the payroll figures.

 

Mr Moodley detailed the external challenges faced by the NRCS, which included inadequate testing facilities in SA, the application and regulation of products under VCs that were outdated, high numbers of abandoned goods, and high transportation and storage costs for confiscated goods. Internal challenges to the NRCS were that the generation of revenue was reliant on trends and markets, that revenue collected was dependent on industry compliance, that the issue of in-scope and out-of-scope still existed, and that the NRCS relied on many manual systems.

 

NRCS First Quarter Report

Mr Moodley moved on to the first quarter report. He explained VCs took 24 months to be developed, so although many projects were under development, none had been finished this quarter. The NRCS had finalised five Review Board cases during this period.

 

In the Automotive Sector, it had processed 602 LOA applications, and over 98% of these had been completed within 120 days. A total of 836 inspections had been conducted during this quarter.

 

In the CMM Sector, it had processed 263 LOA applications, but only 44.4% of these had been completed within 120 days. A total of 990 inspections had been conducted during this quarter, well below the target of 1 642. The variance had been due to the winter paraffin stove campaign.

 

In the Electro-Technical Sector, the NRCS had processed 2 236 LOA applications, and only 68% of these had been completed within 120 days due to a backlog from the previous financial year. A total of 1 173 inspections had been conducted during this quarter.

 

In the Legal Metrology Sector, it had processed 224 gaming equipment LOA applications. Over 98% of these had been completed within 21 days. All 26 Type Approval applications from the first quarter had been processed within 120 days. A total of 1 664 inspections had been conducted during this quarter.

 

In the Food Sector, the NRCS had inspected 100% of all declared locally produced canned fish and meat products, for a total of 1 737 inspections and had conducted 255 frozen fish inspections. It had inspected all declared imported and exported canned fish, meat, and frozen fish products. It had also conducted 208 processing factory and vessel inspections.

 

It had distributed three internal electronic publications, conducted three consumer education events and campaigns, and held about 19 industry meetings.

 

It had reduced the vacancy rate to 5.4%, and trained 11 employees during the quarter.

 

The ICT system had been available 98% of the time. The NRCS was working on planning and sourcing an external service provider for ICT issues.

 

The approved budget for the quarter had been R42 million, though the NRCS had collected R65 million for the DTI. The expenditure for the quarter had been R64 million. It had budgeted for a surplus of R83 000 for the year. Although the NRCS had predicted a budget loss for the first quarter, there had actually been a small surplus thanks to new funding.

 

The Regulator had found non-compliant products worth more than R30 million on the market that could have seriously harmed consumers and the environment. Non-compliant pre-packed goods were estimated at R6.7 million. The NRCS had co-hosted the winter campaign, where 500 paraffin stoves had been exchanged for non-compliant products. It had had a stakeholder consultation meeting in Parliament. It had engaged with the board of SABS, and this relationship had been mutually beneficial. It had also hosted a delegation from Ethiopia.

 

Discussion

Mr Hill-Lewis asked whether it made sense for products that had been tested by internationally accredited testing facilities outside SA to be re-tested here. He gave an example of the tyre market -- there had been quality problems there. However, if the NRCS had a relationship with an internationally accredited testing facility that had approved these tyres in the tyre’s country of origin, why test them again? His understanding was that the Regulator was now requiring those importers to have the products exported again, sent to an overseas testing facility, have them signed off there, and then sent back, when in fact these tyres had already been tested by the manufacturer. Not doing this would reduce processing times.

 

It was unacceptable for a paperwork process in any government structure to take seven to eight months. The Department of Public Works (DPW) could build a school in this time. Letters of Authority could not take that long -- this target should come down from 120 days. If the NRCS was achieving 98% at 120 days, the target must come down.

 

Mr Williams was disappointed by the AG’s report. The AG had said that the NRCS reporting was unreliable. What would the NRCS do about this? Before e-billing, maybe IT systems should be improved. The AG had said that there had been problems with fruitless and irregular expenditure. What was being done about this?

 

Mr Moodley said that the NRCS did accept testing from accredited internal testing facilities, should this accreditation be sufficient for the country’s international trade agreements. These test reports must comply with SA standards. Generally, however, an LOA would be issued, but when the product got into production the standards were lowered. Therefore, the product that hit the market was not of good quality. This was known as the ‘golden sample’ in the industry. The NRCS had to test to avoid this -- this was its responsibility in the name of public safety. Tyres were an example of this.

 

With regard to the paperwork process, the NRCS had discussed this thoroughly at the stakeholder engagement in Parliament a couple months ago. It was reorganising its internal processes, but it could not compromise safety. With regard to the AGSA, the Auditor General had acknowledged that the NRCS’s alternative methods had helped. The NRCS now went to the ports of entry to prevent dangerous products from entering the country. It would engage with the AG soon in order to better define in-scope and out-of-scope. On 28 October, the NRCS and the AG would engage.

 

Mr Marks Thibela, Deputy Commissioner: NRCS said that the findings had centered mainly on revenue issues. The NRCS had enlisted the help of outside IT authorities. It had to address ageing hardware. Not everything could be implemented at once. The procurement process was clear, and the NRCS was pursuing this.

 

Ms Mathura said that irregular expenditure had dropped from R32 million to R7 million. The reason that irregular expenditures had been condoned was because they had added value. Some of those investigations had resulted in the issuance of warnings. The bulk of fruitless expenditure had resulted from requests from the DTI. The NRCS was pursuing criminal charges against the two companies that had been marked as fruitless expenditures.

 

Ms Scholtz said that the qualification was a technical and long-lasting one. The NRCS had outlined its action plan.

 

Dr Tshenge Demana, Chief Director: DTI said that with regard to processing LOAs, 120 days was given to ensure that the NRCS prevented undue negative effects on local jobs. The NRCS still dealt with backlog issues, so even the 120 days was not quite enough. The Minister was considering complaints from business. The Minister was recommending that the number of days be reduced to four months to remedy the impact on business.

 

Mr Hill-Lewis welcomed that news. He called the Minister’s comments very positive and a step in the right direction. The Committee had e-mails from businesses who were laying off staff because there was no stock in their stores, as there was no LOA to allow for bringing stock into the country. This needed to be rectified soon.

 

The Chairperson thanked the NRCS. He said that the Minister did take this issue seriously, although safety was equally if not more important. The NRCS was experiencing external challenges. Industry cooperation needed to improve.

 

The meeting was adjourned. 

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