National Consumer Commission on its 1 Quarter 2016/17 performance

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Trade, Industry and Competition

09 September 2016
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The National Consumer Commission (NCC) briefed the Committee on its 2015-16 annual report, which focussed on its achievements against planned targets, its financial management, progress against the findings of the Auditor General of South Africa (AGSA) and key challenges. Due to time constraints, the 2016-2017 first quarter report was not presented.

The NCC reported that it had received an unqualified audit opinion. It had conducted 57 inspections with regard to paraffin stoves and the labelling of food products, and conducted 25 investigations. It had also assessed 6 802 consumer files. In demographic terms, Africans consumers had lodged the highest number of complaints -- 3 111, or 46% -- whereas whites had lodged 41% of the complaints, and Indians and coloureds 10% and 3%, respectively. 61% of complaints had been received from males and 39% from females. This was an illustration that consumers were aware of their rights.

It reported that 11 of the 18 targeted deliverables had been fully achieved, and the performance information had attracted an unqualified opinion. In order to address inefficiency problems, the NCC had introduced better planning and management of capacity and skills to address unachieved areas. More effective internal control measures had had to be effected within finance, supply chain management and the information communication technology (ICT) units. Action plans to deal with irregular, fruitless and wasteful expenditure, deviations and invoice registers, had been implemented.                                                      

With regard to the financial performance, R57 million had been spent, reflecting an over-spending of 2.7%. R7.2 million of the R9.5 million irregular expenditure had been incurred in prior financial years, 60% of which was attributable to an improper lease agreement. Fruitless and wasteful expenditure of R3.6 million from prior financial years had been written off.

Members felt that the management of the NCC was to blame for maladministration at the entity and that the Department of Trade and Industry should be held to account for failing to turn around the NCC, or to appoint management that was effective. They sought clarity on a number of issues, including why the number of processed complaints were insignificant, why complaints were dismissed on the mere grounds of non-cooperation by a supplier, why it was difficult to lodge a complaint with the NCC, why three towing services reports had not been submitted to the Minister, on how matters raised by the AGSA were dealt with, whether there was an action plan to turn around the NCC, on communicating its relocation, and on its relations with the workers’ union. 

Meeting report

Opening of meeting
The Chairperson reminded Members that at their previous meeting they had had a proposal to meet with the South African Revenue Services (SARS), but no-one had communicated with SARS due to the Parliamentary staff deadlock. She would invite the SARS herself to come and brief the Committee on 16 September 2016.

The agenda was adopted without amendment.

National Consumer Commission: Briefing
Mr Ebrahim Mohamed, Chairperson: National Consumer Commission (NCC), presented an overview of the first quarter report, with achievement against planned targets, financial management, progress against Auditor General of South Africa (AGSA) findings and key challenges. He reported that the NCC had received an unqualified audit opinion. There had been 57 inspections conducted with regard to paraffin stoves and the labelling of food products, and 25 investigations had been conducted.

The NCC had assessed 6 802 consumer files, and had found that Africans had lodged the highest number of complaints – 3 111, or 46% -- whereas whites had lodged 41% of the complaints, Indians 10% and coloureds 3% respectively. 61% had been received from males and 39% from females. This was an illustration that consumers were aware of their rights. At the provincial level, Gauteng had the highest number of complaints.

As part of resolving disputes between consumers and suppliers, the Consumer Goods and Services Ombud (CGSO) and the Motor Industry Ombud had received 2 495 calls between March 2015 and February 2016 from complainants. In 2014, prior to accreditation, 41 894 calls had been received and in 2015/16, following accreditation, 175 932 had been received. Between 15 and 20 dealerships were visited by inspectors daily.

Mr Mohamed said that 11 of the 18 deliverables targets had been fully met, and the performance information had also attracted an unqualified opinion. The NCC had introduced better planning and management of capacity and skills to address unachieved areas. More effective internal control measures had had to be effected within finance, supply chain management and the information communication technology (ICT) units. Remedial action against irregular, fruitless and wasteful expenditure, deviations and invoice registers had been implemented. All findings made by the AGSA and internal audit had been monitored and reported on at audit and risk committee meetings.

Ms Ntsobe Nkoana, Chief Financial Officer, NCC, reported on the Commission’s financial performance, saying that R57 million had been spent and, when compared to the approved budget of R55.5 million, it reflected an overspending of 2.7%. There had been under-spending of R1.6 million on the compensation of employees due to the time required to fill vacant positions. Goods and services expenditure had exceeded the budget by 12%, due to advertising, legal costs and training. Research expenditure totalling 75% of the approved prior year’s surplus, had been included. R7.2 million of the R9.5 million irregular expenditure, had been incurred in the prior financial years. 60% of this amount was attributable to an improper lease agreement. The fruitless and wasteful expenditure of R3.6 million from prior financial years had been written off. This had occurred after an investigation had been conducted, and attorneys had recommended that it would be uneconomical to recover the amounts.  


Mr G Hill-Lewis (DA) sought clarity on 6 802 complaints that were processed, which he felt it was insignificant compared to the number of NCC staff. He queried the 230 complaints that had been dismissed merely on the basis that there had been no cooperation from the suppliers. Was the ground of non-cooperation reasonable to dismiss a complaint? Drawing from his correspondence with the NCC, he said that there were some inefficiencies that had not been reflected in the presentation, and asked for the reason. Why was it difficult for the public make contact with the NCC? Why would the NCC respond to a complainant that his or her matter had been referred to someone else without stating who that person was? Why was it difficult to get hold of the NCC via e-mail? He finally remarked that the CGSO was more inefficient than the NCC.

Mr A Williams (ANC) said that the NCC was the worst performing entity in the Department of Trade and Industry (DTI). There had been performance problems in the past, and he was expecting the NCC to have addressed them. Could the NCC explain how it would address issues raised in the Auditor General’s report, and what would the interventions be to prevent similar problems from happening next year?

Mr J Esterhuizen (IFP) remarked that there were still problems of manufacturers or suppliers failing to meet electrical compliance standards, resulting in more electrical appliances failing to function. In most cases, consumers did not know of the electrical fault when buying, and did not know what to do in these circumstances. How did the NCC dealt with these scenarios? What was the situation of the NCC as regards its staff? Had it negotiated with the workers’ unions?

Mr D Macpherson (DA) the Auditor General’s report pointed to the NCC management’s inability to guard against fruitless expenditure. It was unacceptable to transfer the difficulties the NCC was facing to previous leadership. How could the NCC explain that it received had received 6 802 complaints but had investigated only 25 complaints? What could be reasons behind this? Over the past years, the NCC had been failing to meet its targets. He felt that the NCC was not meeting its targets because it had not developed a code of practice, coupled with poor planning. Why was the NCC attending four international conferences a year, and how was it NCC was benefiting from them? He felt that attendance at these conferences was just another way of wasting of money. He finally sought clarity on why three researched reports had not been submitted to the Minister. 

Ms P Mantashe (ANC) remarked that the NCC should submit to the Committee a clear programme on how it would respond to the AGSA concerns. What were the plans to respond to instability in the NCC and to resolve its problems with workers’ unions? 

The Chairperson sought clarity on why the NCC was not accessible to consumers, and described the state of the NCC as alarming. He sought clarity on whether the NCC had relocated, and if so, what its new address was. A website could not be the sole means of communicating the relocation, because it was not everyone who had access to the internet or knew how to use it. What actions had been taken to address the issue of staff?

NCC response
Ms Thezi Mabuza, Deputy Commissioner: NCC responded that in the mediation of disputes, a complainant received a letter informing him or her that the supplier was not cooperating. In cases such as these, the matter would be referred to the CGSO. If the CGSO was not cooperating, the complainant would come back to the NCC. In the presentation, it had been mentioned that the NCC would be conducting 12 investigations of this nature. The number appeared to be small because the NCC had had only five investigators. Investigators had to travel and search for suppliers, and these processes required money. The NCC had expanded its investigating team to seven people and accordingly hoped to investigate more cases.

When the legal adviser had resigned, his position was converted into two positions to include a prosecutor who would work closely with the Tribunal. The prosecutor would be assisted with a legal researcher. The NCC had 47 people who ensured that it operated effectively. It had 16 people who were placed in call centres. These people received the complaints that had to be written down in order to find the legal recourse. This was the reason why the resource was taking so long.

On the question of performance, Ms Mabuza agreed with issues raised by the AGSA report. With regard to data capturing, she contended that where the report indicated a misstatement, this had been due to a disagreement on the formula. In the NCC’s formula, it did not discount the public holidays. Because of this problem, the days of working were more, instead of being less. The formula had made the NCC to look worse in meeting targets in line with its performance plan. On the issue of record keeping, there had been a problem in tracking complaints because, according to the AGSA, if the NCC had 6 802 complaints, these had to be linked to a file number, where particulars of complainants could be ascertained. The research conducted by the NCC had not linked participants in the research to their file numbers.

On the question of compliance with safety standards, Ms Mabuza responded that a certificate was issued to state that a supplier/manufacturer’s product complied. The issue of compliance was a matter primarily dealt with by the National Regulator for Compulsory Specifications (NRCS), which could determine whether specific conditions had been met. The safety of electrical products also fell in the ambit of the National Home Builders Registration Council (NHBRC). The safety question of electrical appliances was not an issue of the transaction. For instance, when the NCC did a ‘safer stove’ campaign, it had been concerned with the copper wire that was melting, and this had led to launching an investigation into the matter. In addition, there had been a complaint on the matter lodged with the courts, where the supplier had been found to be importing counterfeit products. There were three bodies that were mandated with ensuring compliance, and these bodies had to cooperate for the sake of compliance. When investigation was completed, the NCC would have a list of companies importing counterfeit products.

On the question of inefficient management, Ms Mabuza responded that the NCC faced a legacy of inefficiencies and, while trying to mitigate the inherited problem, irregular expenditure had arisen. In the previous year, the NCC had faced the issue of corruption in supply chain management. When the NCC had started to be firm with its workers by holding them to account, it had been hit by stand-offs. These were the same people who had involved the NRC in the problem of irregular expenditure. The NCC management was in the process of figuring out how these problems could be resolved.

The issue of researching towing services was long overdue. The reason why the three studies had not been handed to the Minister was due to the fact that the studies had been based on secondary data. The towing industry could be compared to the taxi industry, as it was difficult for the NCC to permeate it to get first-hand information. The NCC had to cooperate with the Department of Transport in order to get more information, because the Department also had the intention of initiating a towing service bill. The bill might have been abandoned, or suspended due to a lack of sufficient information. The NCC did not have the capacity to carry out the towing service research project. It had two only researchers. The reports that had been established by the researchers needed to be edited. Professional editing was taking too long to be finalised. Relying on secondary data was the major weakness of the reports.

Mr Mohamed said that a clear plan of action had been presented by the Chief Financial Officer. In 2015, the relationship with the workers union had not been good. There had been tensions and issues. In 2016, the relationship with the union was very healthy. There were no major issues and he hoped that there would be no major issues in the future.

He confirmed that the NCC would be relocating in two weeks’ time and that everything was on track. All details about relocation had been on website for two weeks.

The Chairperson repeated the point that not all consumers had access to the internet, and sought clarity on how those who did not have access would get to know that the NCC had relocated.

Ms Mabuza responded that the NCC was planning to run advertisements on radio and TV.

Mr Mkongi referred to the demographics, and asked why women were less complaining, and what consumers were complaining about? He remarked that if people were not complaining, this was an illustration that consumers were not aware of their rights. He also sought clarity on why suppliers would request money back on a returned product a consumer had bought and, at later stage, had found that it was malfunctioning. This occurred regardless of the supplier having assured a customer that the product had a guarantee.

Ms Mabuza responded on the question of international conferences, saying they were essential because that was where they could learn about new crimes, like cyber crime, and get more information or share information. Every month there was a teleconference to update one another on consumer protection, as well as issues related to cross-border problems. The Southern African Development Community (SADC) countries were also interested to know more about the Consumer Protection Act. The attendance at conferences had been cut down to three, but in order to reduce costs, the NCC could send one delegate.

On the question of turning away complaints, the Consumer Protection Act prescribed the manner in which a complaint could be lodged, and this requirement was followed.
Mr Williams suggested that the accountability of the NCC should be also the responsibility of the DTI. If by next year the NCC was still facing management problems, the DTI ought to explain why.

Mr Hill-Lewis said that a valid complaint could not be turned away on the basis that it did not comply with the prescribed manner of reporting.

Mr Macpherson commented that the NCC had been treading water for more than two years. It looked as if its management did not know what to do to turn it around. This was reflected in the AGSA report. All problems that the NCC was facing stemmed from mismanagement. Mismanagement could not be justified on the entity’s inherited problems. He felt that the conferences should be cut down to two.

The Chairperson remarked that the substantive issue of investigating towing services was taking too long. The NCC should answer all outstanding questions in writing.

Mr Williams reiterated that the DTI should be held responsible for mismanagement at the NCC.

Mr Mkongi was concerned about the towing of cars by municipalities. He suggested that the investigation of the towing sector should not be restricted to private businesses only, but extended to include public businesses.

Mr Hill-Lewis remarked that unconscionable conduct of the NCC in rejecting valid and legitimate complaints on the basis of their inconsistency with the prescribed format should be desisted from. The complainant should not be prejudiced.

The Chairperson expressed her concern about the emergence of a provision of loans and insurances to consumers by furniture shops.

Mr Williams asked for details on the type of consultancies for which a budget had been allocated.

Mr M Kalako (ANC) sought clarity on the fruitless expenditure, saying that fruitless expenditure was used by many entities as a mechanism to carry out corruption.

The Chairperson remarked that the protection referred to in the Consumer Protection Act was not protection of health, but the protection of the consumer. What was nature and scope of the protection? Was there an action plan to turn around the NCC? If there was such a plan, it should be submitted to the Committee.

Mr Mkongi took cognisance of the fact that the NCC was a small entity that could not deal with all the issues affecting consumers at once. He asked whether the NCC was protecting consumers, or clients of the state. Citizens were consumers of the state’s service delivery. They were buying certain services such as healthcare services, water, electricity, etc. Was the NCC receiving complaints in this field? If yes, what were the constraints in its efforts to address these complaints?

Ms Mabuza responded that if a complaint was lodged against the service delivery, the complaint had to be referred to the department or municipality concerned. The Consumer Protection Act restricted the NCC from interfering in the state’s activities. However, the NCC was engaging with metros to ensure that structures were set up to deal with complaints from the state’s consumers.

Mr Mohamed said that due to the time constraints, responses would be provided in writing. He sought clarity on what to do with the second report covering the entity’s performance in the first quarter of the 2016-2017 financial year.

The Chairperson responded that since the time allocated to the meeting had run out, Members should send their questions on the report to the NCC in writing. The NCC should respond to those questions within a reasonable period of time.

The meeting was adjourned.

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