SABS, DTI, B-BBEE Commission, National Lotteries Commission performance

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Trade and Industry

06 March 2019
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The Chairperson noted that that the European Union had determined that no new intra-EU investment arbitration proceedings would be initiated and had issued a declaration on the legal consequences of a judgement of the Court of Justice of the European Union on investment protection in the European Union. She indicated that the document bore many similarities to SA’s Protection of Investment Act and was a testament of SA once again leading the way.

The Administrators appointed by the Minister to manage a turnaround in the South African Bureau of Standards reported on steady progress but noted that there was still a lot of work to be done. The good news was that SABS was currently maintaining around 7 430 standards. It had published 314 standards in the year, with a strong focus on health care, telecommunications, manufacturing and engineering and had completed seven out of nine Industrial Policy Action Plan projects. The biggest problem in the standards space was the turnaround time. The total revenue of R760 million, including revenue from conformity assessment services and the state grant has remained flat over the past few years. The loss for the year had increased to R48.2 million and SABS had received an disclaimer” audit opinion from the Auditor-General following the 2017/18 audit.

The diagnostic testing had shown that there had been unsustainable adversarial policy and mandate creep between the shareholder and SABS, and stakeholder and client relations had deteriorated as a result of declining capacity/capability in testing infrastructure, sub-optimal resolution of complaints and queries and ineffective business processes permit expiry, loss of accreditation, standards development. Human capital was in a crisis with the loss of critical skills and long-standing mission critical vacancies, and the absence of an employment equity plan, amongst other issues. There were serious shortcomings in the areas of maintenance and facilities, and a lack of capex investment in plant and equipment. The finances showed a precipitous fall in revenue in certification and laboratory services. The investigation into the Bureau involvement in falsely certifying Tegeta coal was almost complete.

Members noted that the Human Resources division had not implemented an equity plan. They asked about the entity’s equity plan, policies to support workers, retention strategy, the use of local standards and the report on Eskom coal.

The Broad-Based Black Economic Empowerment Commissioner briefed the Committee on its performance. The challenges had not changed. The Commission still did not have an independent budget but relied on the budget of the Department of Trade and Industry. The process of listing the Commission had not been completed and although all details had been sent to National Treasury, there were concerns about certain clauses in the Act establishing the Commission as an independent body. The Commission was also waiting for Public Works to arrange office space as the space it was sharing with the National Gambling Board offices was inadequate.

The Commission needed to have administrative powers as the criminal route was time-consuming. Over 85% of complaints received by the Commission in the past 18 months were about fronting practices. Other concerns included the creation of 51% black-owned entities and black ownership with no economic benefits/participation for the black partners. 150 B-BBEE certificates had been withdrawn. The Commission also intended to introduce serious consequences for non-compliant Heads of Departments and to conclude Service Level Agreement and Shareholders’ Compacts with line departments.

Members needed clarity between a 51% black-owned company and a B-BBEE black-owned company. They further asked if those in the Black Industrialist Programme genuinely black companies, why was state procurement not aligned to B-BBEE and the Commission’s relationship with InvestSA?

The National Lotteries Commission reported on performance in the third quarter of 2018/19. Funds from the national lottery had been well-used in the building of the Dr Credo Mutwa Library and Museum in Kuruman, Northern Cape that had opened in February 2019. Funds had also been used to support the victims of township fires, especially in Gauteng.

The State Security Agency had begun investigations into the problem that had arisen in 2018 with the integrity of the Commission data that had been stored outside the country, and arrangements had been made for immediate independent investigations into any criticism of the Commission or its projects observed in the media.

The revenue from share of ticket sales, year to date to December 2018, was R1.098 billion against a budget of R1.105 billion, a 0.5% underperfomance year to date. The Commission informed the Committee that the Powerball had recently had a jackpot of R232 million, which had been won by an ordinary truck driver in the Western Cape.

Members wanted to have sight of the procedures for utilising pro-active funds as that was a key risk, and an ethical risk. Members asked for an update on the hacking of the computer systems. Had the Commission ensured the integrity of the data, and ensured that it could not happen again? Was the system now bullet-proof? How did the Commission deal with responsible gambling and were there any awareness programmes dealing with irresponsible gambling?

Meeting report

Opening remarks
The Chairperson asked those Members who had been in the Committee to recall the Promotion and Protection of Investment Bill which had been deliberated on and approved by the Committee, and passed by the House and had become a piece of legislation. There had been a lot of comment, mostly critical, but the Committee had reminded the critics that when South Africa had adopted its Constitution, many had warned about that document. Today many emulated its content. It was a remarkable document. Many of the strongest critics, and supporters, had come from the USA and Europe. For that reason, she felt obliged to refer the Committee to the fact that the European Union (EU) had determined that no new intra-EU investment arbitration proceedings would be initiated. The EU issued a declaration on the legal consequences of the judgement of the Court of Justice of the European Union in Achmea and on investment protection in the European Union: European Union members confirm rejection of Investor-State disputes to settle EU-based Investors’ claims.

The document bore many similarities to SA’s Protection of Investment Act. Once again, she noted, SA was leading the way.

The Chairperson announced that outstanding reports had been received from the Department of Trade and Industry (DTI), the response to the 3rd Q report from DTI and the responses from National Consumer Council and the Export Credit Insurance Corporation (ECIC). The DTI had sent a letter to the Speaker as requested and a response had been received from DTI about the audit status of the ECIC. The Minister had responded to the Committee’s Second Quarter Report.

Mr S Mbuyane (ANC), seconded by Mr A Williams (ANC), proposed the adoption of the agenda.

The Chairperson welcomed the DTI team: Acting Group Chief Operating Officer Nontombi Matomela, Acting DDG Thandi Phele, and Tebogo Tsotetsi, Director of Lotteries Law and Policy.

The Chairperson welcomed the team from SABS: Acting CEO, Mr Garth Strachan, Administrator, Ms Jodi Scholtz, CFO, Tina Maharaj, Executive Certification, Amanda Gcabashe, Head of Legal Services, Joseph Leotlela, Administrator of IT and stakeholder representative, Dr Tshenge Demane.

Briefing by the South African Bureau of Standards (SABS)
Ms Jodi Scholtz introduced the presentation by SABS. Since the Minister had appointed the Administrators, they had done the diagnostics and it had become clear that the Minister had done the public a very good service when terminating the Board. The work that was mission critical had been identified, critical infrastructure had been upgraded, stakeholder plans had been revised, partial testing had been re-introduced. Following the 2017/18 audit, SABS had received a disclaimer from the Auditor-General, indicating that there had been a serious problem. Progress had been steady but there was still a lot of work to be done.

Mr Garth Strachan began the briefing by recapping on performance and addressed the SABS turnaround. The good news was that SABS was currently maintaining around 7 430 standards. It had published 314 standards in the year, with a strong focus on health care, telecommunications, manufacturing and engineering and had completed seven out of nine Industrial Policy Action Plan (IPAP) projects. The biggest problem in the standards space was the turnaround time. The total revenue of R760 million, including revenue from conformity assessment services and the state grant, has remained flat over the past few years. The loss for the year had increased to R48.2 million and SABS had received a disclaimer” audit opinion from the AGSA for 2017/18.
The diagnostic testing had shown that there had been unsustainable adversarial policy and mandate creep between the shareholder and SABS, and stakeholder and client relations had deteriorated as a result of declining capacity/capability in testing infrastructure, sub-optimal resolution of complaints and queries and ineffective business processes permit expiry, loss of accreditation, standards development. Human capital was in a crisis with the loss of critical skills and long-standing mission critical vacancies, amongst other issues. There were serious shortcomings in the areas of maintenance and facilities, and a lack of capex investment in plant and equipment. The finances showed a precipitous fall in revenue in certification and laboratory services.
The Administrators were addressing each of those issues. A cost containment and revenue generation programme had been implemented with ongoing effort to secure stronger execution and outcomes. A review and finalisation of the full suite of SABS policies would be completed by the end of the financial year, including the finalisation and implementation of an employment equity plan and the occupational health, safety and environmental management plan, and the training, learning and development plan.
National standards were receiving urgent attention following a review of current capacity and capability and an optimised structure, aligned to best practice, had been established, refocusing and strengthening the Technical Committee output and productivity. Where tariffs were on the backburner, standards had become critically important.
The intention was to grow the revenue to return the institution to stability. External training would be prioritised and strategic partnerships developed. Mr Strachan was confident that by the end of the MTEF the institution would return to financial stability.

The issue of the Eskom forensic audit into the circumstances of the testing of coal samples at Brakfontein was not yet complete. A firm of auditors had been appointed and had submitted a draft report. The Administrators had not signed off on the report because, from a governance point of view, that could prematurely identify the laboratory manager responsible and that would have legal implications. SABS management anticipated that the report would be finalised by the end of the financial year.
 
Discussion
Mr Williams stated that it sounded like good news and hoped that the entity, which was still trusted by the public, would come right. He was excited that SABS would be looking into localisation. The previous day, there had been complaints that no one was doing compliance of localisation.  Did SABS work with the National Metrology Institute of South Africa (NMISA), and was it sufficiently capacitated by government to do their job so that SABS could do its job? If NMISA failed to do its job, SABS would fail to do its job.

Mr Mbuyane wanted to check on the successes in respect of localizsation. He also noted that the Human Resources division had not implemented an equity plan. Had such a plan never been implemented before? Was there a retention strategy and policies to support workers? SABS needed very scare skills. He noted that international standards were being adopted and adapted, but what about South African local standards?

The Chairperson agreed that the inability to retain critical skills in the public service was an issue.

Mr D Mahlobo (ANC) appreciated the report and the attempts to stabilise the entity but was now was the time for implementation. The filling of critical positions was essential as were the turnaround times that had to be improved. The timelines were slow because of a lack of skills. Clear timelines had to be developed. He hoped that SABS would include young people. He wondered whether SABS received sufficient funds. The infrastructure capability had to be sufficient to respond to the demands of the time. The audit outcome was really concerning but he could see that the Administrators were working on the issues and had a plan.
 
The Committee had to give SABS time, but he was happy that, at least, the Eskom investigation was being attended to. That was a very important matter. The comment made by SABS about where other entities such as National Treasury fit into the picture of local content and local production was an important observation.  The scenario might be different after the election when the whole value chain would be lined up, but the fact was that the work had to be done. The Committee was looking at the value chain and SABS was a tool in checking the implementation of localisation. Government would be giving a lot of attention to localisation. Some work had been done, but a lot still had to be done.

Mr G Cachalia (DA) noted that a draft report on the Eskom coal would be signed off by the end of the financial year. When would the Committee get sight of the report?

Ms P Mantashe (ANC) stated that she might have missed the explanation on the financial losses. She asked SABS to explain what had caused the R48.2 million loss.

The Chairperson was pleased to see that measures had been developed to address challenges. She was pleased that SABS had addressed the issue of the permits as the integrity of the standards was critical. It was heartening to see attention to that. She appreciated the cost containing measures linking it to performance and to the key units. The disappointment was that the report on Eskom was not ready. The Committee had hoped to finalise that matter but she had no doubt that the matter would be robustly engaged with by the relevant Committee in the Sixth Parliament. The legacy report would refer to that.

Ms Scholtz supported Mr Williams’ view that the public did have faith in the SABS mark. SABS had recently had meetings with relevant industry players, including the paint industry and there had been a positive attitude towards the role that SABS should be playing. It was important that SABS was relevant to IPAP.

Ms Scholtz agreed with Mr Mbuyane that human resource policies had to be addressed. The Human Resources Executive was still fairly new in his post, but he had developed an equity plan and he was looking at bringing women in, particularly in the technical fields. The skills had been lost over a number of years and 62 mission critical posts had been identified.

She supported Mr Mahlobo’s view that infrastructure had to be addressed, but infrastructure was capital intensive. The Administrators had a plan in place and the first phase had started in December 2018, but a strong digitalization process was being developed to support the infrastructure.

Ms Scholtz told Mr Cachalia that the report would be handed over to the shareholder as soon as it was ready, and the shareholder would guide the process from that point, but she was quite sure that the report would be sent to the Committee.

Mr Strachan informed Mr Williams that Dr Demane represented the shareholder and SABS was working closely with the National Regulator for Compulsory Specifications (NRCS), South African National Accreditation System (SANAS), and the National Metrology Institute of South Africa (NMISA). They had formed a forum where the members discussed issues such as: What was an optimal eco-system and what were peer middle-income countries doing to ensure that the industrial effort was adequately supported by the technical infrastructure? He should bear in mind that NRCS was the independent Regulator for those standards contained in regulations and, as such, gave letters of authority for those standards.

Mr Strachan explained that SABS was a member of an international organisation. Most standards came from the organisation and were tweaked by SABS. So SABS did not develop standards but managed the technical committees in industry that developed and set standards. 90% of standards were ISO standards, many of which had been adapted.

SABS had received R23 million to undertake local content verification where designated, and once that local content verification was complete, the results would be handed to DTI. Government needed to determine the long-term funding of the verification of local content. That was critical for ensuring that for local content was verified, thereby supporting policy implementation. Verifiers had to literally go to factories to verify. An electronic platform would improve efficiencies and that was under development.

Mr Strachan said that it was unfortunate that an employment equity plan had not been in existence in SABS, but a plan had been developed to take into account the employment of women and young people in the technical space. SABS hoped to fund programmes to support young people, with a focus on gender issues, to fill the technical positions. That was critical to an employment equity plan.

On average R250 million was transferred from DTI per annum. In addition, an extra R100 million had been received from the DTI but that was ring-fenced for laboratory infrastructure and was not for operational expenditure.

Mr Strachan agreed that the report on the forensic investigation into Eskom would be ready by the end of the financial year and DTI would indicate what would happen to that report. He was sure that Parliament would interrogate the report, but it was not a SABS report. The shareholder had requested the report. He explained to Ms Mantashe that the losses were a result of the decision to stop customer specific requirement testing specification, known as part-specification. That had caused a precipitous loss of revenue, and then there a loss in the certificate space, and a steady decline in the sale of standards. Across the institution, there had been operational and managerial decision-making failures. Operational and decision-making failures had led to a loss of revenue. The deficit for 2017/18 was R48.2 million. In 2018/19, SABS expected a deficit of R25 million. By 2021/22 SABS should be stable and have financial viability.

Ms Tina Maharaj said that SABS would be experiencing a loss but was on track for the year-end processes. She would be reviewing the balance statement line-by-line to determine issues that had to be addressed. There had been a reduction in loss in the current year.

Ms Amanda Gcabashe informed that Committee that SABS was building capacity. A General Manager for local content verification had been appointed. That appointment was critical as according to the Mining Charter, mines had to report on localisation. That meant that the SABS had to build up capacity to assist private companies as well with localisation verification. R22 million had been received from DTI for the verification of local content for 64 companies. That was an ongoing process of verification and SABS would report to DTI. SABS had entered into a partnership with Proudly South African so that SABS became more visible and was identified as a partner in the localisation process. Proudly South African would assist in informing industry of the processes relating to the verification of local content.

Ms Gcabashe emphasised that it was critical, especially for public entities, that government determined who paid for verification of local content. She added that a number of businesses that had approached SABS in connection with localization were prepared to pay. The IT upgrade was vital as it would allow informed decisions to be made at the time of evaluating tenders and making procurement.

Ms Joseph Leotlela responded to Mr Williams’ question on NMISA. A memorandum of understanding between SABS and NMISA had been finalised which would solidify the current working relationship.

The Chairperson reminded Members that the Committee had to review and approve Committee minutes while a quorum was present, but she could see that Members wanted further engagement. She noted that Mr Strachan had referred to a report on localisation. She informed him that it would be very helpful if the Committee could receive that report the following week as the Committee would be submitting its report on localisation to the House. The Committee would accept even an interim report.

She agreed to allow pertinent questions on record and but wanted responses from SABS in writing by the end of the week.

Mr Mahlobo noted that the team had done good job under the circumstances. On the question of the shortfall and revenue targets, he asked SABS to report in writing if any incentives or bonuses had been paid to those who had not met the targets, and what would be done about that. The performance agreement was part of the structure of labour agreements in the country and could not be undermined by rewarding those who had not performed.

Mr Radebe agreed that it was a good report. He asked how the SABS related to the issues of the Tripartite Free Trade Agreement. Intra-Africa trade was 18% and there was trade with the world. Now that there was free trade in the tri-partite region, there would be a free flow of goods across the continent and even of goods going abroad. If there were not proper standards, it was going to be problematic. How had SABS positioned itself in terms of ensuring standards of goods moving across the continent and abroad?

Mr Mbuyane suggested that the Committee needed the HR report and strategy in writing, including references to capacity. If SABS was talking about a turnaround strategy, it was talking of human resources. How much of a challenge were the international standards for SA?

The Chairperson requested the responses in writing. As much as the Committee would have like to spend a couple of hours with SABS, there were time constraints. She thanked the team for assisting government, and the country, to begin the turnaround of SABS.

Minutes
Minutes of 19 February 2019 were proposed for adoption, without amendments, by Mr Williams and seconded by Ms Mantashe.

Minutes of 26 February 2019 were proposed for adoption, without amendments, by Mr Radebe and seconded by Mr Cachalia.

Matters arising
The Chairperson indicated that the Committee had to keep track of the Brexit-related agreement and the treaties as those matters needed to go to the House in the following week.

Mr Radebe indicated that the treaties would be in the House on Tuesday 12 March 2019.

The Chairperson informed the Committee that she had received a response from DTI on the Marrakesh Treaty.

Minutes of 27 February 2019 were proposed for adoption, without amendments, by Mr Mbuyane and seconded by Mr Radebe.

B-BBEE Commission Presentation on Performance
The Chairperson welcomed the team from the B-BBEE Commission: Commissioner Ms Zodwa Ntuli, Acting Head: Compliance Ms Busisiwe Ngwenya, and Executive Manager: Investigations Moipone Kgabogile.
Ms Zodwa Ntuli informed the Committee that two of her investigators, Ms Mudau and Ms Madihlala, had started as trainees and had since been included in the team. She had brought them to Parliament to give them exposure. Mr Jacob Maphutha, Chief Director for B-BBEE at DTI, accompanied the Commissioner.

Ms Ntuli stated that B-BBEE was a valuable concept and the Commission wanted to see that every company that said it was a B-BBEE company, was indeed one. The Commission had oversight to ensure that empowerment was real in any company that said it was empowered.

The Commissioner informed the Committee that the challenges had not changed and so, as a public service, the Commission had moved ahead despite the challenges. The Commission still did not have a budget but relied on the budget of the DTI. The process of listing the Commission had not been completed and, although all details had been sent to National Treasury, the Commission still could not transact on its own. The Commission was also waiting for Public Works to arrange office space. It was sharing space in the National Gambling Board offices but there was only space for 38 staff members and now there were 39 staff in the Commission, so that prevented any expansion.

The Committee needed to deal with the over-criminalisation of B-BBEE. The Commission needed to have administrative powers as the criminal route was time-consuming. Section 13(f) of the B-BBEE ACT showed the functions of the Commission, which it had to perform, regardless of whether there was a budget or not. The industry could not wait for the Commission to get a budget.

Ms Ntuli pointed out some concerns around B-BBEE. She drew the Committee’s attention to the definition of B-BBEE. Some people said it was not broad enough, but it included black people, women, youth and people living in rural areas. The Committee had amended the definition some years earlier. The Commissioner read the definition and referred Committee Members to the B-BBEE Act which was contained in the Commission’s information booklet that had been handed out to Members.

Ms Busisiwe Ngwenya continued the briefing. She presented an analysis of the complaints received by the Commission in the past 18 months: Fronting practices dominated with over 85% of complaints. Other concerns included the creation of 51% black-owned entities and black ownership with no economic benefits/participation for the black partners. 150 B-BBEE certificates had been withdrawn. The Commission had received 65 tipoffs, some leading to investigations.

Ms Ngwenya stated that the Commission intended enhancing its profile by:
-improving ICT delivery systems to increase accessibility & improve turnaround times.
-widely publishing findings of cases and increasing referrals of contraventions for prosecution.
-implementing the approved a communication strategy to reach more beneficiaries, especially in rural and underdeveloped areas.
-launching a more interactive website and enhancing online accessibility.
-increasing awareness campaigns.
-increasing collaboration with strategic partners.
-conducting immediate site visits on tipoffs for quicker redress.
-publishing packaged messages for businesses and investors and step by step guides.

Ms Ngwenya added that a priority in the next five years would be to ensure adequate resources and to effect changes to the Codes of Good Practice to pool all Enterprise Supplier Development, Skills and Socio- Economic B-BBEE funds. The Commission also intended to introduce serious consequences for non-compliant Heads of Departments and to conclude Service Level Agreements and Shareholders’ Compacts with line departments. Amendments had to be made to the B-BBEE Act to address issues of constrained enforcement and the Commission had to address market access issues and funding for black people.

Ms Ntuli informed the Committee that the difficulty being experienced in following the Alternate Dispute Resolutions route was that companies were demanding that the settlements be kept private. However, as a public entity, the Commission could not do that, and those cases had to go via the criminal route. A further concern was that the Commission had to wait 180 days before publishing findings in order to allow the accused company an opportunity to call for a review of the Commission’s Report.

She was particularly concerned that over 60% of the B-BBEE companies had to acquire funds from Venda Bank because the conditions of the loans were not very good.

The Commissioner added that the National Lottery Commission, which was in the room, had already submitted its compliance report.

The Chairperson asked the Chief Director to explain the challenge that DTI was facing in setting up the Commission as an independent organisation. The Act had been drawn up with the assistance of plenty of legal people, so what was the challenge that National Treasury had identified?

The Chief Director said that in 2013, DTI had recognised that an institution such as the Commission was necessary to ensure that there was full adherence to the policy and DTI was fully behind the process to list the Commission. The intention was for the Commission to be a juristic person. The Act had conferred the independence of the Commission from the Department. DTI was engaging with National Treasury which had pointed to certain clauses in the Act as being the reason for the delay. DTI had informed National Treasury of the reason for the establishment of the Commission. When there was a way forward, it would be reported to Parliament.

Discussion
The Chairperson invited questions.

Mr Mbuyane welcomed the report which showed that the Commission was going somewhere. He needed clarity about the difference between a 51% black-owned company and a B-BBEE black-owned company. The two companies that PRASA had reported as 100% black-owned companies had to be checked. He also wanted to know if those in the Black Industrialist Programme were genuinely black companies. He also wanted clarity on the marketing issue.

Ms Mantashe appreciated the work done, especially on a zero budget. The Committee now understood why there was such a call for getting rid of B-BBEE. It was because people had been getting away with a lot of things, but the Commission was now catching them out. She hoped that the next Parliament would do away with the 180 days’ waiting period. She did not know what the Committee could do about the finance because it had been calling for independent financing for a long time. She informed the Commissioner that rural areas did not exist only in KwaZulu-Natal. There were other rural provinces that should also be visited.

Mr Mahlobo apologised for being in and out, but he had some serious matters to manage. He congratulated the Commission on redressing the imbalances of the past. Certain people did not want the injustices to be corrected.

Mr Mahlobo stated that certain things had to be elevated, such as moving from compliance to active intervention. The imperatives of the B-BBEE Act had been hindered by the Procurement Act for more than 14 or 15 years. State procurement could be leveraged to help black people, but state procurement was largely determined by price. Why was state procurement not aligned to B-BBEE? Apart from departments having B-BBEE policies, they were not looking at other elements, especially not at the element about enterprise development. The B-BBEE requirements should be in the procurement plan. B-BBEE cut across the localisation issue. Could the Commission not put in pit stops that would allow it to assess the temperature of the system?

Mr Mahlobo asked how B-BBEE instruments could be used for localisation. There should be a front end and a back end. The Commission needed more capacity to bring in an early warning system. How did one have an early warning system? All tenders and contracts had to be advertised. Could the Commission not stop a contract where there was not a B-BBEE requirement? He was pleased to hear that the Auditor-General was assisting the Commission.

He was happy with the back end but when it came to the front end, the Commission had to be more proactive because people were trying to beat the system. The Committee had heard that the Commission was underfunded. DTI had to make suggestions about the best funding model for entities that played such an important role. The role of the Commission was aligned to the Constitution as its task was to redress the past injustices.

Mr Radebe stated that it was a good report, but it showed the best of times and worst of times. The worst of times was the process that was meant to address the disempowerment of black people, but it was not being taken seriously. There was nothing as dangerous as the fact that, 25 years after liberation, there was still no empowerment. The DTI was not coming to the party. The Commission was like an unfunded mandate. People had joined the struggle to get a better life for all. But it was not happening and that could not be ignored.

However, he stated that the best of times was that the Commission had hit the ground running and it had to be commended. In the next budget, the Commission had to be well-funded. What was the Commission’s relationship with InvestSA? Counter-revolutionaries had said that B-BBEE would undermine investments to the country. Even ambassadors from certain countries had written to the President that they could not invest because of B-BBEE. What was the Commission’s engagement with InvestSA? The Commissioner had to go overseas and explain B-BBEE to people.

Mr Radebe had heard that the Commission had instructed companies that were non-compliant to pay funds into the National Student Financial Aid Scheme (NSFAS) account. How much had been raised for NSFAS?

He understood the Commission’s concern about criminalisation, but a very big stick was necessary to deal
with companies that did not comply. For example, PRASA should have ensured that many local black people had benefitted from the building of trains. The performance agreement of senior managers had to lock them into B-BBEE. Part of the assessment of their performance would be how they had promoted black empowerment.

Mr Radebe congratulated those departments and entities that had complied with the B-BBEE requirements.

The Chairperson asked what the Commissioner was saying when it said that more than 60% people got their financing from Venda. What was Venda? Was it the place?

Mr G Cachalia (DA) agreed that the Commission was delivering on its mandate but Mr Mahlobo’s thinly veiled point that some people did not care about redress could not go unchallenged. No one in their right minds would reject redress. He believed that everyone in the Committee supported redress. Just as Mr Radebe had said, in his very lengthy engagement, that he believed in an open society for all, as did the DA.
He had to speak up to make it perfectly clear that the DA believed in an open society for all and not in a cronyism-based closed society.

The Chairperson stated that she did not think it necessary to talk of cronyism per se. Mr Cachalia had made his point about redress and she thought that it should be left there.

Mr Williams declared that he did not think it was wrong for ANC to challenge the rate at which the economy was being transformed or the rate at which black people were being moved into positions of leadership and control of companies. The Commission had indicated that transformation was at 27% after 25 years. That was a little more that 1.1% per year. Was the DA saying that it would take the country 75 to 80 years to transform according to their model? That was ludicrous. As a white person he could say that there was very little transformation taking place in the country. The DA had been part of the apartheid government and had collaborated. One should not be negative about transformation, but one should be asking how could it happen faster?

Mr Mahlobo stated that he did not want to use the Committee to debate, but he could not allow a misrepresentation of the ANC. The DA was on record as saying that it did not support B-BBEE. He was happy to meet Mr Cachalia in a debate if he wanted to challenge him and they could tell SA who they were and what they were and what they stood for.

Mr Mahlobo said that he had just been quoting the Constitution when he said that the ANC recognised the injustices of the past. And that was a fact. He had not mentioned the DA. The values of human dignity and equality were important because black people had been strangers in their own land. The values in the Constitution were built on non-racialism. The ANC could not feel guilty about that. On any platform that Mr Cachalia wanted, he would meet him for a debate.

The Chairperson noted that B-BBEE was an issue on which the Committee had not reached consensus in the past but did not have the time for an extensive debate right then.

The Chairperson returned the question of more than 60% of black businesses being Venda financed. What did the Commissioner mean? The point about the lack of finance was linked to what National Treasury saw as a lack of clarification on the status of the Commission. The Minister had written to the Speaker about the lack of finance, but it was only likely to be finalised in the Sixth Parliament. She had specifically noted that letter in her introduction.

The Chairperson expressed concern about the fact that the presentation had referred to black ownership being at 25%. Why had it declined from 32%? That was quite serious. One could not have a decline. What was responsible for the decline? What were the issues? The Committee was concerned about the funding of the Commission and that would be addressed again in the minutes and in the legacy report. That matter had to be effectively addressed. She was glad that Auditor General was working with Commission.

The Chairperson suggested that anyone who wanted clarity on the positions of political parties on B-BBEE need only look at the election manifestos of the various parties. One could go further back and note how the parties had voted when the B-BBEE Bill had been before the House.

The Chairperson stated that some responses would have to be given in writing.

Ms Mantashe noted that National Treasury had said that it could not list the entity, but the response from DTI had been too general. One could not say that there was a problem with some of the wording. The Committee needed to know specifically which section was the cause of the problem.

Mr Maphutha replied that he would provide the details in writing but explained that National Treasury was concerned about the clause in the Act that said that the Commission was established within the administration of the DTI. According to National Treasury, that meant that the Commission was not an independent entity. That was the main reason, but there were also other related issues.
 
The Commissioner asked Ms Ngwenya to respond, especially to the question on black industrialists.

Ms Ngwenya stated that initially DTI had asked Commission to evaluate the black industrialists before they could go for adjudication but at some point, DTI had ceased asking for that evaluation. She did not know why, but the Commission was available to do those assessments, if required. The Commission had a memorandum of understanding with DTI so there was a relationship between the Commission and the DTI.

Ms Ngwenya responded to the question about 51% black-owned companies. B-BBEE was intended to look at empowerment of black people in SA – Black, Indian and Coloured. She pointed out that there were different levels of B-BBEE compliance but 51% would normally be at Level 2, which was fully compliant and above. Level 1 was the highest compliancy rate. The problem was that departments and entities did not verify that a 51% black-owned company was, indeed, black-owned. The Commission advised departments not to rely on documentation but to check out the company, preferably by visiting it.

Ms Ngwenya explained that the roll-out by the Commission had been done in conjunction with Economic Development in Limpopo, Mpumalanga, Free State, Northern Cape and North West. The Commission had developed international relationships with the European Union and the United States, as well as the Italian Chamber and the Danish government. The Commission had no resources for overseas trips but, although limited, work on relationships was happening and the Commission would go overseas when it had money.

Ms Ntuli addressed the question of localisation and B-BBEE. She told of a company that was producing local components, and had received a R25 million contract based on its black empowerment partnership, but the partnership, which was supposed to be making components, was two black people sitting in a tiny office answering the phone if anyone was looking for the black partners. The Commission had been to companies with supposed B-BBEE accreditation where they had not been able to find a single black person in the company. In another case, the receptionist was identified as the director. Often could not find a single black person and no black people were being empowered. Localisation was going to be very difficult if B-BBEE did not work.

The Commission wanted to be pro-active but had waited since 2015 for a Procurement Bill that would align procurement and B-BBEE, but that legislation was not yet ready, so it would be preparing legislation on procurement. She had already mentioned that the Auditor General was going to monitor B-BBEE compliance.

Ms Ntuli stated that she would have to provide the amounts given to NSFAS in writing as she did not know the figures. She explained that Venda Bank provided funding to black persons who wanted to buy into a company, especially when those black people were having difficulty getting funds from conventional banks. However, Venda financing came with restrictions so that some people could not even vote in their own companies. She said that, at least Venda Bank was giving black people money to invest, but the Commission was checking that there were no restrictions arising from loans.

The Commission required resources and if not given the resources, it would not be able to fulfil its mandate.
Ms Ntuli informed the Committee that the Commission had absorbed some of its trainees into permanent positions. She added that the Commission was staffed entirely by younger people.

The Chairperson thanked the Commission. It was important that the strategic skills that were required within the Commission were identified and retained. The Committee had established the Commission and would ask the Minister to help with finance.

Report of the Portfolio Committee on Trade and Industry on the Department of Trade and Industry’s Third Quarter Financial and Non-financial Performance for the 2018/19 Financial Year
The Chairperson stated that Members had seen the report and that she would simply refer to some of the additions.

The introduction had been added, as well as the conclusion. The introduction noted the mandate of the DTI. Because the report was being drawn up at the end of the fifth term, the introduction reflected on the role of quarterly reports and what it offers to the Minister and assists in avoiding fiscal dumping.

The Chairperson read the remainder of the introduction as she felt that it was very important to talk about the targets:
With respect to the third quarter report, the DTI achieved 21 of its 25 quarterly performance targets. While three of the four quarterly performance targets were not achieved during the third quarter, the year-to-date targets set for these performance indicators were met and in certain instances, even the annual targets were already over-achieved by the end of December 2018. The fourth performance indicator that had not been met focuses on new jobs created. This could be contributed to the recent technical recession whose lagged effect is still being experienced.

The Chairperson turned to the conclusion, which she said did not contain anything new. She asked Members to check that everyone was included in the Appreciations.

The Chairperson said that the recommendation was instructing the Minister about what he had to do, because the Minister, in many ways, reported to the Committee, which represented the Speaker.

The Chairperson read through the recommendation:

Informed by its deliberations, the Committee recommends that the House requests the Minister of Trade and Industry to:
Engage with the relevant Ministers to reach a resolution on how to support strategic industries through appropriate pricing of administered prices, such as electricity, port and rail charges.

Mr Mahlobo proposed the adoption of the report. Mr Williams seconded the proposal.

The Chairperson noted that there were no objections and that the Third Quarterly Report had been adopted and would be sent to the House for consideration.

She noted that she would shortly be leaving to go to church as it was Ash Wednesday and that Mr Radebe would be acting as Chairperson.

Presentation of National Lotteries Commission Performance Report 3rd Quarter 2018/19
The Chairperson welcomed the Chairperson of the National Lotteries Commission (NLC) Prof Alfred Nevhutanda, Commissioner Ms Thabang Mampane and the COO Phillemon Letwaba.

Prof Nevhutanda introduced the other members of the team: Legal Head Mr Tsietse Maselwa, Company Secretary Nompumelelo Nene, and spokesperson of the NLC, Magda Ndlboho.

Prof Nevhutanda was pleased to say that 90% of targets had been achieved and he believed that by the end of the following quarter, 100% of targets would have been achieved. He announced that the NLC had opened the Dr Credo Mutwa Library and Museum in Kuruman, Northern Cape Province in February 2019. The library and museum would ensure the preservation and display of the work of Dr Vusamazulu Credo Mutwa, a well-known African healer, shaman and a writer and that the establishment of the museum would contribute to the documentation and preservation of the indigenous knowledge systems of South Africa.
The NLC had also contributed to the Cheryl Zondi Foundation as she intended speaking to people around the country about her experience of abuse by a pastor. The NLC had contributed R2 million towards materials for shelters following the fires in Gauteng.

Prof Nevhutanda informed the Committee that the State Security Agency had begun investigations into the problem that had arisen in 2018 with the integrity of the data that had been stored outside SA. The technical capacity in the NLC had been enhanced through a panel of engineers who would look at infrastructure projects. The NLC had arranged for immediate independent investigations into any criticism observed in the media. Prof Nevhutanda noted that sometimes squabbles between people impacted on the NLC so those things would be investigated immediately.

Commissioner Mompane briefed the Committee on the organisation’s performance in the third quarter. As indicated, all except one target had been achieved. The Commission had been unable to meet the target of adjudication of 75% of applications within 150 days. The NLC had exceeded equity targets in most levels of the workforce. People with disabilities comprised 3.6% of the staff complement. The focus was on ensuring equity in the senior management category which currently demonstrated a complement of 56% males and 44% females. The staff complement was 274 permanent employees, with 34 fixed term employees.

Prof Nevhutanda added that the Powerball had recently had a jackpot of R232 million, which had been won by an ordinary truck driver in the Western Cape.

Mr Radebe took over the Chair.

Mr Phillemon Letwaba reported on operational matters. He stated that a total of 588 site visits had been conducted during the quarter for both pre-adjudication and post-adjudication. At the 588 sites, 1623 permanent jobs and 795 temporary jobs had been created. Of the employees, 1634 were adults, 737 were youth and 32 were people with disabilities. The Charities sector had the highest number of jobs.

Mr Letwaba informed the Committee that the revenue from its share of ticket sales, year to date to December 2018, was R1.098 billion against a budget of R1.105 billion, a 0.5% underperfomance in the year to date.

Discussion 
Mr Cachalia asked about the proactive funds. There was very little reference to it in the document but it did state that the new procedure had been approved by the board and so he wanted the Committee to have sight of the procedure as it was a key risk, and an ethical risk. What was the status of the ministerial inquiry into the irregularities that had taken place in the NLC? What were the terms of reference? Was there an inquiry and what were the timelines?

Mr Mbuyane asked the NLC how it dealt with responsible gambling and were there any awareness programmes dealing with it?

Ms Mantashe said that there was to be no forensic audit. Mr Cachalia was not right. The Committee had requested the Minister to set up an internal audit.

Mr Mahlobo said that the performance was more than excellent at 93%, and the revenue was about R 1 billion, but there had to be more because the work in communities was excellent.

He told Mr Cachalia that he should find time to look at the resolutions as decisions were made by Committees. The Committee had been concerned about three projects that were causing problems. Firstly, there was the project in the Eastern Cape where there had been a confusion of names. Secondly, there was a project that had been addressed when he had been in Cabinet but the NLC had addressed the issue and had put in monitors to ensure that the checks and balances were there. That capacity needed to remain. He understood that the Minister had instituted an audit investigation. Proactive funding was making a difference and brought relief to communities. In the 4th quarterly report, NLC should say how the Minister had wrapped up the matter.

Mr Radebe commented that the proactive funding was one of the best things and the library in the Northern Cape was important to the African culture. The history of the African people had been suppressed for so long. The immediate response to needs as a result of fires was the reason that proactive funding had been instituted and the NLC was doing well in that respect.

Mr Cachalia asked for an update on the hacking of the computer systems.

Mr Mahlobo was worried. The ICT system had been hacked into once. Had the NLC ensured the integrity of the data, and ensured that it could not happen again? The integrity of the data should not be comprised. Was the system now bullet-proof?

Prof Nevhutanda stated that the hacking into the ICT system was not a conspiracy theory; it was a real event. The SSA was looking into it. The projects had been removed and the data was located somewhere so that it would go to the new system. In the next presentation, he would show how the hackers had been able to get everything and would educate the Members. NLC had countered the hijacking of the system. The matter had been captured incorrectly in the media and the NLC had not meant that journalists had to be investigated. The NLC had met with SANEF to clarify the matter.

Proactive funding was kept in a single fund. The NLC had to go to the rescue of the person that was dying or displaced. All the nkukus had been burnt down in Alexander again that morning. The NLC had to go to its board with projects and then it went to independent people to adjudicate. In the next quarter he would come with the framework approved by the board.

Investigations had been done by an independent body that had communicated with the internal audit unit. The board had looked at the report but had just read it and had sent it to the Minister.

Ensuring responsible gambling was quite difficult because the NLC did not know how much people spent on lottery tickets. The winner of R232 million had played with R22.50 whereas someone in Northern Cape had told him that he played with R 1 000 each week. That was why it was a game of chance. The NLC was trying to teach people to be responsible. He mentioned that there was a one out of 18 million chance of winning.

Mr Radebe said that the issue of hacking was a serious matter and he was glad that SSA was involved. There would always be unhappiness. The problem was that every time one got funding, others would be unhappy.

Mr Mahlobo said that NLC should continue to do the good work and to change lives.

Closing remarks
Mr Radebe thanked Members and all presenters.


The meeting was adjourned.
 

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