The South African Bureau of Standards (SABS) briefed the Committee on its Strategic Plan and Annual Performance Plan.
The Committee was provided with some background on the legislative mandate, the developmental mandate and on the commercial mandate of the SABS. On the funding model of the SABS 25% was grant funding and 75% was from capital reserves. Staff was the SABS’ biggest expense sitting at 70%. The SABS serviced 34 sectors. The SABS had a Memorandum of Understanding (MOU) with the Competitions Commission to prevent companies from colluding and manipulating standards. The SABS had a national footprint and even serviced Africa. The Committee was given a brief overview of the SABS’ performance in 2017/18. Some of the highlights for 2017/18 was that 314 new standards had been published of which 147 were home grown. The SABS had also conducted three external stakeholder consultation workshops. For 2017/18 the SABS had achieved all key performance indicators with the exception of revenue which fell short by around R40m. The target for revenue for 2018/19 was the same as what it was for 2017/18 as 2018/19 was being used as a stabilising year. The Annual Performance Plan (APP) 2018/19 was elaborated upon in terms of the SABS’ four targets ie Growth, Customer Centricity, Productivity and lastly Competent and Empowered Employees. The Committee was also provided with a comprehensive explanation of the SABS’ internal digitisation process. The SABS also had initiatives that aligned with the Industrial Policy Action Plan (IPAP) 10. Members were also provided with insight into how the SABS contributed towards the Fourth Industrial Revolution.
The Committee at the outset of the meeting made it known to the SABS that it was not pleased with the way things were, especially on the issue that had emerged around the testing of coal by the SABS. The SABS responded that the coal testing issue was under forensic investigation and that it would be prejudicial for the investigation if further statements were to be made. Members were concerned about allegations of bribery having taken place at the SABS on the testing of coal. Inferior quality coal had apparently been supplied by Gupta family-owned company Tegeta to Eskom after the coal had been certified by the SABS. Mr Faber of the DA asked whether charges had been laid against any staff at the SABS. The coal testing issue was a major concern as it could compromise the trust that manufacturers had in the SABS. The issue dated back to 2015. Why was it taking so long to resolve it? The Chairperson made it clear that the Committee was not casting dispersions on the SABS nor was it criticising the SABS. All that the Committee wished for was for the SABS to be a credible institution. The Committee needed to be provided with a written report on the outcome of the forensic investigation as soon as possible. Members asked by when the Committee could expect the report. Members were assured that within a month the outcome of the forensic investigation would be known. Mr Faber pointed out that during the meeting he had received a letter from the Chairperson of the Portfolio Committee on Trade and Industry Mr Joan Fubbs that her Committee had received a report from the Director General of the Department of Trade and Industry (DTI) Mr Lionel October on the outcome of the forensic investigation regarding irregularities around fraudulent certificates. The SABS was asked why it could not provide the Committee with the information. The SABS wished to respond to the comments by Mr Faber around the letter received but the Chairperson stated that the Committee had not yet looked at the contents of the letter and ruled that no further comment on the matter would be entertained.
The SABS was asked to speak to the challenges that it faced and to provide the Committee with timelines on overcoming them. Members also asked the SABS to elaborate on its successes on enabling Small Medium and Micro Enterprises (SMMEs). What was the SABS doing to ensure that ethical standards were maintained in the organisation? The SABS was asked what bad debts it had. Members appreciated the digitisation process that the SABS had implemented but asked how goods were physically checked whether they were up to standard. How did the SABS bring young people into the innovation space to become innovators? Members asked for timeframes when the SABS’ customer dashboard was to be completed. Did the SABS collaborate with the Technology Innovation Agency (TIA)? The Chairperson asked whether the SABS offered bursaries since the briefing had made mention of doctoral and masters graduates being recruited. The Chairperson on technology felt that the SABS should be on top of things and the Committee should be kept informed on aspects of the Fourth Industrial Revolution. SA was part of the global village and technology dominated it. The SABS agreed to submit a list of its challenges as well as outstanding responses to questions to the Committee within seven days. The Committee agreed that it would find the space and time to engage the SABS on the challenges yet to be submitted.
Opening statement by the Chairperson
The Chairperson stated that the Committee would appreciate regular reports from the SABS. As things stood the Committee was not happy with the SABS, especially regarding the incident that was reported to parliamentary committees around the testing of coal. The Committee was not pleased with how things stood. The Committee had gone through the SABS’ report that was before the Committee at present and had also considered how prepared the SABS was for the Fourth Industrial Revolution. The Committee was aware that the manufacturing sector had a huge role to play and that there was a so called manufacturing indaba taking place in Sandton, Johannesburg at present. The issue was about how the SABS safeguarded the public against things that were manufactured. The Committee would be vigorous and critical with the SABS in its engagement.
Mr Jeff Molobela, Chairman, SABS Board, said that as a representative of the SABS Board he realised the importance of the Committee’s oversight role. He noted that the Board was the accounting authority and the Minister of Trade and Industry was the executive authority. On the testing of the coal issue there had been a communication to the Chairperson of the Portfolio Committee on Trade and Industry. He had written a letter to clarify the issue. He noted that the Minister of Trade and Industry had initiated a forensic investigation over the issue. It was therefore prejudicial for the investigation for various media statements to be made. The SABS on the Fourth Industrial Revolution was supportive to industry and manufacturing sectors. SA’s manufacturing sectors had been decimated by the Chinese. Almost all of SA’s imports came from China. The SABS should be testing products that were imported. Testing was however not mandatory. The SABS relied upon the test certificates from the place of origin of the product.
Ms Boni Mehlomakulu, CEO, SABS, said that the SABS took its work very seriously. It also took the Public Finance Management Act (PFMA) very seriously. The SABS tried to work within the laws of SA. She pointed out that the SABS had a good audit record from the Auditor General of SA’s (AGSA’s) Office. Over the past couple of years the SABS had for the most part achieved clean audits. It was only in the last financial year that it had obtained an unqualified audit report. Work was being done to rectify things.
Briefing by the South African Bureau of Standards (SABS) on its Strategic Plan and Annual Performance Plan
Mr Ian Plaaitjies Chief Digital Officer SABS provided background on the legislative mandate, the developmental mandate and on the commercial mandate of the SABS. On the funding model of the SABS 25% was grant funding and 75% was from capital reserves. Staff was the organisation's biggest expense sitting at 70%. The SABS serviced 34 sectors. The SABS had a Memorandum of Understanding (MOU) with the Competitions Commission to prevent companies from colluding and manipulating standards. The SABS had a national footprint and even serviced Africa. The Committee was given a brief overview of the SABS’ performance in 2017/18. Some of the highlights for 2017/18 was that 314 new standards had been published of which 147 were home grown. The SABS had also conducted three external stakeholder consultation workshops. For 2017/18 the SABS had achieved all key performance indicators with the exception of revenue which fell short by around R40m. The target for revenue for 2018/19 was the same as what it was for 2017/18 as 2018/19 was being used as a stabilising year. The Annual Performance Plan (APP) 2018/19 was elaborated upon in terms of its planned targets.
Target 1: Growth
On revenue for 2018/19 the target was set at R560.4m. The planned target for new products and services for 2018/19 was set at two the same as what it had been for 2017/18.
Target: Customer Centricity
On Small and Medium Enterprises (SME) and Entrepreneurship Development the target for 2018/19 was set at around 75 which was an increase from the 70 in 2017/18. The planned target for sector publications for 2018/19 was the same as what it had been in 2017/18 at four.
Target 3: Productivity
The planned target for 2018/19 on the percentage of laboratories in its testing division that was profitable was set at around 70%.On the allocation of income generated from property to fund testing infrastructure the target for 2018/19 was set at R5m.
Target 4: Competent and empowered employees
The planned target for 2018/19 on the number of technical employees that had completed specialist training with leading partners was set at ten. On the number of doctoral and masters graduates recruited or developed to support testing and standards development the target was set at two.
On the SABS’ alignment with the Industrial Policy Action Plan (IPAP) 10 there was a programme for the development and revision of twelve new standards as well to have six projects in the Laboratories & Design Institute. The Committee was also provided with a comprehensive overview of the SABS’ internal digitisation process. Before the digitisation process the SABS’ approval rate had stood at single digit figures around 9% but after digitisation there had been a vast improvement with the improvement rate sitting at 93%. Members were also provided with insight into how the SABS contributed towards the Fourth Industrial Revolution. For one the SABS facilitated the development of standards governing various aspects of digitisation and smart concepts such as smart cities, smart industries etc within its legislative framework by participating in various international forums dealing with the development of standards for Industry 4.0/ the Fourth Industrial Revolution and other digitisation initiatives.
The Chairperson stated that the mission of the SABS in part spoke about contributing towards the efficient functioning of the economy. SA had profound economic challenges. He asked the SABS to speak to some of its challenges. The Committee was also interested to hear the organisation successes on enabling of Small Medium and Micro Enterprises (SMMEs). He noted that the Department of Small Business Development had identified ownership and the use of digital technology as challenges for SMMEs. The SABS was asked what its ethics committee did on corporate governance to ensure that there were ethical standards. The concern was that cheap equipment was being sold to persons living in informal settlements. The equipment often caught fire and persons got killed. The Department of Trade and Industry (DTI) was looking at the issue. What was the SABS doing on it? Were ethical standards being maintained? The SABS in achieving its strategic objectives was asked what challenges it anticipated in achieving them. If the Committee knew what the challenges were then in the future the Committee could check what was done to overcome them. He asked for timeframes to be provided. On the finances of the SABS he asked why budget for marketing and communication was only R8m. He asked whether the digitisation efforts that were presented on fell within this budget. He found it odd that more funds were spent on post retirement medical aid and pensions than on marketing and communication. He noted that in 2017/18 the bad debts of the SABS had been R44m. Luckily for the current year it had come down to R3m. What were the bad debts?
Ms Mehlomakulu, on interventions for SMMEs, said that the SABS needed to create facilities for SMMEs to participate on innovation and standards. Big players in sectors could easily have an impact on standards. To bring SMMEs into the fold the SABS in its regional offices had provided video conferencing facilities that could be used. The SABS did thus assist on the cost of participation of SMMEs. The SABS had also established an SMME department on certification. Provincial departments were also assisted with SMME development. Traditional healers had even approached the SABS to discuss standards on muti. She agreed that ethics was very important. At operational level it was ensured that things were done as they should be. The Fourth Industrial Revolution and digitisation was key to the SABS. It allowed the SABS to service more customers. The SABS had put in an ethics line. The SABS’ internal audit committee scrutinised reports. If there were complaints about SABS employees then human resources dealt with it. She noted that the SABS had a shopping list of challenges.
The Chairperson said that a written response on the SABS’ challenges could be provided to the Committee.
Mr Plaaitjies, on some of the successes relating to the SABS’ mission, pointed out that of the 314 standards there were 147 that were new and home grown. The 147 was developed in the last financial year. A total of 2000 customers had been certified for ISO 9001.
Mr W Faber (DA, Northern Cape) asked if the SABS had an online system for consumers to use how it physically checked if products were up to standard. He stated that Mr Ghaleb Cachalia DA shadow minister for Trade and Industry and a member of the Portfolio Committee on Trade and Industry had written to Minister of Trade and Industry Mr Rob Davies about the inferior quality coal issue. There were allegations of bribery having taken place within the SABS. Lower quality coal had been supplied by Gupta-owned Company Tegeta to Eskom after the coal had been certified by the SABS. He asked whether charges had been laid against persons within the SABS and if they had, against whom the charges were laid.
Ms Mehlomakulu, on recertification of products and on how to ensure that it was the actual product, said that the process was costly because the SABS was so thorough. The SABS took samples from production lines. Private sector laboratories were utilised as well. Processes were thorough.
The Chairperson said that the answer that Mr Faber expected might not be satisfactory as the Mr Molobela had already explained that the coal matter was under a forensic investigation and that discussing it further would compromise it.
Mr Molobela explained that the issue started when media reports had alleged that something had happened. Then a preliminary investigation was done before the forensic investigation was undertaken. He stated that the SABS did not know what fully happened in Middelburg in 2015. He asked how others supposedly knew what happened but the SABS did not. However the forensic investigation would reveal what happened. The preliminary investigation did show that a sample of coal had been sent for testing. The SABS did do coal testing for Eskom. He said that the results were clear. He added that there had been a request for a special sample to be tested. The SABS had not however known for what the product when tested was to be used for. When things were known the Committee would be informed.
The Chairperson responded that if the matter was from 2015 it’s been close to four years that the matter was unresolved. A parliamentary committee had dealt with the issue and people had made statements under oath. It was a major concern to the Committee. The issue had seriously compromised the trust that manufacturers had in the SABS. The SABS had an important role to play in SA. He made it clear that the Committee was not casting dispersions on the SABS. Neither was members criticising the SABS but wished for it to be seen as a credible institution. Members had been stunned by the information that had been presented to the Portfolio Committee on Public Enterprises. A report over the matter was needed as soon as possible. The Committee had to be provided with a written report on the outcome of the forensic investigation. The SABS needed to provide the Committee with the correct facts. Answers had to be given to those who had requested information from the SABS.
Mr L Magwebu (DA, Eastern Cape) added that the Committee respected the forensic investigation. However any investigation must have a scope and frames of reference. He asked by when the Committee could expect the report.
Mr Molobela said that it was the claim in the media that had kicked up a dust storm. On the credibility of the SABS being affected he said that he had met with industry associations and had gotten a positive response from them. He assured the Committee that they were determined and had confidence in the SABS mark. The mark itself was owned by private industry. All the SABS did was play the role of referee. He responded that the SABS would have an answer within a month of getting the engagement letter.
Ms Mehlomakulu on the manner in which issues were communicated said that in SA there was a thirst for news on corruption. Even small issues were made to seem huge. The SABS’ response at the time was that there had been no bribery. It was factual at the time. The media had said something else. She said that a balance on engagement on the issues was needed. The SABS respected the process of the investigation. Nobody would be blocking the investigation. A clear investigation was wanted.
Mr Magwebu in response to Ms Mehlomakulu’s remarks that SA was thirsty for news on corruption said that it was fact and reality that in SA fraud and corruption was rife. The SABS brand could not be compromised. An accusation of bribery against the SABS was deadly for its reputation. If the standards of the SABS were compromised then it was hugely concerning. He felt that SA was in a downward spiral on fraud and corruption.
The Chairperson said that what Mr Magwebu had said would be taken as a comment and his opinion.
Mr Faber was quite concerned considering the response that was given to the Committee about when the results of the forensic investigation would be made available to the Committee. He had just received correspondence from the Chairperson of the Portfolio Committee on Trade and Industry Ms Joan Fubbs that they had received a report from the Director General of the Department of Trade and Industry Mr Lionel October on the outcome of the forensic investigation regarding irregularities around fraudulent certificates. The SABS was asked why it could not provide the Committee with the information.
Mr Magwebu asked if one of the SABS’ values was innovation whether it collaborated with other institutions like the Technology Innovation Agency (TIA). He asked how the SABS brought young people into the innovation space to become innovators. The SABS was asked for timeframes on when its customer dashboard would be completed.
Ms Mehlomakulu responded that the SABS did have a programme for youth. It even had a competition for students on standards. The SABS had a programme with TIA on its youth programme. There were initiatives on design as well as initiatives for school kids. .
Mr Plaaitjies on the customer dashboard explained that the corporate plan was a three-year journey. The SABS was sitting at 60% functionality. The SABS had a three-year digitisation journey.
The Chairperson asked whether the SABS offered bursaries since it had mentioned recruiting doctoral and masters’ graduates.
Mr Molobela for the benefit of members stated that standards were voluntary. Not everything in life was covered. He noted that for Google and Firefox there were no standards. They were too far ahead of their time. In the USA standards were privatised and it looked as though the European Union was going the same route. They therefore had no statutory requirements for standards. Standards were made by conglomerates of interested parties, by industry associations and by governments. There was a worldwide debate on intellectual property within standards. There was a whole host of things related to standards. Consumers were protected by the National Regulator for Compulsory Specifications (NRCS) in agriculture and in health. When the listeriosis outbreak had happened there was talk to place meat products under the NRCS but it did not happen.
Ms B Mathevula (EFF, Limpopo) stated that Max condoms had the SABS stamp on it but she had received complaints that the condoms often broke.
Mr Molobela on standards being voluntary said one did not have to test everything. There were regulations that tested for the protection of consumers. The SABS tested condoms according to the requirements of the Department of Health. The SABS had the same standards as the British. There were standards in manufacturing and regulations for conformity assessments.
The Chairperson asked whether the SABS was cooperating with Agrime SA. He pointed out that in 2017 when he and Ms Joan Fubbs Chairperson of the Portfolio Committee on Trade and Industry had attended World Trade Organisation (WTO) meetings in Argentina they had observed that e-commerce was the topic of discussion and not trade. He said that when the SABS spoke about standards and intellectual property there was section 75 legislation. He felt that the SABS needed to be on top of things. The Committee needed to be kept informed on aspects of the Fourth Industrial Revolution. It was important as SA participated in the Brazil, Russia, India, China and SA (BRICS) Bloc and in the Central America Free Trade Agreement (CAFTA). The rest of Africa also looked to SA. SA was part of the global village and technology dominated it.
Ms Mehlomakulu explained that Agrime SA dealt with innovative products in the construction industry. One of SABS’ executives was a board member of Agrime SA.
Mr Molobela agreed that intellectual property was the game going forward. He was glad that engagements helped clarify things. He said that even when he had served as the Chairman of the Telkom Board he too had been approached by the Guptas. He said that one could not control what the media published. He said that he wished to shed light on the matter of the letter received by Mr Faber.
The Chairperson said that the Committee had not looked at the content of the letter received by Mr Faber. He ruled that Mr Molobela should not comment further over the matter. On alignment with the Industrial Policy Action Plan (IPAP) the SABS was developing and revising twelve new standards which amongst others were to support growth of agro-processing and ocean economy. He asked what the SABS was doing on the programme given that SA had a shortage of fish stocks.
Ms Mehlomakulu said that she would along with the responses on challenges also include all other outstanding responses in writing to the Committee within seven days.
Mr Magwebu responded that he had no problem with receiving the challenges of the SABS in writing within seven days. However to engage on the challenges submitted the Committee needed another sitting. He felt it would be best to deal with the challenges and the ensuing engagement in the present meeting.
Mr B Nthebe (ANC, North West) stated that perhaps the magnitude of the challenges which the SABS wished to highlight was too huge to discuss at present. The Committee might not do justice to it if it was done in the present meeting. He suggested that perhaps the time and space could be found to engage on them. It could be done through the office of the Chairperson.
The Committee agreed.
Minutes dated 6 June 2018 was adopted as amended.
Third Term Committee Programme: 31 July 2018 – 21 September 2018
The Programme was adopted with amendments.
The meeting was adjourned.
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