National Lotteries Commission Quarter 2 performance; NRCS LOAs & ICT modernisation

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Trade and Industry

27 November 2018
Chairperson: Ms J Fubbs (ANC) and Ms P Mantashe (ANC)
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Meeting Summary

The Committee met with the National Lottery Commission for a briefing on its Second Quarterly Report and for a briefing by the National Regulator for Compulsory Specifications.

The National Lottery Commission informed the Committee that technology was a problem as the Lottery Commission was 15 years behind in technology used worldwide in the gaming industry. The Commission raised the question of online gaming as, if online gambling was not allowed, there would be no lottery in South Africa in five to ten years to come and, if the National Lottery Commission had no money, there was nothing that it could do.

The National Lottery Operator was revitalising the lottery in the country. However, the proceeds of the lottery going to the state were not growing, although the operator’s business was doing very well. In terms of getting money for the State to distribute to beneficiaries, the graph was stagnant. The National Lottery Commission had undertaken a study tour to Europe to gain an understanding of the lottery industry in other countries.                                        

Out of 14 targets set by the Commission for the Second Quarter, 13 had been achieved, giving a 93% achievement rate. The target of provincial impact evaluation studies had not been achieved because a service provider agreement had not been signed until 3 October 2018. 739 site visits had been conducted to by the end of the Quarter. Revenue from share of ticket sales as at the Second Quarter was R738 million against a budget of R731 million. There was an improvement in revenue during the month of July with the share of ticket sales reaching R55 million in the first week of August 2018.

The Commission was involved in two litigation matters. The first was with Lotto Star, a matter initiated by the Commission to enforce provisions of the Amended Lotteries Act. The second was with Bongani Community Development Centre that had submitted only one set of financial statements instead of the required two sets. The motion to set aside the administrative decision of the Commission would be going to trial.

The Committee was informed that the proactive funding programme enabled the Commission to identify communities in need of schools, ECD centres and so on around the country. The Commission referred to a recent media report that alleged that R1.2-million had been awarded for building a creche for Siyazama Daycare in East London the previous year, but the centre had not received a single cent. Concerns were raised over “agents” who acted as “middlemen” and duped unsuspecting Lottery funding applicants. The Commission explained that there were two organisations with the same name that had applied for funding and the funds had gone to the other Siyazama.

Another media story was about the Denzhe project. The Commission was facing troubling questions after dispensing funding to a rehabilitation facility that was not a not-for-profit organisation. Denzhe Primary Care, a centre intended to help people with HIV, had applied for funding but years later funds were allocated to the same organisation but the funds went to a drug rehabilitation centre called Denzhe that was using the non-profit organisation number of the HIV organisation. The issue was complicated by a conflict of interest as a family member of the Commission had been the sole director of the drug rehabilitation facility. The Commission had a policy for dealing with such conflicts of interest.

Members asked about the conflict of interest and how the Commission could pay the wrong centre. Why, when the media had made an application for information under the Promotion of Access to Information Act, had that information had been denied? Was it a cover-up? What happened to the additional millions paid out by European jackpots that could not accrue to South African citizens? How had it happened under the noses of the Commission that such a scheme operated under the noses of the Commission? Was the proactive funding actually a slush fund?

Members asked about the small, medium and large sporting fund model. Why were no national sports funded? Was the Commission monitoring those who had received funding to ensure that those organisations met the transformation requirements? Had the SPCA’s application for funding been resolved?

The National Regulator for Compulsory Specifications briefed the Committee on Letters of Authority and the ICT Modernisation Project. Senior staff had been appointed to assist both in the programme and to ensure the smooth management of the Regulator.

The Commission was taking a risk-based approach to certification which had allowed the entity to divide applications into high, medium and low risks with the application turnaround times being 75, 90 and 120 days respectively. The presentation focussed on the Electro-technical Approvals because of the high number of applications on hand and the backlog in that domain. The Commission would be accepting certification by the International Electrical Commission System of Conformity Assessment Schemes for Electro-technical Equipment and Components and the approximately 1 500 applications were annum with such certification would, in future, be classified as low risk. Other interventions included the appointment of six Candidate Inspectors who were scheduled to complete their training by the end of March 2019, bringing the staff complement within Electro-technical approvals to 13. The new cancellation policy gave applicants 30 days to rectify both technical and administrative findings.

The ICT modernisation programme was running behind and the Commission had consequently moved away from the big bang approach and was dividing the project into manageable projects that would show immediate improvement in systems. National Treasury had approved R 52 million for the project.

Members asked if there was there a potential for a dispute between the CEO and staff regarding the ICT modernisation project. Were there 3 095 applications or was there a backlog of 3 095 applications? When would the historical backlog come down to zero and when would NRCS operate in real time? Was the CEO happy with the pace of the ICT modernisation project?

The e-toll system had been imported into the country without any checks against standards. One of the Members wanted to know how such a thing had happened. How was it that even the government, i.e. SANRAIL, was not complying with regulations? How was the Commission going to deal with that? Was there currently a standard for e-toll systems and had the systems on the gantries been tested against those standards?

The National Lottery Commission would be returning to the Committee in February to discuss issues relating to funding, conflict of interests, theft of data and media reports.

Meeting report

Opening remarks
The Chairperson welcomed everyone and recognised the various officials present.

The Chairperson explained that she would have to leave before the second presentation as she had been summoned to a meeting with Mr Frolick, the Chairperson of the Chairpersons’ Forum. She would hand over the Chair at that point so that the meeting could continue.

The adoption of the agenda was proposed by Ms P Mantashe (ANC) and seconded by Mr D Macpherson (DA).


National Lottery Commission (NLC) Second Quarter Performance Report 2018/18
Prof Alfred Nevhutanda, Chairperson, NLC, stated that the Second Quarter Performance Report had been sent to the Committee. Before getting to the report, he wished to raise a couple of issues. He noted that technology was a problem for the NLC as it was 15 years behind in relation to the technology used worldwide in the gaming industry. The NLC needed to know if online gaming was allowed or not. If online gambling was not allowed, he warned that there would be no lottery in South Africa in five to ten years to come.

The National Lottery Operator was invigorating the lottery in the country but the proceeds of the lottery were not growing; they were going down. The operation was very good for business-making for the Operator, but in terms of getting money for the state to distribute to beneficiaries, the graph was stagnant. The NLC had undertaken a study tour to Europe to understand the lottery industry and had gained a lot of information. The report of the study tour had been presented to Members and he hoped that Members would find the time to read the report. If the recommendations contained in the report were implemented, it could assist in a lot of the problems that the government was trying to address. The lottery would be able to assist a lot of programmes. Lottery South Africa was number 15 in terms of lotteries in the world. He presented some of the amounts accruing to the National Lottery Distribution Trust Fund (NLDTF) for disbursement and the amount made by the Lottery Operator since the start of the contract with the current operator:
-2015/16 NLDTF R825 million; Operator R2.6 billion.
-2016/17 NLDTF R1.3 billion; Operator R5.9. billion.
-2017/18 NLDTF R1.3 billion; Operator R6.0 billion.
-2018 NLDTF R1.4 billion; Operator R6.4 billion.
The business was growing but the funds going to the state were stagnant.

The Chairperson informed Prof Nevhutanda that the Committee was expecting the 2nd Quarterly Report. The Management Committee of the Portfolio Committee had decided that, due to a number of meetings being overtaken by a fresh parliamentary programme, the NLC was to come back to the Committee in February 2019 to discuss those issues.

Prof Nevhutanda stated that he wanted to inform the Committee that if the NLC had no money, there was nothing that it could do. He asked his colleague to present the report.

Ms Thabang Mampane, Commissioner, NLC, began with the highlights for the quarter. The strategic funding priorities for 2019/2020 had been compiled in consultation with the members of the Distributing Agencies (DA’s) after taking into consideration the provincial dynamics, the findings of the impact evaluation study and relevant research. The final priority areas would be tabled to the Board for approval. In line with the Board’s directive to promote awareness and understanding of the NLC’s regulatory mandate, a communication campaign had been initiated across all media. On 20 August 2018, 30 NLC employees belonging to National Health Education & Allied Workers Union (Nehawu) and National Union of Public Service and Allied Workers (Nupsaw) embarked on strike action demanding a salary increase of 8.5% after internal negotiations had deadlocked and the CCMA had issued a non-resolution certificate. The strike action lasted for two days, ending with a lower than demanded salary increase.

Out of 14 targets for the quarter, 13 were achieved, giving a 93% achievement rate. The target of provincial impact evaluation studies not achieved had been achieved because a service provider agreement had not been signed until 3 October 2018, just missing the quarter deadline.

The NLC was involved in two litigation matters. The first was with Lotto Star, a matter initiated by the Commission enforcing provisions of the Amended Lotteries Act. The second was with Bongani Community Development Centre. The application was declined as the organisation submitted only one set of financial statements instead of the required two sets. The motion to set aside the administrative decision of the NLC would be going to trial.

Mr Phillemon Letwaba, COO, NLC, told the Committee that a total of 739 site visits had been conducted during the quarter under review. Provincial requests had increased during the period as the provinces were implementing the revised Site Visit Policy on infrastructure projects, as well as the Grants Financial Management Policy. Revenue from the NLC share of ticket sales as at Quarter 2 was R738 million against a budget of R731 million. There was an improvement in revenue during the month of July with the share of ticket sales reaching R55 million in the first week of August due to the Powerball matrix change and the roll-over of the Powerball jackpot, which was subsequently won in the first week of August.

The online platform was activated during the reporting period but was undergoing a post implementation quality assurance process. The online platform would facilitate flexibility and enhance efficiencies between NLC and its external stakeholders.  The Geographic Information System would be utilised to assist with grant applications by identifying possible duplication of funded infrastructure, and as an ongoing strategic tool to monitor and evaluate funded projects.

Mr Tsietsi Maselwa, Executive Manager: Legal, NLC, explained that the proactive funding programme enabled the NLC to identify communities in need of schools, ECD centres and so on around the country. The Commission went to a community and rolled-out infrastructure and created jobs, etc. It had to deal with the conflicts in the communities, especially between councils, traditional leaders and the community. The mode of operation was very important.

Mr Maselwa then referred to a recent report in the Daily Dispatch newspaper that had found that a National Lottery Commission financial record showed that R1.2-million had been awarded for building a creche for Siyazama Daycare in East London the previous year, but the centre had not received a single cent. Concerns were raised over “agents” who acted as “middlemen” and duped unsuspecting Lottery funding applicants. Mr Maselwa explained that there were two organisations with the same name that had applied for funding and the funds had gone to the other Siyazama.
He added that there had been another media story about the Denzhe project. The media articles stated that the National Lottery Commission was facing troubling questions after dispensing funding to a rehabilitation facility that was not a not-for-profit organisation. Denzhe Primary Care was intended to help people with HIV but Takalani Tshikalange’s non-profit organisation in rural Limpopo had failed to take off when she could not raise funding. In October 2016, Tshikalange received an SMS alert from her bank informing her that R7.5 million had been deposited into Denzhe’s bank account by the NLC, but she did not get the money because it had gone to fund a drug rehabilitation centre called Denzhe that was using her NPO number.

Mr Maselwa said that the NLC had been working since June to resolve the issue which was complicated by a conflict of interest as a family member of the NLC was involved. NLC had engaged the investigators and expanded investigations. He stated that the NLC had a policy for dealing with such conflicts of interest.

Ms Mampane introduced the Provincial Manager for the Western Cape, Ms Marcelle Musson.

The Chairperson indicated to Members that they could engage the NLC on the second quarter report as well as the information provided on the media reports.

Discussion
Mr G Cachalia (DA) addressed the issue of the proactive funding which allowed the Minister and NLC to identify worthy projects that they would support. Some worthy projects had been identified but also some unworthy projects that had been identified and it was the latter that interested Members of the Committee. He stated that Fin24 had published an article on the Denzhe situation and a detailed analysis of NLC. It was the first in a series of exposures to follow and had showed a clear conflict when Mr Letwaba of the NLC had handed over monies to an organisation of which his brother was the sole director. That was a clear conflict of interest. In addition, when the media had made an application for information under the Promotion of Access to Information Act, that information had been denied. It sounded to him like a cover-up.

Ms P Mantashe (ANC) appreciated the presentation and the work done. However, she wanted the additional explanation about the media reports in writing so that Committee could follow up on them and assess progress on the report.

The Chairperson requested the NLC to provide the information in writing.

Mr B Radebe (ANC) welcomed the report and appreciated the willingness of the NLC to discuss problems.
He disagreed that it was a conflict of interest because South Africans no longer lived in the apartheid era and under the Internal Security Act of 1982 where the families of activists were found guilty by association. It did not mean that if one worked for the NLC that one’s relatives could not apply for funding. They were adults and so were their families. If it was a worthy cause and complied with all prescripts, anyone could apply for funding.

Mr Radebe was also concerned about Lotto Star. The operation of that outfit worried him. It was very clear that the outfit entered South Africans in the European and other lotteries. Money was taken out of SA and went to European countries. The maximum that could be paid to a SA citizen who won a lottery in Europe was R100 million. One lottery paid out R800 million. What happened to the additional millions because jackpots in those lotteries were worth hundreds of millions of Rand? How did it come to happen under the noses of NLC? Local lotteries had to be protected.

Mr Radebe added that he supported the proactive funding projects as he had seen the many worthy projects completed in the Free State. The NLC had put up wonderful infrastructure that was out of the world in various areas and in various schools. The 2005 Amendment to the National Lottery Act had enabled the NLC to undertake proactive funding because those people did not know how to fill out application forms. It was wonderful and he supported proactive funding fully.

Mr Macpherson agreed that the first thing to do was to accept that there was a problem. He agreed that there were some good projects but, equally, there were some very bad projects. There were problems with the proactive fund, which was being used as a “slush fund” to enrich very few people. Everyone knew that there were shady characters that existed in the murkiness of proactive funding.
Mr Macpherson stated that the Southern African Youth Movement had been given millions in lottery funding but they had nothing to show for the money received. The NLC said pro-active funding was carefully monitored. If so, the NLC was failing in a system that they themselves had set up. It was not a coincidence that Mr Letwaba’s brother was the sole director of the company in the Denzhe saga. Mr Letwaba denied, and continued to deny, that he knew he knew that his brother was the director. It was in the public domain. How could he not have known? The scheme also involved Mr Lesley Ramulifho, a shady character who had previously got NLC funding and who tried to facilitate the Airbus contract. The proactive funding model was vrot (bad).

The Denzhe Rehabilitation Centre had very little to show for R120 million. There had been no monitoring, and no implementation reports. It appeared that the only beneficiary was Mr Ramulifho who had spent money on Ocean Basket food in Limpopo.

Mr Macpherson stated that he would not eat fish in a place so far from the sea but Mr Ramulifho had had no problem in spending plenty of money on fish. He warned the Committee that the recent media report was the first in a series of investigations being released so there was more to come. The NLC had tried to hide behind secrecy laws. It had dodged, ducked and dived. That was not how to conduct an organisation that was in control of public money.

Mr Macpherson suggested to the Chairperson of the Portfolio Committee that there were serious questions about the proactive funding as there seemed to be evidence of more and more corruption. There were some serious questions that existed within the proactive funding model. The only way to deal with that was to institute a forensic audit into all transactions that had taken place through the proactive funding model. The Minister or the Committee needed to conduct a forensic audit into where the funding was going.
Mr J Esterhuizen (IFP) referred to the consideration of the allocation of funds for the next financial year. He asked about the small, medium and large sporting fund model. Why were no national sports funded? Was the NLC monitoring those who had received funding to ensure that those organisations met the transformation requirements? Was the sanction of 50% of the funding for grants above R5 million being paid back if organisations had not transformed? How did monitoring take place? Should the Committee be monitoring? How did the NLC prevent double funding? Everyone had seen how bad the national rugby and soccer teams had been that weekend. Why were they not being funded?

Adv A Alberts (FF+) asked about rescue shelters for animals and the problems that the SPCA had had with funding. Had that matter been cleared up? It was very important as it led to sickness and social problems as well as animal welfare issues.

Mr D Mahlobo (ANC) thought that the Committee was dealing with the Quarterly Report and it was problematic that Members were not looking at the Quarterly Report but were focused on other issues that were important, but not the focus of the meeting. He assured the NLC that the performance looked good. He also noted the improved access to some rural provinces. He was glad that the Western Cape Provincial Manager was there as provincial offices needed to popularise the work done by the national office. Those offices should also promote the demand for the lottery.

Mr Mahlobo understood that currently the NLC was playing more of a regulatory role. That role was important because there were many stakeholders in the industry, but how could the Committee be sure that things were not falling through the cracks? The Lottery Study Review was one issue. The regularity capacity should be enhanced, and not only through warm bodies. There was a time when the Commission was not around because it was travelling all over the world. He asked for a copy of the study report on the visit to European Lottery entities because, although there had been an amendment to the Gambling Act, the Committee was going to tackle major issues in the next Amendment.

Proactive funding was a new thing, and for a worthy cause, but where things were wrong, they had to be dealt with. If the NLC increased its work with worthy causes but was not involved in the implementation, and something went wrong in the implementation, or there was a dispute between the person who had the funding and the person who undertook the implementation, what empowering instrument did the NLC have to allow it to intervene in the project? He knew about the challenges in SA construction. The bigger infrastructure required in a project, the more challenges there would be in funding and quality and so on.

Mr Mahlobo commended the Professor for being upfront and transparent. He added that when it came to conflicts of interest, the Auditor General would have to ask for a disclosure of people doing business with the State in the interest of good governance and accountability. People were people, so extra eyes and ears were always needed.

He informed the Chairperson that he was very pleased with the presentation and suggested that, in respect of proactive funding, the Committee should ask the NLC to come back with a full report on the matter, including investigations, so that the Committee could engage with issue. He congratulated the NLC as it had done well in the quarter, although he saw that funding was being reduced.

The Chairperson stated that all Members had had time to express themselves. There were a lot of issues around proactive funding and the NLC had raised the issue itself, but there was a need to come back, in writing, about certain areas. She asked the NLC to respond succinctly but added that she was impressed with the report on the Second Quarter. She appreciated that the NLC had seen the need for sharing issues with the Committee.

Prof Nevhutanda stated that there was a wish list for dealing with the lottery. The NLC was dealing with people who received grants and all sorts of shenanigans would happen, and the NLC would have to find ways to cope with those shenanigans. He was going to speak to the Minister as he had learnt recently that all the data about all projects since 2001 was in the USA and that the background was an organisation in the Western Cape. All the projects were coming from a site in America and he had reported it so they would be doing a forensic investigation into the NLC computer system and would catch the culprits. There were two culprits in the Western Cape. One had established a website. They had paid a journalist R300 to write a fake story. A paper in one of the provinces was going to retract a picture showing that the NLC had paid R1.2 million to an organisation but nothing had been done with the money. It was a fake picture. The NLC did not deny that there were unscrupulous people outside but an organisation could not be targeted for taking down. The NLC guys had found the website and the backup, and he would give that information to Members as it was still sensitive.

Prof Nevhutanda promised to give the Committee details of proactive funding as adjudicated by an independent panel. The funding was monitored by the NLC. He would not allow the destruction of an institution created by a democratic government to give money to people who needed money. His daughter had once worked in an NPO that had received funding and so she had had to resign. The NLC conflict of interest policy indicated quite clearly that it was forbidden for family members to apply for lottery money. But if the people involved in the current case had declared that interest, he should let the investigation take its course.

In the so-called Denzhe project, or hijacked project, the applicant had written an affidavit saying that she had been paid money to make the statements about the funding going to the rehabilitation centre. Those people had said that they would protect her. The NLC would present that affidavit.

Mr Mahlobo intervened, suggesting that the Professor should not give details because some people might be endangered. He could simply state that the matter was being dealt with. There might be elements of the campaign that would be interested in knowing what the NLC knew and was going to do. Unless the affidavit was in the public domain, the Professor should not say more in respect of the details.  The Committee could be informed about the legal details.

Mr Macpherson told the Committee Chairperson that he was concerned about a couple of things. What was going on was the equivalent of shooting up flares in the air hoping that no one could see what was going on over there. The matter could not be sub judice as there was no court case. He asked that the speakers desist from the idea of a Western conspiracy. The conspiracy theory was just a lot of baloney. The Committee was there to ask questions, and the NLC should respond to those questions. Soon the Committee would be told that Dr Evil was behind all of it.

The Chairperson reminded Mr Macpherson that there was once a so-called conspiracy theory by a journalist in the UK so not everything was in the imagination. She had already said to the Professor that she would appreciate some responses in writing, especially as she was leaving the meeting soon. There was no suggestion of sub judice but she advised that if any cases were in the offing, the NLC should leave those alone.

The Chairperson asked the NLC for answers on the Second Quarter report, which was the focus for the day. She had already pointed out that the Committee did not have the luxury of time to be able to invite them back for a second meeting that quarter, but that they would be invited to return in February 2019.

Prof Nevhutanda stated that, on the matter of proactive funding raised by Mr Macpherson, the NLC would give a full report on the conflict of interest and the steps to be taken. Once the NLC had investigated the media articles, it would furnish a report. He would provide details of the process of proactive funding as the board was not involved in proactive funding, except for setting a strategic goal or sector.

In response to the issue of the organisation that had received proactive funding in Mpumalanga, the NLC had tried to find the person in the article but could not find him. He stated that a person could come back and engage with the NLC after a cooling off period. He had read the article with concern but the things mentioned there had nothing to do with the board, which would only investigate the amount and the equipment requested. Nevertheless, the policy of conflict of interest would apply, regardless of who was conflicted.

Regarding the Lotto Star situation, the NLC did not want to take a gambling authority to court as they had the same Minister, but in that case it was confusing about what was happening to the millions and there was no payback to the state. The NLC would be following up that case.

Concerning the cats, the dogs and whatever, the SPCA had been invited to the NLC office and it had reached an agreement with the SPCA. What the organisation had applied for was not in the focus area determined by the NLC, but the Commission had reached an agreement about how much could be given to the applicant. The SPCA had been given proactive funding.

The Chairperson noted what NLC had done for the cats and dogs. She stated that Mr Williams had had a similar concern about the life saving people (National Sea Rescue Institute).

Prof Nevhutanda replied that the NLC had bought four helicopters to assist in the rescue of the people. He stated that the concerns of the Members were welcomed and the NLC would look at things to make sure the NLC looked at the whole perspective.

Mr Letwaba responded to Mr Esterhuizen’s question about transformation. The NLC aligned with the Department of Sport and what it was prioritising that year. He confirmed that the NLC did ask for a transformation plan and followed up on it. The NLC was funding the National Federation, including SASCOC.
Concerning the SPCA which had 39 offices across the country, he informed the Committee that the offices applied individually. The issues about funding had been related to the national office only and those had now been resolved, but he assured Members that millions of Rand had gone into SPCA at the provincial level.

The NLC had addressed issues regarding the quality of work done using NLC money. Mr Letwaba informed the Committee that in 2016, the NLC had appointed a panel of engineers to assist in matters of construction because many of the construction firms employed by those allocated funding lacked experience. The NLC now required quality assurance reports and was able to ensure good construction.

Mr Maselwa explained that in response to requests in terms of the PAIA, the NLC had followed the processes in the legislation. Regarding access to information, the 2001 Lotteries Amendment Act No 46 of 2001, section 67 stated that no person, including the Minister, a member or employee of the board or the Department, or a former member or employee of the board or the Department, may disclose any information submitted by any person in connection with any application for any licence, certificate or appointment under the Act. Every decision in response to an application for information was recorded according to the requirements of PAIA.

Mr Maselwa agreed that the information about the Denzhe project was not sub judice. He thought that there was consensus in the room that proactive funding worked, but was not perfect. The investigation into the Danzhe case had started some months ago, but new information had recently come to light.

The Chairperson explained that as a result of the new parliamentary programme, the Committee could not meet again until February. She thanked Members for pointing out that the Committee needed to be cautious.

Mr Macpherson stated that his questions had not been answered. How were organisations given money when those organisations did not meet the NLC standards? He had also suggested that there should be a forensic audit of all beneficiaries. The Committee needed to resolve how that was to take place.

Mr Cachalia noted that the Chairperson and Mr Mahlobo had told Members to look at the Quarterly Report, but the issues they were discussing should have been part of the Quarterly Report. There was no risk analysis in the report and that should be there. He supported the call for a forensic report. He reminded the Committee that the DA had always warned about the need to take extreme caution when giving Ministers too much discretion. The shenanigans meant that an independent audit was required. He also asked whether Fin24 was likely to be a source of fake reports.

Mr Radebe said that proactive funding was a very important programme. It fulfilled a real need in provinces where kids could not go to school and the communities did not have skills to make an application. Proactive funding supported the poorest and most vulnerable people. The ANC would never support the DA request for a forensic report as the ANC was always on side of the poor. Thorough research could be done for the five-year review. In respect of the cases that were out there in the media, he suggested that the Committee requested a report from the NLC. A forensic report would intimidate the staff working at NLC. Those undermining proactive funding should go to jail.

After a brief private exchange, Mr Radebe complained about what Mr Cachalia had said.

Mr Mahlobo confirmed that he had heard the word. He stated that there was no need to stoop so low as Mr Radebe had always respected other parties. Mr Mahlobo requested the Committee to look into the incident with Mr Cachalia. The Committee had to be honest and stick to the agreed upon agenda.

Mr Mahlobo suggested that the Committee should ask for a spreadsheet report on proactive funding. How many cases were there? What was the information about each case? He wanted that information in February 2019. Also, in February, the NLC should give ideas regarding due diligence. In certain instances, the cases had come about because people or organisations shared names. Organisations were not allowed to have the same name. How could that be resolved?

He added that the data that had been compromised was a serious matter and NLC might need to approach the police. The data in NLC database concerned the most vulnerable people and others could not have their data. Lastly, he addressed the report of the NLC visit to Europe. Could the NLC present the report because that information could be included as part of the Committee’s legacy report on what still needed to be done in respect of gambling.

Mr Mahlobo proposed that the Committee accept the Second Quarter Report. He also advised Members that that the quarterly report was grounded in the Annual Performance Plan and presented financial statements. One could not say that it was wrong unless it did not cover those aspects.

The Chairperson appealed to all Members to respect each other. She had tried hard and earnestly to respect the Constitution that made it clear that many people had suffered because their dignity had been taken away. She requested that Members treat each other with dignity and respect, regardless of the political parties they belonged to. She sincerely hoped that members of her family had not died for nothing.

The Chairperson stated that she would communicate with the NLC and asked the Commission to respond as soon as possible and not to wait for the next meeting to provide answers.

The Chairperson addressed the question of a forensic audit. She stated that in a similar matter relating to the South African Bureau of Standards, the Committee had asked the Minister to conduct an enquiry and that process had stood the Committee in good stead as the Minister had taken the matter forward. She wanted to refer the current matter to the Minister. He would look into the issue. Other outstanding matters had been addressed but the Committee would need a much longer meeting with NLC in February.

The Chairperson handed over to Ms Mantashe as she had to attend a meeting with the Chairperson of the Chairpersons’ Forum.

Ms Mantashe welcomed the NRCS and invited the CEO to address the Committee.

Presentation by the National Regulator for Compulsory Specifications (NRCS) on LOAs and the ICT Modernisation Project
Mr Edward Mamadise, CEO, NRCS, began with the good news. The NRCS had appointed a Chief Information Officer who would start in January 2019. The NRCS had a newly appointed Chief Operating Officer (COO), Ms Abigail Thulane. A Modernisation Programme Manager, Mr Bongani Khanyile, had been seconded to the CEO’s office, effective from 1 November 2018 and would be responsible for the implementation of the modernisation programme. The post of Human Resources Administration Manager had been filled by Ms Ndivhuho Phosa who had joined the NRCS on 1 November 2018.
Mr Mamadise said that he would be relieved of some of his burden as he had had many sections reporting directly to him, but most of those sections would now be reporting to the new managers.
Letters of Authority (LOAs)
The presentation focused on the Electro-technical Approvals due to the relatively high number of applications on hand and the backlog that had been experienced within the Electro-technical Domain.
The NRCS had implemented a number of measures aimed at ensuring that all applications were processed within 120 days (including a 30-day appeal period), or processed within the identified turn-around times as per the risk classification of the product and company.

The NRCS would be accepting certification by the International Electrical Commission System of Conformity Assessment Schemes for Electro-technical Equipment and Components (IECEE Certification Body Scheme). That meant that NRCS could separate Certification Body Scheme applications as they would, in future, be classified as low risk. NRCS received 1500 applications on average per year that would fall into that category.

Other interventions included the appointment of six Candidate Inspectors on 1 April 2017, who were scheduled to complete their training by the end of March 2019, bringing the staff complement within Electro-technical approvals from seven to 13.

The NRCS had adopted a new cancellation policy. Applicants were given 30 days to rectify both technical and administrative findings. 1 520 applications were rejected from 1 April to 30 October 2018 because the applicants had failed to address the findings within 30 days. In 2017/18,1 545 applications were rejected for the whole financial year.

NRCS was taking a risk-based approach to certification which allowed the entity to divide applications into high, medium and low risks with the application turnaround times being 75, 90 and 120 days, respectively. Thus far, only medium risk applications had not met the targeted timeframes. That approach had reduced the number of applications on hand from 5 236 on 1 April 2018 to 3 095 at the end of October 2018.

Modernisation Programme
The key to improving efficiencies and addressing modernisation was the ICT plan. The Modernisation Programme was a suite of interdependent strategies that NRCS planned to deploy to address system challenges and improve efficiencies. An Integrated Enterprise Resource Planning system for Human Resources, Financial Warehousing and Project Management was being developed. It included the automation of the operational environment which comprised inspections and approvals and would be integrated with the support systems. The program was running behind and so NRCS had moved away from the big bang approach and was dividing the project into manageable projects that would show immediate improvement in systems. National Treasury had approved R 52 million for the project.

Discussion
Ms Mantashe thanked Mr Mamadise for providing timeframes as requested at the last meeting in June 2018.

Mr Macpherson told Mr Mamadise that it was difficult to assess whether things were good or the same. The report was two years late and he and Mr Mamadise knew that the NRCS was one of the most significant but undervalued cogs in the economy, especially in the retail sector. It was no surprise that the German delegation was concerned about regulators like NRCS. NRCS was specifically mentioned by the delegation. That was a concern, and the entity was still providing a poor service. The contribution to the economy was important which was why the Committee took NRCS so seriously.

He noted that under the risk-based assessment, buy-in by management and staff was highlighted. One would assume that it was a given that management and staff would be committed, but it had been a cause of dispute between the former CEO and the staff. Was there a potential for a dispute between current CEO and staff? Was that why the CEO was bringing the matter to the attention of the Committee?

Mr Macpherson stated that looking at the current backlog; the numbers seemed to be consistent with the backlog in the past. No matter what the NRCS did, it could not eradicate the backlog. Was the number given, the number of applications or the backlog? Did the 3 095 refer to the applications or the backlog?

Mr Esterhuizen said that bodies like NRCS and SABS had to regulate standards of products and prevent substandard products being introduced into the market, but there was serious doubt about the effectiveness of the bodies and so there was a reduced impact from NRCS and SABS. The SABS mark was not even used on plastic pipes and other things from the pipe industry. The public had lost complete confidence in regulatory organisations.

Mr Cachalia asked when the historical backlog would come to zero and when NRCS would operate in real time. That area had to be addressed. Concerning the IT project, he asked whether the CEO was happy with the pace of the project, and when was he going to appoint a CIO.

Ms Mantashe asked the CEO to inform the Committee about the programme on Carte Blanche.

Adv Alberts said that the NRCS played a very important role in the economy by setting standards which were very important for safety, as well as optimal delivery. He was concerned that there was a rush of products into the country and either the goods did not comply with existing standards or they were new articles for which SABS did not have standards against which to check.

An example of what was really shocking was the electronic systems. The e-toll system in use in Gauteng had been imported into the country without any checks that it adhered to any standards at all. How did such a thing happen? How was it that even the government, i.e. SANRAIL, was not complying with regulations? How was the NRCS going to deal with that? There were no standards for the e-toll system at that                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     time. Was there now a standard and had the systems on the gantries been tested against those standards?

Mr Mahlobo suggested that the Committee accept the report and note that there it was a work in progress. There were delays, which was unfortunate, especially in the IT modernisation project that was needed to be able to do the work, but he was pleased that a project manager had been appointed. NRCS should consider coordinating with CSIR and even with SITA. SABS could also assist. The NRCS needed those bodies to assist. There would also be risks associated with the service providers so NRCS should work with others when going out on procurement. He was happy that there was a relationship with National Treasury. Treasury should do more than providing money. It should also provide a sounding board.

Mr Mahlobo noted that there was a dedicated team, but reminded the NRCS that the checks and balances could not be neglected.

Mr Radebe welcomed the report. He liked the modular approach to implementing the IT modernisation programme. It was not only the Germans, but also Members of Parliament who complained about the long delays. The online process would make a big difference. How could the time be shortened? What were the risk processes in the NRCS so that the entity did not get to the end of the project and find that things were not right?

Mr Radebe also informed the NRCS that he was concerned about fires in township houses. There were faults with plugs, electricity and other building equipment that came straight from the warehouse. Electrical faults meant that houses were razed to the ground until there were only ashes as a result of the fires, and people lost everything. The NRCS had a job to do as a regulator.

Ms Mantashe asked for a written report on the Carte Blanche programme on the previous Sunday. She added that anything that the NRCS sent, had to be sent to the Committee Secretary and not directly to the individual. She appreciated that people had been appointed to key positions. She wanted the NRCS to wipe out backlogs but not to err.

Mr Mamadise replied to Mr Macpherson. He agreed that the work done by the Regulator was critically important. The NCRS had to ensure that there was fair trade, but, at the same time, NRCS could not allow substandard goods into the country. Concerning the point about the buy-in of management and staff, he noted that there was always a fear that an IT project would encounter resistance, so it was a question of change management that to be implemented. Some things that had been done by humans would no longer be done by humans, such as data capturing of what the inspectors had done as they would capture it directly on the system. Changes like that could concern staff. People were naturally uncomfortable with change.

3 095 was the number of applications on hand by the end of October 2018, but there might be some within that number that had that exceeded the planned timeframes. When trying to manage the backlog, it was important to understand the context. The NRCS received applications in January and some were in the process until March but at the same time, applications were being received on a daily basis. In 2016, the backlog had been 7 000 and the entity had been gradually targeting the backlog. A full complement of inspectors in 2019 would allow the NRCS to start with clean sheet.

Mr Mamadise was not happy with the delays in the IT modernisation programme but he was happy that there was a plan. Management had made an assessment of processes and determined that, in order to be efficient, the entity had to have system that would help with processes and would also collect data. He reminded Mr Cachalia that he had explained at the beginning of the programme that NCRS had appointed a CIO who would start on 2 January 2019.

Regarding the relationship with SABS, Mr Mamadise said that he was pleased to say that the NRCS was beginning to have a solid relationship with SABS. NRCS had met with SABS and they were identifying the roles of each organisation for them to work best in the space within the Ministry of Trade and Industry. The NRCS was still working on standards for e-tolls. He noted the advice of Mr Mahlobo and Mr Radebe.

Mr Macpherson asked for details of the 3 095 applications and how many were past the 120-day cut-off. Change management was important and that had not happened under the previous CEO, which was why Mr Mamadise was sitting in that position. The Committee would be able to support him, if necessary, as it did not want to see another CEO leave.

Ms Mantashe reminded the NRCS to send all information to the Committee Secretary and not to individuals.

Programme Changes
Ms Mantashe noted that the meeting on 4 December 2018 would start at 9:00 and not at 11:00. The meeting of 5 December 2018 would start at 8:30 and not at 9:00.

Ms Mantashe thanked the Members and the Department and invited everyone upstairs for lunch.

The meeting was adjourned.

 

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