NRCS on its 2015/16 Annual Report & 1st Quarter 2016/17 performance; outstanding matters

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Trade and Industry

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

The Committee first received an advisory presentation by the Parliamentary legal advisor regarding the concerns and recommendations raised by the Auditor General (AG) in the qualified audit of the National Regulator for Compulsory Specifications (NRCS). The AG had indicated that he could identify a trend regarding the qualifications in the entity’s audit, and that he had recommendations to remedy those issues. While there could be a few issues raised in terms of the auditing methodology, the Committee should rather focus on obtaining a proper report and explanation from the NRCS regarding the qualifications and the AG’s concerns.

The NRCS then informed the Committee of the risk-based approach which had recently been adopted by the entity. A considerable amount of effort had been placed on increasing border and manufacturing source inspections in order to adopt a pro-active approach to their mandate, to prevent unsafe products from entering the market in the first place, as it was difficult to recall them once they had entered into circulation. The number of Letters of Authority (LOA) applications per month had increased to 1 200 per month in 2016, after the new risk-based approach had been adopted.

The processing of LOA applications had changed from taking an average of 120 working days, to 120 calendar days, which had been the result of engagements with the Department of Trade and Industry and various stakeholders. The number of the electro-technical industry compulsory specifications had increased from four to 18. The risk-based approach was currently in its pilot phase. It was envisaged that the entity would switch the LOA application process to a fully automated online system next year. At present, LOA applications were processed manually, which significantly increased the amount of time and resources to process them. Interventions had been put in place to address concerns regarding slow turnaround times, and a number of new inspectors had recently been trained and qualified which would reduce turnaround times. It also envisaged that LOA renewal applications would be dealt with under a different system and that if a product had received an LOA and its composition had not changed, when a renewal application was made, it would not be necessary to go through the same system as a normal application.

The system primarily relied on assessing the risk of products with reference to three main factors: the product risk, the country of origin and the company. A firm of attorneys had been retained to ensure that the system was within legal bounds and they had confirmed that, in their opinion, no issues in that regard were present. It was envisaged that LOA applications from companies that had a compliance culture would be given preferential treatment, which was common international practice. The most important factor currently being considered was the history of compliance of companies under the pilot phase, but more factors would be included as the system became more operational.

Members wanted to know whether the approach would allow discrimination between countries based on their risk factors, and whether such a policy would be in conformity with World Trade Organisation (WTO) guidelines. Were companies that had been rated under the pilot project been made aware of their risk status? There was concern as to what legal measures could be taken against products which were not subject to compulsory specifications, as the Legal Metrology Act did not allow any action to be taken against products which are not subject to compulsory specifications. 

Meeting report

Havana trip cancelled
The Chairperson dealt with the cancellation of the trip to Havana in Cuba to attend a trade indaba. The Minister of Trade and Industry had sent the Chairperson a letter the previous day, on 13 September 2016, in which the he had informed her that he had had to reprioritise other Department projects, so funding also had to be reprioritised. The Department and the Committee therefore would not be attending as a result, but one official of the Department would still attend. She said that the letter which had been addressed by the Committee to the Speaker in relation to the Cuba trip, would subsequently be withdrawn, and reasons would be provided for its withdrawal.

Legal advice on Auditor General’s report 
Advocate Frank Jenkins, Senior Parliamentary Legal Advisor, then addressed the Committee on a letter which had been sent to the Committee by the Auditor General (AG), but which had not been circulated publicly at the meeting. He said that, in his opinion, the contents of the letter were to assist the Committee in compiling its Budgetary Review and Recommendation Report (BRRR) and to make a proper assessment of the National Regulator for Compulsory Specifications (NRCS), which fell under the oversight mandate of the Committee as an entity of the Department.
 
The letter dealt with the past three years of auditing of the NCRS, and each year the entity had received a qualification. He said that there was a pattern in this regard, which the Committee could then deliberate on and make recommendations regarding issues such as funding. A few issues were raised in the AG’s letter. He had in his possession a power point presentation which set out both the process that the AG had followed in conducting the audit and the recommendations which he believed should be followed. A draft report had been submitted to management and a proper interaction had to occur between the auditee and the AG in relation to his recommendations. When the AG finalised his report in terms of the letter, when he came before Parliament, it would be regarded as constituting correct findings, given that the Auditor General was the supreme auditing body in the country. He added that the Public Audit Act allowed the AG to submit further audit reports if certain issues were unclear or others needed to be emphasised.
 
The report noted that there were various areas of concern, and the AG could not form a proper opinion on certain issues, and he had raised further concerns about various accounting standards. The report did emphasise that improvements had been made towards the end of the year, but it did still remain a qualified audit and work would have to be done in that regard.
 
It was noted that the letter did detail certain measures which had been put in place to correct the concerns raised. It was important that the letter and presentation dealt with a three-year cycle of audits. The implication was that if the measures to correct the issues raised were not dealt with either in year one or two, then the next year would also result in a qualified audit unless the accounting recommendations were properly implemented. He said there could be differences of professional opinion regarding the audit recommendations, but that was not an issue to be dealt with by the Committee, who rather had to ensure that the entity implemented the recommendations which had been made.
 
The Chairperson thanked Adv. Jenkin for his advice and asked the Committee whether there were any comments. No Members had any further comments or contributions.
 
NRCS: Presentation on Risk-Based Approach
Mr Asogan Moodley, Chief Executive Officer (CEO), NRCS, said that prior to 2008, the entity had received approximately 400 Letter of Authority (LOA) applications per month in the electro-technical and environment industry sectors. In 2012 and 2013, a risk-based approach was implemented in relation to the surveillance work, which made border and source inspections a key factor in fulfilling the entity’s mandate.
 
In terms of the entity’s jurisdiction, the word “source” referred to the point at which manufactured products entered into the country, which was under the territorial jurisdiction of the NRCS. A considerable amount of effort had been placed on inspections at both the points of entry and manufacture, in order to prevent non-compliant products from entering the market at the various points of trade in the national economy. The entity had adopted a pro-active approach, as it was difficult to locate and recall non-compliant products once they had already entered the market. Certain products were also of such a nature that once they were sold and circulated in rural areas, it was difficult to inspect them, and use of non-compliant and unsafe products could cause serious injury to persons and property.
 
Since the entity had adopted its current approach of removing those products at their source of entry, the number of LOA applications had increased from approximately 400 per month in 2008 to an average of 1 200 per month in 2015/16. Prior to the introduction of the strategy of inspecting products at the source, there had been an average of approximately 40% in product compliance, but since the implementation of the risk-based approach strategy, there had been an increase in LOA applications for products to be approved before they entered the South African market.
 
However, there were still a large number of products entering the country which did not comply with specifications and were unsafe to use and trade, which was a concern. A decision had been taken that the pre-market approval process had to become more rigorous in order to address that issue and to ensure that products entering the country were safe for both consumers and the environment in accordance with the NRCS’s mandate.
 
Mr Moodley said mandate of the entity was to protect the environment and consumers from unsafe products, to promote fair trade and to promote the uniform observance of building standards and regulations. It was a major concern that a large number of non-compliant products were still entering the country, but the pre-approval processes had been tightened in order to ensure increased compliance and further measures were being taken to prevent such products from entering into circulation.
 
The number of LOA’s had increased from an average of 1 200 per month in 2015/16, to an average of 1 300 per month in the first quarter of the 2016/17 financial year. It had previously taken between ten to 21 days to process an LOA application, but the NRCS had increased that figure to 120 working days in 2015. A number of concerns had been raised regarding the 120 working day period, but after a series of engagements with various stakeholders and the Department, the Minister had decided to alter the period to 120 calendar days, which was a 30% reduction in the turnaround time for LOA application processing.
 
In terms of regulatory environment indicators, the entity had previously used four specifications with which all LOA applications had to comply. These had subsequently been increased to 18 compulsory specifications. The background information regarding LOA applications had been made to Parliament in the previous week. In total, 1 365 LOA’s had taken more than 120 days to process, and on average they were 53 days outstanding.         

A series of interventions in order to ensure increased efficiency in processing LOA’s and addressing the backlog had been implemented, which was envisaged would bring the targets back to normal figures by October or November. The first intervention was to separate the administrative processes from the technical processes. Previously, the technical inspectors were fulfilling both the administrative and technical checks on the LOA’s. A series of checklists had been introduced to identify which issues fell within the technical and administrative processes of LOA applications, which could then be allocated to administrative assistant personnel.  Once, the administrative issues had been resolved, the LOA’s could then be sent for technical evaluation, and this should result in increased overall efficiency. That intervention dealt primarily with low and medium risk products.
 
Thus far, the risk-based approach was in its pilot phase, but LOA applications were still being handled manually. An automated system was, however, being developed. Renewal of LOAs had automatically been classified as low risk, provided that the product composition had not changed and the validity of the test report period remained. It was the opinion of the entity that provided that those conditions had been met and they had previously issued an LOA, it was unnecessary to issue a new LOA again. It was stressed that this approach would not result in increased risk of harm either to consumers or the environment, as those products had previously been technically evaluated and found to be compliant.
 
Local manufacturers were also placed in the low risk category, as the entity was able to conduct inspections of their products by looking at their production and assessment processes to make a determination regarding their product compliance.
 
Components which were imported into the country went through a further process of quality processing, where determinations could be made regarding the processing systems and control mechanisms of the foreign companies which produced those components. This could only be done, however, where such a quality processing procedure in terms of those foreign components could be done, and if they could not, then those products would not fall within the low risk category.
 
A second intervention which had been implemented to improve the processing of LOA applications was that four additional inspectors had recently qualified at the end of August and had been assigned to the approval section to assist with LOA processing. This had meant an overall capacity increase of 40%. Electro-technical surveillance inspectors had also been assigned to the approval section, to further assist with LOA approvals. It was emphasised that electro-technical surveillance was highly qualified and would provide much needed assistance and improved processing of applications.

An instruction had also been issued by the CEO on 2 September 2016 in all the other business units to assist in the LOA evaluation process during September and October. The CEO had also given approval for two additional candidate inspectors to be appointed in the unit, and this was currently underway. It was noted that as the NRCS was a government entity, they would be required to comply with all recruitment and selection processes in that regard. Two surveillance inspectors had also been permanently reassigned to the LOA approval process. The additional inspectors who had recently qualified and the inspectors who had recently been reassigned, had resulted in the overall inspectors in the unit being increased by 150%, which would do much to decrease the backlog in LOA applications.
 
In the short to medium term, other interventions had been implemented to increase the capacity of the LOA approval unit. One of those interventions had been to use the business capacity of the other units. A comprehensive exercise was currently being undertaken to examine the capacity of the other business units, as reports had shown that the majority of the under-capacity, which was contributing to LOA backlogs, was in the electro-environment sector. Investigations were also currently being undertaken to determine whether it would be feasible to consolidate all the business units into one unit and an equitable approach adopted in terms of the LOAs, which would assist considerably in reducing the turnaround times for LOA application processing.
 
The most important intervention which had been undertaken in the short to medium term was to finalise the information technology (IT) system to support LOA processing.  
 
Risk-based approach methodology
Mr Moodley emphasised that he had stated in previous reports before the Committee that there was no possibility of the NRCS giving preferential treatment to any LOA applicant. Whenever applications were made, they would be placed in a queue, because the regulatory policy and mandate of the entity did not allow preferential treatment to be given to any applicant. However, an exploratory approach had been adopted to determine whether preferential treatment could be given to applications which had a history of a compliance culture and complying with the regulatory requirements of the entity.
 
Following the adoption of the risk-based approach, it was decided that preferential treatment should be given to applications which had a compliance culture which was standard international practice. A firm of attorneys had been retained to determine whether additional regulations would have to be adopted in terms of World Trade Organisation (WTO) rules to recognise and reward a compliance history and culture which had been fostered in terms of applications. The attorneys had advised that a policy would have to be developed and that policy could then be used for the purpose of recognising and rewarding applications which had a compliance culture.
 
There was generally no one universal definition of what constituted a risk-based approach. All the definitions, however, converged on the fundamental concepts which centred on determining probability and impact factors of risk, namely: what was the probability of the risk occurring and should the risk occur, what would be the impact of that risk occurring? Once, those two factors were determined, a regulatory response could be formulated which would centre largely on the calculation of the probability of that impact. A further implication of the approach was the development of the entity’s policy tools, which could then inform their decisions by using their limited resources more efficiently.

The risk-based approach aimed largely at focusing resources into areas which had a high risk in terms of the two above factors and then allocating resources more efficiently away from companies which have a compliance culture, which would improve the way that resources were utilised. The primary objective was to focus more attention and resources to areas which were shown to have a higher probability and impact of risk and to devote fewer resources and less attention to areas which had a lower probability and impact of risk. The determination of which areas had more or less risk would be based on objective criteria, which would then help to create a formula which could be used to create risk profiling.
 
The regulatory rules and processes had already been developed for that process, and the pilot phase had been implemented. A periodic review would take twice every year, but the approach was only in its pilot stage and the bi-annual review had to be revised to include more reviews that would be implemented, following a reassessment and evaluation of the system.
 
In the risk-based framework there were two stages: the administrative compliance stage and the technical compliance stage. The administrative compliance stage was to simply determine whether the application met all of the administrative requirements, such as the attachment of the required documentation with the requisite information, which was required to make an assessment of the application. If the application did not pass the administrative compliance stage, it would be an automatic rejection and sent back to the applicant for further processing. If the application passed through the administrative compliance stage, it would be captured and then go through to the technical compliance stage. The technical compliance stage was concerned with whether the product itself complied with the technical and compulsory specifications of the NRCS.
 
Once full implementation of the programme had occurred, it was envisaged that low risk applications would be processed within 75 calendar days, medium risk applications in 90 calendar days and high risk applications in 120 calendar days. Interventions already mentioned in the presentation would assist in meeting those turnaround targets.
 
The risk model took three high level factors into consideration: the company risk, the product risk and the country of origin. Certain downstream factors were also considered, such as consignment-based applications by conformity assessment bodies, to determine under which category an application would be processed. A further factor was participation in a self-compliance scheme. Engagements had begun with various industry participants in the past year, to establish a self-compliance scheme. All industries, persons and companies which traded in the South African economy were required to comply with the compulsory regulations and specifications, which was non-negotiable. What the scheme wanted to establish was a culture of self-compliance to personally ensure that their products and processes complied with those requirements without the NRCS having to intervene to enforce compliance. The scheme aimed to recognise and reward that self-compliance by entering into a voluntary contract or memorandum with those industries or companies, recognising their participation in the scheme by implementing internal processes to ensure compliance. The result would then be that the entity would lower their regulatory oversight over the industries and companies which had entered into those schemes. This would also be a factor which would take that company into the lower risk category for LOA applications. A further downstream factor which would be taken into consideration was whether the company had been issued with a certificate of compliance (COC). It was stressed that the entity would not determine who would be entitled to partake in the scheme, which would be offered across the industry for all companies to voluntarily participate in.
 
A factor which was always taken into account was the history of compliance for the company, which was information that was available to the NRCS and which was objectively quantifiable. In terms of product risk, factors were largely standardised and certain products would automatically be labelled as high risk, such as paraffin stoves, while other products would automatically be labelled low risk, such as certain IT equipment for example. Whenever an international alert was issued for a particular product, this could also impact on the product risk rating, such as the recent alert given regarding exploding Samsung cell batteries. Product risk was a factor which stayed more or less the same, but it could change depending on whether the components in the product changed.
 
It was more challenging to determine risk regarding different countries, but international alerts were a factor that was taken into account. This was due largely to the fact that gaining information regarding product and company compliance history was more objective, and more weight was placed on those factors, with far less weight been placed on a country’s compliance history.
 
It was envisaged that in the future, more risk factors would be added regarding developments in risk. When new safety specifications were added to certain products, it would be difficult to assess the risk regarding a lack of information, but where the risk specification was already in existence it would be far easier to quantify the risk of that product.
 
The extent of product utilisation was also an important consideration. Paraffin stoves had been specifically mentioned because they were widely used throughout the country, which would then influence how closely the product was scrutinised in terms of its risk, as well as the propensity for failure. However, both of those factors would be utilised only in the future, as currently only the history of compliance was being considered.
 
International alerts were also particularly important indicators. The CEO refused to name specific countries, but said that he had information indicating that the same product which was manufactured in different countries could have a profoundly different rating in terms of risk.
 
Under company risk factors, the most important factor relied on at present was the compliance history and culture of the company itself, but reliance on that factor alone was only a short term goal. It was envisaged that in the future other risk factors would be added, such as the sustainability of the company. If a judgment history against a company could be obtained, that would also be used as a factor in determining the risk.

The NRCS registration was also important, which was a requirement for all companies. The entity would link with the Companies and Intellectual Property Commission (CIPC) to gain further details, inclusive of geographical details. Research conducted had shown that two companies which were situated close to the border of the country were manufacturing non-compliant products and that due to their geographical location, they were able to escape a degree of compliance regulation, which was an issue that was being addressed.

Levy payment history would also be considered, and where companies and industries had levy payment costs due which had not been paid, that would also be taken into consideration. Reputational risk to the company was also of critical important in determining the risk of a particularly company.
 
The further factors identified would be implemented at a later date, but the entity had currently implemented only the first factor, which was compliance history. The other factors would be implemented at a future date, if the current pilot project proved to be successful.
 
The presentation then detailed how the risk rating would work in practice.
 
A weighting system would be adopted where the product risk, company risk and country of origin risk would all be factored into the eventual rating.  The country of origin risk would be given the lowest rating of 10%, the product risk the highest with 50% with the company risk being given a rating of 40%. The company and product risk rating were closely intertwined, with only a 10% difference between them, as the two factors were often closely related, with the country of origin risk playing a lesser role. However, the probability and impact factors would first be taken into consideration before the above three factors would be factored in, before giving a final risk rating.
 
The presentation then dealt with the specifics of the risk rating formula in terms of probability and impact. The highest probability rating that could be allocated to a high risk product was a rating of five, while the lowest rating for a low risk rating would be one. Regardless of the probability of failure, the impact would still have to be considered. If the impact of the product failing was high, then the highest rating that could be allocated was a five, the lowest a one. If a product had a low probability of failure but a high impact if it failed, such as a paraffin stove, then it would fall into the high risk category. If a product conversely had a high probability of failure but a low impact if it failed, such as an iPad, then it would fall into the low risk category. The probability would then be multiplied by the impact, which would then give a value as to the risk rating of that product.
 
Once the risk and probability rating had been determined in terms of the above calculations, the risk rating of the actual application itself could then be determined, using the three risk factors of product, company and country of origin. Advice had been received from the firm of attorneys retained, that the risk rating system was compliant with all the applicable legal requirements.
 
Thus far, the risk-based approach had been reviewed, and awareness of it had been raised both internally and externally since the end of March 2016. Various industry groupings and stakeholders had been engaged in that regard, especially the chambers of commerce. At the end of April 2016, the benchmarking and approval systems had been done. However, the system was still being manually implemented and had not yet been automated. The reason was that the entity first wanted to properly fine tune the manual process before automating it, in order to ensure that the system operated properly and efficiently.

At end of May 2016 the compulsory specifications in terms of risk had been classified, with the assistance of focus groups and experts in the entity itself. 100 companies had been identified through the risk sampling process and a risk rating conducted on them. Of those 100, 66 had been classified as high risk and 25 as low risk. In terms of country risk classifications, six had been classified as high risk for specific products, while 14 import clearing agents had been classified as high risk. At the end of June 2016, a phased in implementation had occurred, starting with local manufacturers, and the process for renewal applications had been implemented. However, if the product composition had changed then it would no longer qualify for the benefits implemented in terms of renewed applications, as mentioned earlier. At the end of July 2016, the risk-based approach had been fully implemented in terms of renewal applications, as well in terms of low risk products. A pilot programme had been implemented in terms of medium risk products, and the risk-based approach had also been applied to the surveillance functions of the entity as it pertained to the sources of entry.
 
The manual process of the system was then dealt with in further detail. The system that was currently being used was called Customer Risk Management (CRM). The CRM gave the applicant a tracking number to track the progress of the progress of their applications. A manual registration was then done of the CRM, and a confirmation process was done in terms of levy payments and the compliance culture of the applicant. Levy payments and the compliance culture of the applicant were given a high amount of weight in considering their application. Intensive measures would be implemented in future to force applicants to adopt a compliance culture, and it was becoming increasingly evident, particularly in terms of levy payments, that payments were not always forthcoming. Measures would be implemented in the short to medium term to do deal with those issues. Once the above processes had been completed, administrative checks would be done and the LOA applications would be assigned. What had occurred prior to June 2016 was that the entity would do the complete administrative process in terms of all new LOA applications, and only once that process was completed would the applications be sent for capturing and issuing, which took approximately 120 days. This had been done largely to cater for the capacity and resource difficulties faced, but as mentioned earlier in the presentation, interventions had been put in place to deal with that backlog as many applications had even exceeded the 120-day mark for processing.
 
Since June 2016, the new system had been implemented in terms of low risk applications. First, the approval and capturing would be performed, which had brought down the waiting process for applications to an average of approximately 75 days. Products which fell within the medium risk category first required a technical evaluation, followed by an approval and capturing process, due to the possible increased risk of those products, which would take approximately 90 days. High risk categories required a full assessment of technical evaluation, followed by approval and then capturing and issuing, which it was envisaged would take approximately 120 days.
 
The current process was currently done manually for all applications, but a plan had been put in place to automate the system. There would be an online LOA application system, which at the moment was CRM. The accounting and registration aspects would be done off the system, as both systems used different accounting standards. The CRM system was being readjusted to allow the system to effectively do the administrative checks. It was envisaged that the revised system would firstly request mandatory information, such as the test report and country of origin, which would have mandatory fields which had to be uploaded on to the system. The system would then do an automatic check, and if certain information was either not uploaded or incorrectly uploaded, the applicant would be sent an automatic prompt to provide that information. If that information was not properly subsequently provided, then the application would automatically be rejected, and that would reduce a high amount of the administrative work currently being done under the manual system. Once the system had verified that the administrative requirements had been correctly uploaded, it would check further information provided against a central database regarding the country of origin and other factors, which were continuously updated by the NRCS. At the present, over 100 companies had currently been included in the database against which LOA applications could be checked.
 
Once the application had been through the administrative process and checked against the database, it would then be sent to the various technical evaluators at the entity for further evaluation. Depending on which risk category the application fell into, different streams of technical evaluation would be followed.
 
Mr Moodley provided further details regarding the envisaged automated system. It was intended that within the next two to three months, improvements would be made to the CRM system. The long term goal of the next 18 months was a project to modernise the systems of the entire entity, including the LOA system. In terms of short to medium term interventions regarding automation, the project had been approved for a revamp of the CRM system and a service provider had been appointed. It was envisaged that the by end of December 2016, the additional modifications of the CRM to cater for the risk-based approach model would have been implemented. The automated system would firstly sort the applications into different risk categories, with applications in the low risk category being fast tracked, with far more attention being focused on the high risk categories. The underlying approach of the entire system was to allocate resources more efficiently, based on the degree of inspection that would be required in terms of the risk of different LOA applications. It was necessary to revise the CRM system, as it had been implemented more than five years ago and needed to be adjusted considering the implementation of the risk-based approach and the application of that approach to source and border inspections.
 
Long term goals included an 18-month window period, to modernise the entire NRCS by September 2017. In the short term, a process had been engaged upon to modernise many of the entity’s processes and identify possible areas for improvement, which included the risk- based approach. A further goal was to create benchmarks with other entities such as the South African Revenue Service (SARS), to determine good practice. Discussions had already begun with SARS and the CEO had engaged with the Commissioner of SARS for benchmarking processes.

The entire strategy and approach of the NRCS had changed since 2012 and processes would be revised to support that strategy. The modernisation of the process would do much to improve the processing of LOA applications, but the actual technical evaluation would still be done by a technical supervisor. The process would also allow levy payments to be performed online, which would also deal with extra resource costs in terms of paper and so on, which would save further resources. Online payments of levies would also allow more efficient collection of payments which would also help the entity collect monies owed to them which would improve the amount of resources they had to effectively perform their mandate.
 
Discussion
The Chairperson said that she had requested a transcript of the meeting, as she had been unsure how it would progress. Any issues which were outstanding after the meeting could be addressed to the entity in writing after the transcript had become available.
 
Mr A Alberts (FF+) had a question regarding products which fell outside of compulsory specifications. He noted that there were currently 18 compulsory specifications which were being monitored by the entity. He was concerned that the law currently allowed any product which was not subject to compulsory specifications to be brought into the country and then traded without any accompanying legal responsibility due to the fact those products fell outside of those specifications. He wanted to know how the entity dealt with those types of products. Products were continuously been developed increasingly quickly -- were there were any plans to introduce a generic specification to fill the gap left by those products which were not subject to those specifications? In terms of his reading, the Legal Metrology Act  allowed for that situation to continue, which he regarded as unacceptable. His recommended that either an umbrella generic or product specific classification be created to deal with that situation in order to fill that gap.
 
Mr J Esterhuizen (IFP) wanted to know what the NRCS’s working relationship with the South African Bureau of Standards (SABS) was, and said that a positive working relationship between them would do much to benefit the industry. Previously, the SABS specifications were recognised by South African consumers as a sign of product reliability. The SABS was funded primarily by compulsory levies. He shared the concern of Mr Alberts, and thought that the importation of all products should be regulated to some extent by both the NRCS and the SABS. He was concerned about the reduced presence in the market of compulsory specifications and regulations on certain products, and said that even some products which were certified were not effective or safe.
 
Mr G Hill-Lewis (DA) congratulated the CEO for the improvements which had been made in relation to the concerns which had been raised by the Committee over the last 18 months. He noted that entity had committed to specific deadlines when the system would be operational, and wanted to know whether a commitment could be made so that customers would know when the new risk-based management system would be fully operational. He also wanted to know whether a commitment could be made that low risk customers’ LOA applications would be dealt with in 75 calendar days. It was important to commit to that deadline. He also wanted a commitment that the system would be fully operational by December 2017, and that any issues related to the introduction of the system would have been sorted out by that date. His concern was that the system would not go live in December 2017, with further issues relating to the introduction of a new system. A second question was whether customers would be informed of their risk rating so that they would be incentivised to decrease their risk rating, which he believed would add further value to the system and the objectives which it aimed to achieve. A third question was whether the Department’s trade lawyers had examined the policy and whether it would be legal for the entity to discriminate against different countries based on their risk rating. Would the 75-day period decrease once the system had become fully operational in December 2017? Would the system accommodate pre-import certification applications?
 
Mr B Mkongi (ANC) raised a question regarding the usage of different concepts which overlapped with one another in the presentation. He noted specifically mention of the word “source” of the product, and in the same presentation it also talked about country of origin. He said that the source of the product could overlap with the country of origin, and wanted further clarity on how a distinction was made in that regard. Regarding the history of compliance of a company and the self-compliance scheme, which aimed to incentivise companies to voluntarily comply with the regulations, he was concerned as to how the Committee or the NRCS would be able to effectively monitor companies which participated in the scheme and their compliance history as a consideration. Companies could have a history of compliance, but it could later emerge that their products were in fact non-compliant. He specifically made a mention of cars which complied with foreign compliance frameworks, but those products, when imported into the country, did not comply with the local regulatory framework. He wanted to know why SABS certification was not considered as a relevant factor in determining the risk of products.
 
Mr N Koornhof (ANC) said that the number of compulsory specifications for LOA applications had increased from four to 18. He wanted to know why the number of specifications had increased and who had made the decision to increase them. He also wanted to know whether there was a possibility that the specifications would increase or decrease in the future.
 
Mr D Macpherson (DA) congratulated the entity for the progress that they had made. He said that it was commendable that the Department and the entity had been pro-active in dealing with changes in the market in terms of specifications and changing products, as opposed to being reactive when those issues arose later. While it was necessary to ensure regulatory oversight over products in order to protect consumers, the Department and the entity should be wary of creating an over-regulatory environment which could stifle economic growth. He asked about the average delays in terms of LOA applications, prior to the interventions by the entity, and what the difference was between delays of 100 to 120 days. His issue was primarily why it would be seen as necessary to delay an application to an average of 120 days, when that same application could be dealt with in a period that would be less if possible. He requested that the CEO provide that response in writing to the Committee. With regard too the determination of a country’s risk factors, why was the value of a consignment considered a relevant factor in determining that risk? In respect of low risk LOA applications, did the 75-day calendar period apply to all low risk applications, or could they be dealt with in a shorter period? If the Department or the entity had issues regarding resources, had they considered engaging with industry and implementing a premium levy to be imposed on them if they wished to engage in the voluntary compliance scheme? Such a scheme would benefit both the entity and industry, as it would improve the turnaround times for further LOA applications. Were the companies which had been classified already been informed of their risk status at present, and was an appeal process in place if they felt that they had been unfairly classified? Would LOA applicants be able to track their applications online once the system was operational?  Had the policy recommendation, based on the legal advice the entity had received, been formulated and sent to the Minister, and would the pilot project be able to proceed while that policy was still in the process?

The meeting was adjourned.

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