South African Bureau of Standards on its 2015/16 Annual Report

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Meeting Summary

Annual Reports 2015/16 

The Committee was provided with brief background on the SABS and what its value chain of services entailed. It was highlighted that the SABS was the only organisation in SA that developed standards. The SABS sold standards as well. On revenue the SABS was 23% funded by a government grant, the remaining 77% was covered by services it provided and other income. On total revenue there was a 3.8% growth year on year. Total expenses grew 5.6% year on year. On the down side there had been a R45m reduction in the government grant. There was also a slower uptake of local content verification. Staff costs had also increased due to additional benefits being granted to employees in 2014/15 and 2015/16. On performance for 2015/16 the target for revenue generated from sales was R622.6m but actual performance was only R554.7m. The underperformance was blamed on low demand for the SABS’ services. Remedial action taken was that the focus would be on reviewing certification and testing processes to improve governance. The Committee observed that the SABS had for the most part exceeded or met most of its targets that had been set. For example on its operating profit the target was set at 0%, actual performance was 2.28%. On the retention of customers in certification the actual performance was 97% when the target was set at 95%. On looking to the future for 2016/17 the SABS had embarked on a programme of digitisation. Everything was being done electronically. For 2016/17 the SABS expected to achieve all its targets with the exception of those on revenue. The SABS had also launched its new website in 2016.

The SABS was asked to provide the Committee with documents that would speak to greater detail, especially on how funds were spent. Members asked how the work of the SABS, Agrement SA and the National Regulator for Compulsory Specifications (NCRS) differed. Was there an overlap in the work? The SABS was asked to elaborate on its national footprint. Members were concerned about the slow uptake of local content verification and asked what the SABS was doing to address the matter. Members also asked whether knock-off goods coming into SA was being regulated. The SABS was asked how it marketed itself besides having a website. Members observed that one no longer saw the SABS mark of approval on goods in SA. Members were under the wrongful impression that the SABS was a regulator. The SABS was also asked whether coal standards were regulated. If indeed coal standards were regulated why had Eskom purchased sub standard coal. Members felt that the coal issue needed to be addressed. Members also observed that the SABS on verification seemed to have an unfunded mandate and asked the DTI to shed light on the matter. Members were concerned about the SABS possibly having a high staff turnover rate. For 2015/16 the staff turnover rate had been 107. The SABS was asked what the reasons for the high staff turnover rate were and furthermore why had there been resignations. Members further asked whether it was true that the SABS could not meet its recruitment figures of PHD professionals that it needed. How did the SABS ensure that its SABS mark of approval was not abused? What action was taken where it was abused? Concern was raised over the importation into SA of inferior quality tyres that caused minibus taxi accidents. What could the SABS do about the matter? Why could SA not manufacture its own tyres? The SABS was asked whether the DTI provided support to them and whether the DTI conducted oversight over them. Members were also concerned about countries like Turkey exporting high sugar content soft drinks to SA. The soft drinks were detrimental to the health of South Africans as diabetes was already spiralling out of control in SA. SA needed to be stricter on the importation and distribution of products in SA.

The Committee was updated by Committee Staff on arrangements regarding its oversight visit to Mpumalanga Province, its study tour to Malaysia and the Committee’s possible attendance of the Local Government Tourism Conference. The oversight visit to Mpumalanga Province and the study tour to Malaysia had been approved by Parliament. 

Meeting report

Briefing by the South African Bureau of Standards (SABS) on its Annual Report 2015/16

Mr Ian Plaatjies, Executive: Corporate Services, SABS, gave a brief background on the SABS and what its value chain of services entailed. SABS was the only organisation in SA that developed standards. SABS sold standards as well. On revenue,SABS was 23% funded by a government grant, the remaining 77% was covered by services it provided and other income. On total revenue there was a 3.8% growth year on year. Total expenses grew 5.6% year on year. On the down side there had been a R45m reduction in the government grant. There was also a slower uptake of local content verification. Staff costs had also increased due to additional benefits being granted to employees in 2014/15 and 2015/16. On performance for 2015/16 the target for revenue generated from sales was R622.6m but actual performance was only R554.7m. The underperformance was due to low demand for the SABS services. Remedial action taken was that the focus would be on reviewing certification and testing processes to improve governance. SABS had for the most part exceeded or met most of its targets that had been set. For example on its operating profit the target was set at 0%, actual performance was 2.28%. On the retention of customers in certification the actual performance was 97% when the target was set at 95%. On looking to the future for 2016/17 the SABS had embarked on a programme of digitisation. Everything was being done electronically. For 2016/17 the SABS expected to achieve all its targets with the exception of those on revenue. The SABS had also launched its new website in 2016.

Discussion

Mr W Faber (DA, Northern Cape) stated that there was an entity that was doing similar work to what the SABS was doing but he could not recall its name.

The Chairperson noted that the Committee needed more detail on how funds were spent. He asked that additional documents be provided to the Committee so that members had access to greater detail. He appreciated the distinction that the SABS drew between its work and the work of Agrement SA.

Mr Plaaitjies on the finances of the SABS said that it had achieved a clean audit for four years running. SABS envisaged having a clean audit for 2016/17 once again.

Mr Faber recalled the name of the entity – it was the National Regulator for Compulsory Specifications (NCRS). How did the work of the SABS, Agrement SA and the NRCS differ? He felt that perhaps there was an overlap in their work. A small overview from the Committee’s Researchers on the work that each entity did would be appreciated as it would enlighten members. He asked what the national footprint of the SABS was. Was there a presence in the Northern Cape?

Mr Plaaitjies responded that the SABS did not have a footprint in Kimberley. SABS did have offices and labs in Pretoria. SABS did not have offices throughout SA but serviced the entire country. The SABS was active in all regions.

Ms Boitumelo Mosako, Chief Financial Officer, SABS, added that the SABS had an office in Durban that did certifications. SABS also had a footprint in Secunda, Middelburg and Richards Bay where coal testing was done. There was also a facility in the Eastern Cape where automobile testing was done.

Mr Tshenge Demana, Chief Director: Technical Infrastructure, dti, explained that SABS set standards. There was also the South African National Accreditation System (SANAS). Then there were a number of regulators ie the NCRS, Independent Communications Authority of SA (ICASA), railway regulators and many more. Regulators took some of the standards of the SABS and made them compulsory. The rest was voluntary standards in the industries. Even the NCRS took some of the SABS’s standards and made them compulsory. The NCRS enforced these. Regulators asked the SABS to check on whether products met requirements. Agrement SA dealt with building standards. If it was innovative building then there were no standards for it. If it was a normal building then SABS standards would be used.

Mr L Magwebu (DA, Eastern Cape) asked about the slow uptake of local content verification. What was SABS doing to address the matter?

Ms Mosako, on local content verification, replied that it was done when the SABS was instructed to do so or where the Department of Trade and Industry (DTI) gave it the mandate to do so. An office was duly set up and it was believed that the division dealing with it would be self sustaining. On procurement and verification, things were not where it should be. SABS had consequently engaged with State Owned Entities (SOEs). Amongst the industries where it was supposed to happen were rolling stock, clothing and textiles. The matter had been raised with the Portfolio Committee on Trade and Industry. A colloquium had been held and one of the key issues was about who was to pay for local content verification. The matter was referred to the DTI and National Treasury to resolve. The Chairperson of the Portfolio Committee on Trade and Industry had sent a letter to the Minister of Finance on the issue. The issue of who pays had not yet been clarified.

Mr M Chabangu (EFF, Free State) asked whether knock off goods coming into SA were regulated. The SABS was asked how it marketed itself besides having a website. He pointed that these days one no longer saw the SABS mark of approval on goods in SA.

Mr Plaaitjies responded that the SABS specialised in verification services. SABS was not a regulator itself. When the SABS partnered with regulators, they asked it to verify quality. SABS had not been doing too well on marketing. Things were improving and the SABS had appointed a marketing person in February 2016.

Mr Faber was under the impression that the SABS regulated as well. He asked whether coal standards were regulated. If coal was supposed to be at a certain standard why had Eskom bought sub standard coal? Why was coal standards not regulated?

Mr Demana,on coal testing by Eskom, explained that the power utility was an implementer and a regulator. On coal, Eskom would determine what quality it needed. If Eskom themselves did not stick to their own rules then it was a problem. Any regulator could approach the SABS for help as a third party. SABS had the ability to test coal and did it for many exporters at Richards Bay. There was no reason why government entities could also not use the SABS to test coal.

Mr M Rayi (ANC, Eastern Cape) asked for clarification about revenue generation not being able to meet targets on commercial activities. He noted that the SABS as a verification agent had an unfunded mandate and asked the DTI to shed light on the matter. He observed that the SABS had a huge staff turnover. There were 107 staff turnovers in one financial year. He asked what the reasons were for the high staff turnovers. What were the reasons for resignations? He asked whether it was true that the SABS could not meet its recruitment figures of PHD persons that it needed. SABS was also asked how it ensured that its mark of approval was not abused. On instances where the mark was abused what action was taken?

Ms Mosako explained that 23% of revenue was from grant funding. The remaining 77% was income from commercial activities. The dynamics of competition also applied to the SABS. The NRCS did not have to use the SABS for testing since 2008. The SABS had to apply for tenders. Meeting revenue targets was a challenge. There were many laboratories that were opening up for testing. From a market perspective it was challenging. The SABS marketed itself aggressively.

Mr Demana,on the unfunded mandate of the SABS on verification, said that the DTI’s Programme of Industrial Policy was a process of discovery. Verification was one of them. The Minister of Trade and Industry realised that there were challenges on verification. Consequently, the DTI and the SABS formed a task team to address the issue of verification. By now every product that was designated should be verified. The challenge was that it had not happened.

Mr Plaaitjies said that the SABS relied on people to inform them about abuses of its SABS mark. He noted that the SABS did have successes over the past year. Monitoring abuses of its mark was part of its digitalisation strategy. The SABS would scan websites and take action where there was abuse. On physical products the public needed to inform the SABS of abuses. SABS listed all the products that it verified on its website. On the staff turnover figure of 107 only 52 were resignations. The 107 was not considered a huge figure if the staff complement of the SABS was 1000. It was under control and not a concern. SABS was closing the gap on employees with PHDs and Masters.

The Chairperson brought up the issue about inferior quality tyres that did not conform to safety standards being fitted on vehicles in SA. Could the SABS do something about it? He was concerned about taxi accidents due to inferior tyres being fitted on them. He asked whether the DTI supported the SABS. Did the DTI perform oversight over the SABS? He noted that he had worked with South African Revenue Services (SARS) on investigating shipments that came in at ports and border posts. Often when goods were imported the consignments were deliberately incorrectly described so that they paid a lower rate when the goods came in. The South African Police Services (SAPS) confiscated a great deal of fake music that was destroyed. There was also a great deal of cargo that came through SA’s airports. SA with its South African Development Community (SADC) partners worked hand in hand on trade and tariffs. He was concerned that countries like Turkey were bringing in products like high in sugar soft drinks that were dangerous to the health of South Africans. These were especially sold in lower income areas like townships. SA needed to be stricter on the importation and distribution of these types of products.

Mr Plaaitjies, on the issue of quality of tyres, said that the SABS was not a regulator. Regulators approached the SABS. The work of the SABS was voluntary. The SABS could not withdraw products only regulators could. He noted that the DTI support to the SABS was good. There were no complaints. The SABS not being a regulator could not do anything about the products from Turkey that was detrimental to the health of South Africans due to their high sugar content.

Ms Elekanyani Ndlovu, SABS Board Member, said that the SABS had relationships with regulators and hence engagements were taking place.

Mr Demana explained that on the quality of tyres there was a compulsory standard. Regulations had to be met. There was a difficulty in that there were no commercial labs to test tyres. It was difficult to address the issue due to budget costs but the matter was nevertheless being looked at.

The Chairperson asked that if the SABS had lost the contract at Richards Bay, who held the contract at present?

Ms Mosako stated that the SABS had lost the contract four years ago. An ex employee of the SABS financed by a European was able to set up a testing lab in Richards Bay. The SABS still had a presence in Richards Bay but just not as it did before.

The Chairperson felt that the tyre issue was important and asked why SA could not manufacture its own. There were too many deaths due to accidents caused by these inferior tyres. There needed to be stricter controls over the importation of tyres. He noted that there were talks about the possibility of introducing a sugar tax as diabetes in SA was a huge problem. The coal issue also needed attention.

Mr Chabangu referred to the incident where a bridge had collapsed in Midrand. He asked whether the materials used in the construction of the bridge had been approved by the SABS. Was there negligence on the part of the contractor?

Mr Plaaitjies stated that he could not speak on the issue. The matter fell outside the mandate of the SABS. He did not know how the bridge had been constructed. The SABS was not a regulator or the police.

Ms Ndlovu added that the matter of the bridge did not form part of the mandate of the SABS. She noted that the Engineering Council of SA had gotten involved in the matter. Reports over the incident had not yet been released. Statutory bodies had looked at it and would report back to the Department of Public Works.

The Chairperson said that a team was dealing with the collapsed bridge issue and various spheres of government were involved.

Update on the Committee’s Oversight Visit to Mpumalanga Province, its study tour to Malaysia and on the Committee’s attendance of the Local Government Tourism Conference

The Committee’s oversight visit to Mpumalanga and its study tour to Malaysia (15-24 April 2017) had been approved by Parliament. The Committee had submitted an application to Parliament for members to attend the Local Government Tourism Conference to be held on 3 and 4 April 2017.

The meeting was adjourned.

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