Companies and Intellectual Properties Commission; National Consumer Commission; National Regulator for Compulsory Specifications 2nd Quarter 2015/16 performance

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Trade and Industry

18 November 2015
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

Three entities of the Department of Trade and Industry (dti) presented their second quarter 2015/16 performance reports. The Companies and Intellectual Property Commission (CIPC) focused on the efforts it was making to automate its systems and aim for a paperless organisation. It had also reintroduced the traditional Call Centre and USSD technology for applications. The Call Centre was heavily understaffed, and management was attempting to move all available staff to this function. The moratorium on hiring would be lifted for critical vacancies only. For this quarter, 88% of targets were met. Detail about the modernisation programme was provided. A Business Intelligence Services Group had been formed to set the ground work on the e-services. The self-services technology had been rolled out, and there was partnership with other websites. Partnering was also used to boost a presence in all provinces. CIPC was going through rapid enhancements but was trying to ensure that whilst it was enhancing rapidly, it was also stabilising the automated system. A Central Suppliers Database was launched with National Treasury and South African Revenue Services. It was collaborating with the dti on Black Economic Empowerment (BEE) certification. E services verification would allow for paperless certification. On-line transactions were increasing and stable and figures were presented for this and the new names automation. Webinars and Information Sessions were held between July and September. Complaints related to non-compliance with the Companies Act would be investigated by CIPC, but the CIPC had to increase its enforcement role. Most companies were following the audit route, rather than independent reviews, because the banks preferred them to do so. There was low activity and improvement around lodging of prospectuses. This year, CIPC had started 1 911 business rescue proceedings. The critical vacancies and hiring statistics were given, as well as key performance achievements. 88%of targets were met. CIPC needed to do more outreach and engagement, improve turnaround times still further and address the call centre. The financial performance results showed that the expected 15% extra expenditure would result in a R17 million deficit compared to budget, but the CIPC had a surplus from the previous years. 5% of the capital budget was spent, and 37% of operations budget. Employee costs showed underspending, with only 16% spend to date, and it was currently reviewing employee costs. Rental expenses had been waived by Transnet.

Members asked how long it would take until all calls were answered at the call centre, and one Member pointed out that until the basic frustrations around business registration were simplified, the call centre would not assist people. The website was seen as problematic due to the number of links, but CIPC explained that this was to do with the back-end functionality. Members also asked about the reach in the remoter areas and provinces, and urged that any gaps that allowed unscrupulous people to charge huge sums to get trademarks or companies registered be closed. Members questioned what informed the targets and asked for more detail on phase 1 status. They asked what exactly the difficulties were with integration and  corporation uptake and the bottlenecks in the website.

The National Regulator for Compulsory Specifications (NRCS)  said that in this quarter, it had found non-compliant products worth more than R19.4 million, with R44 million of non-compliant pre-packed products, and 26 non-compliance certificates being issued for fishery production. The targets and achievements on each of the strategic goals were outlined. The compulsory specification verification feasibility study was concluded and the project was closed. Five compulsory specifications were published by the dti and a further two were awaiting publication. The numbers of letters of application in the automotive, chemicals, material and mechanicals, electro-technological and legal metrology and food industries were given. NRCS had managed to reduce the vacancy rate, at 6.6% due to retirements. NRCS trained 115 employees and six positions were filled in the quarter. In this quarter, a surplus had been realised.  NRCS received 47% of revenue from the dti by way of transfers, whilst levies accounted for 37%. The transfer from National Treasury was reduced for 2016, due to the surplus from the previous financial year. Other income of R51 million was cash from investments to supplement the reduction in government funding. To date, it had not been used. Some projects had not materialised, and some vacancies were not filled after the retirement of high level staff. Actions had been taken to rectify the findings from the last audit, some of which were detailed, and the Chairperson asked for these to be put in writing. External challenges included inadequate testing facilities in the country, the application and regulation of compulsory specification products that were outdated, and the fact that large volumes of abandoned goods at ports attracted high costs to transport, store or destroy goods, when the owners could not be traced. The same costs applied also for confiscated goods. Internal challenges related to revenue generation and collection, although interpretation of performance targets had now been clarified. The manual systems for financial and performance management, monitoring and reporting were a challenge.

Members asked how the NRCS was determining its investment vehicles, and thought that it needed to improve on turn-around times, and possibly also on reducing targets. The bottlenecks in the flow of goods into the country’s economy were seen as problematic. One Member suggested that perhaps the NRCS should be governed also by the overall dti mandate to promote the economy and grow jobs, but the Regulator disagreed, saying that it was strictly bound by the Consumer Protection Act. Members were concerned that some applications were simply taking too long, although gambling applications were resolved in a  far shorter time, and the Committee impressed upon the NRCS that although it was strongly in favour of robust approvals, the processes needed to be addressed, and asked the NRCS to share its challenges in writing. They were appreciative of its success in the Food and Associated Industry programme, asked about penalties and asked when the risk based evaluation approach was to be implemented.

The National Consumer Commission (NCC) reported that it had conducted sixteen inspections were conducted, targeted at retailers in Tauten, in Cape Town and shortly would visit Northern Cape. Improper labelling had been found with poultry products in the cold chain, bakeries and butcheries. n-house bakeries and butcheries were also found to have improper ingredients listed on products. Produce recalls and reasons were set out, showing a wide range of affected companies. NCC had held ten community workshops with elderly women and the youth, who were the groups that, statistically, tended to complain less. It also held 10 business workshops. NCC participated in eight exhibitions, designed its first newsletter,had achieved success with the Africa Dialogue conference and was helping with consumer protection lawmaking in Zimbabwe. 64% of complaints were from males between the ages of 15 and 44 years old. 46.4% of the complaints were from Africans. Motor vehicle complaints were high in number, because these were high value goods. The Motor Industry Ombud and the Consumer Services Ombud submitted reports to the NCC, and were very helpful. 1  541 complaints were received from consumers between July and September, so people were encouraged to submit reports. Twelve of the nineteen targets were achieved in quarter 2. Signing of MOUs was under way with Motor Vehicle and Consumer Goods Ombuds. The NCC completed three of four investigations. The Opt-out register was established and registered as a Public Private Partnership. R2 million was assigned to NCC for the appointment of a Transact Advisor. The project costs were underestimated and a request for more funding was submitted to the National Treasury. It was addressing the 48 audit findings. NCC had received all transfer funding, paid its rent in advance, but reiterated concerns that its lease was coming to an end and it needed to finalise, with dti, where it would move. It had an accumulated surplus that it had applied to retain.

Members noted that the lease issue had been raised previously and the Committee had already suggested that office space be shared. They asked how the NCC planned to deal wit complaints about the motor sector, asked if research findings were available. Members requested a written answer on the lease from the dti.

The Committee adopted minutes of 17 November, and its draft first term programme for 2016.
 

Meeting report

Chairperson's opening remarks
The Chairperson thanked those who had stood in during parliamentary staff protests.

She indicated that she had had only one apology, from Ms P Mantashe (ANC) who would arrive late.  In future, anyone arriving later than 15 minutes of the meeting's start would be marked as absent.

Second quarter 2015/16 reports:
Companies and Intellectual Property Commission (CIPC)

Mr Rory Voller , Acting Commissioner, Companies and Intellectual Property Commission, presented the non-financial report and explained that the activities in the first two quarters were focused on the modernisation initiative, with the aim to automate the Commission (or CIPC).

He said the stability of the system was good. CIPC was also focusing on enhancing accessibility to its services by refining the existing partnerships, re-introducing the call centre and increasing education and awareness of the entity.

CIPC was aiming for a digital and paperless environment where web services are primarily used. It will be scanning documents for a faster turn-around time. The CIPC would also be returning to the traditional call centre and working on making it more accessible. CIPC would be looking into the query resolution systems, not only using the call centre but also USSD technology, the website and emails.

Another focus area was the improvement of compliance. CIPC had moved from being an administrator to being a regulator. Under the Enforcement Action and Visibility targets, he said the entity had taken on high profile cases to showcase the work of the Commission.

Mr Voller then went into detail about the modernisation programme. The Information Technology department of CIPC formed a Business Intelligence Services Group to set the ground work on the e-services. The self-services technology had been rolled out and there was an ongoing process to spread it wider. The roll out was also intending to partner websites to improve visibility.

To obtain a presence in all provinces, CIPC was using the partnership model development and testing. The full testing programme had been completed and the partner sites were identified. The partnerships included other government departments and professional entities like accountants and lawyers.

Mr Voller said the CIPC will improve scanning, indexing and imaging process by encouraging emailed applications and scanning paper applications. He said the option had been around for about 14 months and CIPC would now continue to stabilise the system. He explained that CIPC was going through rapid enhancements so it had a “snags list committee” to ensure that while it was enhancing rapidly, it was also stabilising the automated system.

The launch of the Central Suppliers Database with National Treasury and South African Revenue Services (SARS) was a success. It integrated the service model between SARS, Standard Bank, Nedbank, and Absa. The database would be going live through Nedbank and would be launching during the weekend of the 27-29 November.

He then explained the Unstructured Supplementary Service Data (USSD) function. This was being monitored and was showing great results in service utilisation. The information needed would be easy to access for clients.

The collaboration between the Department of Trade and Industry (dti) on Black Economic Empowerment (BEE) certification had shown good results. CPIC was the sole issuing authority for BEE certificates for exempted micro-enterprises. It would be entering into an MOU for further roll-outs and to strengthen the enforcement action. The e-services verification process would allow certification without paperwork, and therefore faster issuing of certificates was anticipated in future.

Mr Voller said the on-line transactions were increasing and stable. Utilisation of these services was continuously increasing. The numbers increased from 300s to about 1200 users on the system and website. He said the CIPC was encouraged to do more.

In relation to new automations, he added that the Names Automated approval system allowed name applications to be approved in a couple of hours by screening the application before it went to the back end. 33  579 names were automatically approved immediately between July and September 2015.

Speaking to the target for accessibility to CIPC services, he noted that the Call Centre statistics had marginally improved, in relation to the number of calls answered. A Call Centre manager had been appointed. Additional recruitment and system enhancements were planned to capacitate the Call Centre.

Webinars and Information Sessions were held between July and September. There were up to 800 international parties logged in to the webinars. The Information Session tickets get sold out within a day. These initiatives were in addition to the educational campaigns held all over the country. CIPC had a good relationship with the Ministry of Small Business Development, to assist in spreading awareness of its presence.

Mr Voller noted that the Independent Regulatory Board for Auditors (IRBA) must inform regulators of any instances of non-compliance found during audits. Complaints related to non-compliance with the Companies Act would be investigated by CIPC. Mr Voller said it was important for the CIPC to increase its enforcement role. It works closely with the IRBA and National Prosecuting Authority (NPA) in relation to matters falling within the ambit of these bodies.

In respect of general reportable irregularities, Mr Voller explained that although accountants were seen as part of assurance givers, the CIPC was not seeing enough reports on general irregularities. Not many companies are doing independent reports as they tended to follow the audit route. CIPC held a meeting with companies to find out what the problem was and the feedback was that banks placed more importance on audit reports than on independent reviews. He believed that the emphasis on independent reports needed to be increased.

In the field of prospectus registration, Mr Voller noted that there was low activity and low improvement. He explained that there was much dependence by the market and industry in offering shares to the public, which was an activity beyond CIPC’s control. He said it was working with the Johannesburg Securities Stock Exchange (JSSE) and legal experts to find resolutions.

Other key activities of the CIPC were also described. In this year, 1 911 business rescue proceedings were started. The CIPC had over 200 commissioners to facilitate these proceedings (see slide 19 for full details on the outcomes).

He noted that because of a dispute between management and organised labour, there was a moratorium on filling vacancies. After good consultation between management and labour, it was agreed that recruitment for critical vacancies would now continue. The critical vacancies were identified as Patent Searches (2 year training), Trade Mark Examiners (who tended not to stay long after being trained, as this was a specialist skill in high demand), Divisional Mangers in Risk, Compliance and Governance and Human Capital, Executive Managers in Business Information Systems and Corporate Services. Mr Voller said there would be new executive managers taking up their positions in the next month. The IT vacancies were critical because of the automation drive. CIPC was advertising in-house first.

The transformation and staffing issues were now stabilising, after the labour disputes. Staff sessions across the divisions were continuing. The Transformation Task Team continued to deal with pertinent issues in order to build a stable labour environment.

Summarising the key performance indicators, Mr Voller noted that for this quarter, fourteen out of the sixteen (88%) of targets were met. Details of the targets were found on slides 24 to 28 but he spoke only to the targets not achieved. In Programme 1: Business Regulation and Reputation, the area of Corporate Governance needed to achieve more in relation to enforcement of companies' annual returns. More campaigns were needed to make companies aware of the need to comply with lodgment of annual returns.

In relation to Programme 2: Innovation and Creativity, education and awareness events happened all over South Africa in the form of exhibitions, workshops, trade fairs,  and others. In relation to protecting intellectual property, CIPC played an active role in anti-piracy campaigns and recently had raids around Cape Town and Johannesburg. Intellectual Property (IP) lawyers use the CIPC services for bulk applications but CIPC needed to improve automation. In the last quarter, it had taken time out to fix bugs in the system.

In relation to Programme 3: Service Delivery and Access, CIPC did not meet the vacancy targets due to the moratorium but Mr Voller was confident these would be met before the end of the year.

In conclusion, Mr Voller said that CIPC was dedicated to continuing the path to improvement. This quarter showed a stable labour environment and stable IT platform, with less outages and quicker responses when they did occur. The filling of vacancies was speeding up, and at the same time it was enhancing the relationship with the new collective bargaining forum. He reiterated the improvements in the automation initiative, and its new collaborative efforts. He said that CIPC needed to do more around regulatory aspects and was hoping the current court cases can be seen as deterrents to offenders. He said CIPC needed to do more outreach and engagement to increase company knowledge in the public sphere. The entity's turnaround times were improving but call answering remained a challenge as the call centre lacked capacity. He assured the Committee that it was channelling all available employees to the call centre.

Ms Fundi Malaza, Acting Chief Financial Officer, CIPC presented the financial performance.  R466 million was received for the 2015/2016 financial year. The expenditure for the same period is expected to be R484 million; and this was an expected 15% increase in expenditure, that would result in a R17 million deficit. Ms Malaza explained that CIPC retained surpluses from the previous year which were available to it from National Treasury.

Ms Malaza said that only 5% of the capital budget had been spent, the operations budget was 37% spent and the total budget spending was 35% in this quarter. This was an improvement from quarter 1, which had shown poor performance due to management challenges and labour disputes that had delayed the progress of projects. More implementation came through in Quarter 2 after the resolution of the issues.

The projected revenue earnings for Quarter 2 were R211 million and the actual revenue was R226 million. The interest income was projected at R22 million but earned R48 million due to the excess reserves with South African Reserve Bank (SARB). Actual income was 18% above the targeted income.

One expenditure line item that stood out was the employee costs, which were projected at R127 million, but only R109 million was spent,which translated to 16% being under-spent. The entity was currently reviewing employee costs.

Operational expenditure was projected at R94 million but R52 million was spent. The variation was due to the fact that CIPC had budgeted for rental expenses at the self-service centres but due to the partnership with Transnet, rental expenses were waived.

Administration expenditure was under-spent by R8 million due to the moratorium. The savings came from the internship programme and IP examiners who were not appointed.

Overall, an actual surplus of R105 million was realised compared to the deficit that was projected.
She described the annual returns as the second largest generators of income. There were no drastic changes in operational expenditure. The capital budget projections included computer hardware and software but delays in implementation of infrastructure resulted in the spending being 80% below targets.

Discussion
Mr A Williams (ANC) noted that the Call Centre had 41% calls going answered and he asked how long it would take until 100% of the calls were answered. He also asked about the plan to get to this target. He believed it is vital that consumers actually should get to talk to the Commission.

Mr D Macpherson (DA) said that the Call Centre could have a 100% staff rate and still not deal with the frustration that people experienced. Whilst the filling of vacancies was important, he believed that it was equally important to see to simplifying business registration. The website was also problematic, since there were too many links to go through to get to the vital information. He wanted to know how CIPC was going to simplify the registration process ,to reduce calls to the Call Centre and make calls shorter.

Mr F Shivambu (EFF) asked about the expansion plans to other provinces, and particularly wanted to know about CIPC’s reach to remote provinces. He did not believe that the on-line services covered the same ground. He said leaving a space open allowed for other forms of unregulated firms to take advantage of people who wanted to register trademarks but could not get to Pretoria or Cape Town. He suggested that CIPC should accredit other companies to help with the registration process or expand themselves further. He said that, to his knowledge, there were individuals charging about R20 000 to register companies on people’s behalf. This was something that needed urgent attention.

Mr B Mkongi (ANC) asked what informed the 16 targets the CIPC had set for the quarter. He enquired why the presentation referred to “enhancing the first phase of modernisation” whist in October, in an interview, CIPC revealed that that when Mr Voller took over from his predecessor, phase 1 was not completed. This was a key challenge. He said that in 2012, the dti adopted a document on the promotion of an integrated corporate sector for South Africa. He recalled that key tasks were put out for CIPC to enhance integration and corporation, yet the percentage of corporation uptake was still slow. He wanted to know what the difficulties were. Lastly, he said CIPC had been reporting on making the website user friendly since 2013, and he asked where exactly the bottlenecks were.

Mr Voller responded to Mr Shivambu's concerns that the CIPC model was to use partnerships rather than increasing the service centres, because service centres were harder to maintain. He said CIPC was entering into a partnership with the Chamber of Commerce and was enhancing its reach by moving to municipalities, which was more cost effective. Using its partnership with Transnet, CIPC would be expanding to Eastern Cape and Limpopo next. The plan was to first go to the capital of the provinces before spreading to municipalities. The biggest problem would be maintaining the centres. If there were too many, then the IT team could not reach them in good time during downtime. In its partnerships, CIPC had included maintenance agreements to counter this problem.

Mr Voller agreed that a more efficient system would result in less calls to the Call Centre but said he cannot yet promise 100% answered calls. He explained that when the new organogram was drawn up, the Call Centre was not envisioned. He could not increase the staff numbers so he had to find staff from within the organisation by redirecting staff to the Call Centre as far as possible. The innovative solution was to give people other mechanisms for sending their queries and be more efficient so that people did not need to call.

Mr Voller reminded Mr Macpherson that CIPC’s website was a transactional website, therefore, stability in the back-end was important. The CIPC had received complaints when the additional services were moved to another website, so they were brought back to the main site. Mr Voller agreed that usability was important but added that the back end must be stable. He believed that the introduction of USSD technology was a game changer as it allowed for instant verification and improved turn-around time.

Mr Voller explained to Mr Mkongi that there was in fact a drastic increase in corporations due to incentives but when incentives were reduced, so did the number of corporations. He admitted that corporations were not functioning properly.

Mr Lungile Dukwana, Chief Strategy Executive, CIPC explained that CIPC was in the fourth year of its five year strategic objectives, so targets were kept constant. The targets were informed by the review of the strategy which must be a reflection of business and be measurable. He added that the there was a correlation between the number of corporations registered and the activity in provinces that encouraged corporations.

The Chairperson requested Mr Dukwana to put the rest of his response in writing.

National Regulator for Compulsory Specifications (NRCS)
Mr Asogan Moodley, Chief Executive Officer, National Regulator for Compulsory Specifications,  presented the highlights for the quarter. He said the NRCS found non-compliant products worth more than R19.4 million. The value of pre-packed products found non-compliant was R44 million. 26 non-compliance certificates were issued for fishery productions.

Strategic Goal 1 was to develop, maintain and administer compulsory specifications. One out of the targeted four compulsory specifications was sent for approval by the Executive Authority. Additional resources were allocated to ensure that the target would be met. The compulsory specification verification feasibility study was concluded and the project was closed. Five compulsory specifications were published by the dti and a further two were awaiting publication. One Review Board case was finalised even though it was outside the 90 days turnaround time.

Strategic goal 2 was to maximise compliance with all compulsory specifications and technical regulations. In the automotive sector, NRCS processed 936 letters of authority (LOA) applications. 98% were processed within the 120 days deadline. 966 of the targeted 1  200 inspections were conducted. The variance was due to group inspections that targeted identified non-compliant role players.

In the chemicals, materials and mechanicals industry, 100 LOA applications were processed. 70% were processed within 120 days. A total of 1  676 inspections were conducted which exceeded the target of 1  662.

3  613 LOA applications were processed for Electro-technical products. 87.1% were processed within 120 days. The variance was caused by backlogs from the previous financial year. A total of 1  519 inspections were conducted, 199 above target.

Legal Metrology LOA applications showed 274 processed, of which 273 were processed within time. A total of 2  021 inspections were conducted in the quarter, again, above target.

In the Foods and associated industry, the NRCS inspected 100% of all declared locally produced canned fish and meat products, frozen fish inspections and all imported canned fish, meat and frozen fish products. 242 fishery and canned meat processing factories and fishing vessels inspections were conducted.

Strategic goal 3 was to inform and educate stakeholders of NRCS. This was done through an internal electronic publication, through Information and Stakeholder Campaigns, international and local forums and technical meetings as well as industry meetings.

Strategic goal 4 was to have an optimally capacitated institution. The current vacancy rate was at 6.6% due to retirements. NRCS trained 115 employees and six positions were filled in the quarter.

Ms Reshma Mathura, Chief Financial Officer, NRCS, presented the NRCS financial performance. She said that a R52 million surplus was realised in the 2014/2015 audited financial statements and the approved budget projected a surplus of R82  000. Of this R51.3 million was the actual surplus. NRCS received most of its funds from the National Treasury and reduced its employee costs.

Revenue comprised of transfers from the dti, and all of that money expected was received. The government funding accounted for 47% of revenue, interest income made up 4% of revenue, levies from compulsory specifications made 37% of revenue and the balance was from other income and service revenue. Ms Mathura said the transfer from National Treasury was reduced for 2016, due to the surplus from the previous financial year. Other income of R51 million was cash from investments to supplement the reduction in government funding. To date, it had not been used.

Ms Mathura presented the expenditure per category. Employee costs made up 43% of total expenses, Goods and Services made up 31%, the remaining 26% is for other expenses. She asked the Committee to bear in mind that some projects had not materialised and some vacancies were not filled after the retirement of high level staff.

In relation to the Annual Report findings, she wanted to give an update on the progress of actions taken to rectify the findings from the last audit. A revenue strategy was prepared, NRSC was finalising its e-systems, it was more engaged with National Treasury and dti, and there was better alignment of strategies and goals. The NRCS had also started reviewing regulations to make amendments that would deal better with levies declarations. The reconciliation process would be automated for better reporting. Lastly, the strategic plan was being finalised and dealt with the technical definition of in- and out-of-scope.

Implementation of controls to ensure the dates for LOAs in the correct period was done. A review of inspections was completed and a review of the perform monitoring and evaluation function was finalised.

Mr Moodley presented the organisational challenges. External challenges that NRCS identified were inadequate testing facilities in the country, the application and regulation of compulsory specification products that were outdated, and the fact that large volumes of abandoned goods at ports attracted high costs to transport, store or destroy goods, when the owners could not be traced. The same costs applied also for confiscated goods.

Internally, NRCS had challenges with revenue generation and collection. Interpretation of performance targets was a challenge but had been clarified. The manual systems for financial and performance management, monitoring and reporting were a challenge.

The Chairperson requested that the NCRS should change the colours used on the presentation pie charts in future, to make the figures visible. She also requested that NRCS submit details of its revenue model. She recalled that it received a qualified audit opinion and would like to see the measures being considered to avoid a repeat qualification. These should be e-mailed to her office by Friday 20 November at 10:00.

Discussion
Mr N Koornhof (ANC) asked if the NRCS would work through a financial analyst to suggest the investment vehicles for best returns when it invested the surplus.

Mr G Hill-Lewis (DA) said that the NRCS needed to improve on the turn-around times. He also believed that the number of targets must reduce as they were achieved. Some sectors’ LOAs were taking an unacceptably long time to be approved, because of serious bottlenecks in the flow of goods. He said he had records of complaints about slow response times. He said he recently received another complaint, in respect of high-end musical instruments from Japan, that had been sitting at the harbour for six months. He said the effect was a bottleneck in the flow of goods into the country’s economy.

Mr D Macpherson (DA) said there was a misperception that NRCS purely existed to fulfil a regulatory function for he pointed out that the dti mandate applied equally to the NRCS, and it too must act to promote the economy, grow jobs and the like, but this was not happening as things stood presently. It could be argued that the NRCS should be focusing on those sectors that were contributing to the economy – such as tax from retailers, but he believed that it was not the job of this entity to grow businesses. Mr Macpherson said that approval of 80% of LOAs in 129 days was too low. LOA applications were being finalised close to 120 days, but gambling electronic machine applications were resolved in 21 days. Businesses said they were willing to pay more if it meant that they could get quicker action. He suggested that this would be an ideal opportunity to improve the business and get revenue. He asked for the date by when the risk approach system would be implemented.

Mr Mkongi noted that the NRCS had been successful in the Food and Associated Industry programme. He asked what kinds of penalties had been imposed on non-compliant companies. He said some companies could see the internal discrepancies and were taking advantage of this. He noted that the NRCS had reported a 6.6% vacancy rate and asked what the previous rate was. He asked when it would implement the risk based evaluation approach to LOAs, as he believed this would assist its work going forward.

Mr Moodley said that the mandate of the NRCS was to protect the consumer and ensure fair trade. This was clarified in the Consumer Protection Act, and the NRCS had no other mandate. He commented that the importance of its work was shown when considering the recent burning down of shacks due to the use of non-compliant paraffin, and the 35% non-compliant brake pads found in the automotive industry. He thus appealed to the Committee that should it not put pressure on the NRCS to bring in non-compliant products that will ultimately harm the consumers. He urged the Committee to respect the policy and mandate given to the entity.

He said there had been an improvement in the number of days it took to approve LOAs. The NRCS indicated previously that it was working toward approvals in less than 120 days, which it had now achieved.

He noted that an attorney was appointed to assist with the risk based approach to LOAs. The entity was hoping to achieve this by June 2016. The draft document was completed, and the entity would move with speed to ensure it was implemented.

He explained that there had been several discussions that penalties should be issued by the magistrate's courts.  The matter had been taken up with the courts. The NRCS was working with the National Consumer Commission on the effects of the outcome on the pending cases.

Mr Moodley said the NCRS was aware of products that were first brought into the ports, before applications were made. This went against all trade practices and even though these goods were delayed at the ports, they would not be allowed into the country without proper documentation. He said the NRCS would not bow to pressure to deal with companies that were not following procedure.

Ms Mathura felt it was important that the technical nature of the qualified audit results be understood by the Committee. She said the NRCS had implemented a lot of controls and projects that would take two to five years to resolve. The surplus was invested at the South African Reserve Bank and approved by the National Treasury.

Ms Meisie Katz, General Manager for Foods and Associated Industries, NRCS, said that the entity worked in collaboration with the Departments of Health and Agriculture to approve foods and related products entering the market.  She said that all local producers were registered with the NRCS.

Mr Moodley extended an invitation for the Committee members to view the process of destroying non-compliant products on 11 December 2015.

The Chairperson said no one on the Committee supported approval of non-compliant goods. The Committee was simply saying that goods that appeared to be compliant were being delayed longer than the standard approval times. She said it would be useful for the NRCS to share in writing what impediments it had found, to assist the Committee in understanding its particular challenges. The Committee would consider including the NRCS in an oversight visit.

National Consumer Commission
Mr Ebrahim Mohamed, Commissioner, National Consumer Commission, noted the request to present only the highlights, in the interest of time. He said that the Commission (NCC) operated four divisions: Research, Legal, Corporate Services, and the Office of the Commissioner.

Describing the highlights of the quarter, he noted that sixteen inspections were conducted, targeted at retailers in Gauteng. There were inspections in Cape Town and would be more soon in the Northern Cape. The NCC would go to small and big retailers. Certain poultry products in the cold chain were inspected and improper labelling was found. In-house bakeries and butcheries were also found to have improper ingredients listed on products.

Slides 5 and 6 set out details of product recalls and reasons for the recalls. Some of the companies affected were Toyota, Chevrolet, Isuzu, Honda, Massmart, Shoprite, BMW.

Under the target of promoting education and awareness, the NCC held ten community workshops with elderly women and the youth, who were the groups that, statistically, tended to complain less. It also held 10 business workshops. NCC participated in eight exhibitions. The first newsletter was drafted and designed. The annual Africa dialogue conference was a success. NCC hosted a Zimbabwean delegation and was playing an important role in the law making processes for consumer protection in Zimbabwe. The NCC also had 101 media features. Mr Mohamed said that the NCC had had a wide public reach this quarter.

Trends Analyses were then presented. In relation to the complaints, 64% of complaints were from males between the ages of 15 and 44 years old. 46.4% of the complaints were from Africans. Motor vehicle complaints were high in number, because these were high value goods. The Motor Industry Ombud and the Consumer Services Ombud submitted reports to the NCC. From July to September, 1  541 complaints were received from consumers. This showed that the message was getting out that consumers could approach the NCC. However, the figures for the provincial offices were low. In the past, the Scorpions unit would refer complaints to the NCC, but take payment for services rendered for the NCC. The NCC now requested the consumers' details so that it was able to take over the case completely.

Twelve of the nineteen targets were achieved in quarter 2. The unmet targets were partially achieved. Five of the seven vacancies were filled. Two posts were being considered for restructuring. More vacancies had been filled since the report was compiled.

Signing of MOUs was under way with Motor Vehicle and Consumer Goods Ombuds. The NCC completed three of four investigations. The last investigation was ongoing.

The Opt-out register was established and registered as a Public Private Partnership. R2 million was assigned to NCC for the appointment of a Transact Advisor. The project costs were underestimated and a request for more funding was submitted to the National Treasury.

There had been 48 audit findings, mostly in relation to internal matters, and to assets.

Ms Ntsobe Nkoana, Chief Financial Officer, NCC, presented the financial performance to the Committee. She reported that all transfers were received. The excess funds were invested with the South African Reserve Bank, at 6% interest income. NCC paid its rent in advance. The main concern was that the rental lease agreement would shortly be coming to an end. NCC had submitted a request to the dti for an additional R5 million to move out of the building. It was crucial that this must be resolved as the current lease agreement was found to be irregular.

Together with the previous financial year’s surplus, the accumulated surplus amounted to R12.6 million. NCC requested permission from National Treasury to retain the 2014 surplus.

Only 50% of the revenue received as transfers was recognised in the Statement of Financial Performance. Transfers only increased by 2.3% which was below the inflation rate.

She said it might seem as if operational expenses were under-spent but this apparently discrepancy was due to some quarter 2 projects overlapping to quarter 3, and part of the expenses being carried over. There were also legal fees of cases included in the amount.

Discussion
Mr Mkongi said the lease issue was raised previously in the Committee, and again during the oversight visit. The Committee had suggested sharing of office space. Mr Mkongi noted, from the highlights presented, that the motor industry was the most problematic for consumers. He asked what the plan was to deal with this issue. Secondly, he asked if the NCC's research findings were available to the public. Mr Mkongi said he would have liked to hear about unfair contract terms.

Mr Narain Kuljeeth, Company Secretary, NCC, responded that the research was under way but not yet published. The findings of the NCC had revealed that when banks sell repossessed houses, the ordinary consumers cannot get occupation because often the previous owner wanted to remain in the property. Sheriffs had sometimes failed to evict the occupants. Banks were now telling consumers that they could not guarantee occupation. This was something the Commission wanted to look into.

Mr Kuljeeth, in relation to the accommodation, said that unless the dti decided to put all entities in one office park, it would be hard for individual entities to organise office sharing. This point had been raised in the past and it was already under consideration by the dti for the long term.

He said the Motor Vehicle Ombud was doing a good job. There were quicker turn-around times and experts, manufacturers and dealerships in the industry were complying. The nature of complaints was such that the ombudsman was able to deal with them very quickly. By and large, manufacturers did co-operate and had approached the NCC before, to assist in recalling, and the NCC staff would monitor and track progress.

He said that the Consumer Protection Act made provision to deal with unfair contract terms, depending on the type of agreement.

The Chairperson reiterated that the NCC had known for a few years about the need to relocate, and the irregularly processed lease. She requested a written response from the Chief Operating Officer of the dti, Ms Jodi Scholtz, and said that she would like the matter to be addressed as a matter of urgency. She told Mr Mohamed to note an early warning to allow for engagement with the Minister or Ms Scholtz. She did not like to see notices at the eleventh hour.

Committee Business
Minute adoption

Minutes of the meeting held on 17 November 2015 were distributed, along with the Chairperson’s final notes.

Mr  Macpherson asked why the person posing the questions was not identified.

The Chairperson responded that she thought this was not the usual template, but would check and revert to him on that point.

The minutes were adopted.

Minutes of an informal meeting (no date specified) were also adopted.

Draft Committee programme: First quarter 2016
The Chairperson asked the Committee to chose whether it wanted to split the Committee or travel to two provinces in one day for the oversight visit in January.

Members decided to keep the Committee together, and work on Saturday and Sunday 30 and 31 January.

Mr Macpherson announced that it was his last day on the Committee. The Chairperson wished him well.

The meeting was adjourned.

 

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