NCC 2018/19 Annual Report & Quarter 1 performance

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Trade, Industry and Competition

22 October 2019
Chairperson: Mr D Nkosi (ANC)
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Meeting Summary

Annual Reports 2018/2019  

The National Consumer Commission presented its Annual Report 2018/19 and 1st Quarter 2019/20 financial and non-financial performance. The Commission had received an unqualified audit with one finding relating to a computer supply contract entered into in 2017/18 which had not been properly accounted for in 2018/19.  The NCC had achieved 8 out of 11 performance targets, and the three failures had been the result of relatively minor administrative errors or circumstances beyond its control. Irregular and fruitless and wasteful expenditure had increased slightly from 2017/18, to R1.55m and R154 000 respectively. In the 1st quarter of 2019/20, it had achieved eight out of ten performance targets. Many of the Commission’s challenges in both years could be traced back to its lack of skills and human resource capacity.

Committee members discussed the non-functionality of the Commission’s website and its ability to act proactively to prevent incidents like the Ford Kuga case. They asked for a detailed breakdown of irregular, fruitless and wasteful expenditure, how the Commission planned to solve its vacancy problem, and for the Department of Trade and Industry to commit to a time frame for amending the Consumer Protection Act.

Meeting report

Briefing by the National Consumer Commission 2018/19 Annual Report & 1st Quarter Report 2019/20
Ms Thezi Mabuza, Acting Commissioner, NCC, presented the mandate, vision, mission and strategic objectives of the entity. She then presented the NCC’s highlights for 2018/19. The entity had received an unqualified audit with one finding relating to a computer supply contract entered into in 2017/18 which had not been properly accounted for in 2018/19. Other highlights included: an inquiry into the timeshare industry’s cancellation practices, an inspection leading to a criminal case against Chester Wholesale Meat, an investigation into fires that had started in Ford Kuga cars, co-operation with provincial Consumer Protection Agencies (CPAs) and similar agencies to standardise communications with consumers and improve efficiency, and to assess the alignment of provincial consumer protection legislation with national legislation.

The NCC had achieved 8 out of 11 performance targets. Of the three that had not been achieved, one was due to an administrative error (a 2nd Quarter assessment report had been submitted to the Department of Trade and Industry (DTI) instead of the 3rd quarter report), one was due to matters not being submitted to the National Consumer Tribunal within 60 days, and the third was due to a complaint being withdrawn.

Ms Mabuza outlined the NCC’s financial management. She detailed the budget and actual spending of each of the NCC’s four programmes. She explained that no spending was indicated for compensation of employees in programme three because it was carried out by the same employees who carried out programme one and two. The total revenue of R71m included R13m from the DTI in January 2019 to begin setting up an opt-out register for unwanted communications. This money had not been spent yet. Total expenses amounted to R53m and approval had been granted by National Treasury for the NCC to retain the surplus. Irregular and fruitless and wasteful expenditure had increased slightly from 2017/18, to R1.55m and R154 000 respectively. The causes of this expenditure had been investigated and appropriate action had been taken.

Ms Mabuza explained that NCC had hired an approved external auditor, Rain Chartered Accountants Incorporated. The auditor had noted three areas of concern: the quality of submitted performance information, supply chain management and human resources.

Ms Mabuza discussed the NCC’s key challenges. Its underperformance was partly due to matters beyond its control. There was a significant lack of human resources, which had knock-on effects: the new legislation governing labelling of imported textiles and leather goods could not be properly enforced, and NCC was expecting to have challenges finding the skills and capacity to make the opt-out registry for unwanted communications effective.

The salaries at NCC were also often lower than the salaries at other regulators, and the labour union had requested parity with other entities in DTI.

Ms Mabuza presented NCC’s 1st Quarter 2019/20 performance and financial information. It had achieved eight out of ten performance targets. The NCC had failed to take enforcement action on sufficient matters, and had not met its legislative reform target. Both failures resulted from insufficient skills and capacity, she said. NCC had made good progress in addressing audit findings. Only three out of 28 had not been resolved. She outlined a strategy to improve the audit outcome for the next year. She announced that three senior management positions had been filled, and noted that NCC did not have a board of directors.

Mr D Macpherson (DA) asked how someone could lodge a complaint through NCC’s website. The website did not seem to be functioning properly.

Ms Mabuza admitted that the complaint form on the website was not functional at present, and said that it would be updated and fixed. The website was hosted by the State Information Technology Agency (SITA), and the change of account manager had created a problem with updating the website.

Mr Macpherson did not think the website functionality should depend on SITA. It was simple and easy to set up a website.

Ms Mabuza admitted again that the website needed to be repaired, but noted that websites using the .gov domain did have certain special requirements.

Mr Macpherson said that the NCC only seemed to deal with complaints, and did not do any investigations on its own initiative. He understood that there were financial constraints but wondered whether the mandate of the NCC could be enlarged to allow it to take the lead in investigations.

Mr Babs Kuljeeth, Company Secretary, NCC, agreed that the NCC was mostly reactive, investigating matters when complaints were received. But it did initiate some investigations and co-operated with international counterparts. For example, the NCC had led a recall of motor vehicle airbags that had involved hundreds of thousands of cars. The Ford Kuga case, too, had been investigated by the NCC before it had received any complaints.

Mr Macpherson asked the NCC to avoid issuing or agreeing to suspended fines where it had a choice. In the Chester Wholesale Meat case, had the NCC agreed to the suspended fine?

Ms Mabuza explained that the suspended fine was issued to Chester Wholesale Meats as part of a criminal sanction, so the NCC had no control over it.

Mr Macpherson asked what role the NCC was playing in arranging a settlement agreement in the Ford Kuga case, and whether the Jimmy family had been consulted about the settlement. He appealed to the NCC not to agree to a suspended fine, if possible.

Mr W Thring (ACDP) asked what the NCC was going to do with regards to the Jimmy family, as a lost life was completely different from a lost laptop or car.

Ms Mabuza replied that the Jimmy family case was a criminal matter, and it had been settled. The NCC did not know the details of the settlement, as it was outside its ambit. Most other affected owners had been refunded. The NCC was still pursuing an administrative fine against Ford, as the provision of unsafe goods was in a certain way a crime against the state. The NCC was looking at a similar case in Australia.

Mr Macpherson appealed to the NCC to be more proactive, so that cases like this were prevented. The issue with the Ford Kuga was known long before Mr Jimmy died and it could have been prevented.

Ms Mabuza said that the NCC tried its best but it also had to pick its fights carefully, given its resource limitations.

Mr Thring asked if the NCC had had an opportunity to submit the correct quarterly report after it submitted the incorrect one.

Mr Kuljeeth replied that the error had been detected too late.

Mr Thring asked the NCC to clarify the amount of irregular, fruitless and wasteful expenditure. The figures given on page 32 of the presentation were both significantly lower than the figures on page 31. Why were they different?

Mr Anton Van Der Merwe, Chief Financial Officer, NCC, explained that the difference between the figures was irregular, fruitless and wasteful expenditure carried over from the year before. A large proportion of these amounts had now been condoned or written off by National Treasury.

Mr Thring observed that many of the NCC’s problems could be attributed to a lack of attention to detail. Was this simply a problem of capacity? If this was the case, the Committee should assist the NCC to get the resources it needed.

Ms Mabuza conceded that attention to detail was a problem, and agreed that it was a problem of capacity.

Ms P Mantashe (ANC) asked the NCC to explain its use of an external auditor.

Ms Y Yako (EFF) also asked about the use of an external auditor, noting that the NCC spent the majority of its budget on compensation of employees. Where there plans to do the audit in-house in the future?

Ms Mabuza explained that one manager was responsible for auditing at the NCC. There had been in-house auditors before. It was much cheaper to hire external auditors.

Ms Mantashe asked for more detail on irregular, fruitless and wasteful expenditure.

Mr Van Der Merwe provided more detail on the amounts presented on page 32. The NCC had not sought quotations for services from the National School of Government and Government Printing Works, assuming that they were the sole providers of these services. There had also been 11 bids where evaluation criteria had not been applied, one petty cash transaction that had been approved by someone without that authority, five cases where contracts were overpaid, and four cases where standardised bidding procedures had not been followed to the letter. All of these cases had been investigated and action had been taken. The NCC had been fined by the South African Revenue Service (SARS) for making a payment one day late, a supplier had claimed a VAT refund despite not being registered for VAT, and an accommodation plan had had to be changed at the last minute.

Ms Yako asked if the NCC had a registry of irregular, fruitless and wasteful expenditure.

Mr Van Der Merwe replied that there was a register.

Ms Yako asked how the NCC was planning to promote public awareness of consumer protection matters.

Mr Kuljeeth replied that the NCC held workshops throughout the year, alone and in partnership with other agencies. They participated in events on World Consumer Rights Day, and also used almost all radio stations in the country, and numerous television programmes.

Mr Macpherson said that even with these awareness campaigns, too few people knew about the work or even the existence of the NCC.

Ms Yako asked if there was a register of businesses that had been found guilty of malpractice. What interventions had been made against such businesses?

Ms Yako asked what the turnaround time was for the NCC’s investigations.

Mr Kuljeeth replied that it was usually 60 days.

Mr Mbuyane asked what the strategy was for addressing the computer supply contract emphasised in the audit report.

Mr Van Der Merwe explained that the NCC had an invoice tracking mechanism, but it had been a struggle to get invoices from SITA, who had supplied the computers. He was confident it was not a systemic issue and he expected drastic improvement in the future.

Mr Mbuyane asked what the process would be to appoint a board of directors.

Ms Mabuza explained that the NCC was a commission: there was no provision for appointing a board of directors.

Ms Nontombi Matomela, Acting Group Chief Operations Officer, dti, confirmed this.

The Chairperson asked the NCC to present a plan for addressing the issues raised in the audit report and the large number of vacancies.

Mr Mbuyane also asked about the plan to address the vacancy issue.

Ms Mabuza replied that the NCC had been trying for over three years to increase its budget. As an interim measure, higher level of vacancies were sometimes broken up into two lower-level positions to make them easier to fill. She added that the NCC had never been fully funded.

Ms Matomela said that the Department had advertised for a new commissioner and the Minister was currently considering a shortlist of candidates.

The Chairperson asked the Department to help follow through to ensure that the Commission could be sustainable.

The Chairperson asked if the NCC was making progress in regulating cheap imports of various goods. Was the NCC co-operating with other government structures?

Ms Mantashe asked when the Consumer Protection Act would be amended so that provincial and national consumer protection agencies could work in harmony.

Ms Zandile Brown, Chief Director, dti, said that the Department was doing an impact assessment of the amendments which was expected to be complete by the end of the 2019/20 financial year, and the whole process was expected to be complete during that same period.

Ms Mantashe said that Committee would hold the Department to this time frame.

Mr Kuljeeth doubted whether the Department of Trade and Industry could really resolve the problem of national and provincial co-ordination. The provinces were responsible for bringing their consumer protection legislation into line with national legislation. He suggested that the Select Committee on Trade and Economic Development might be able to help.

The Chairperson suggested that the National Council of Provinces might be able to help.

Ms Mabuza said that in the meantime the NCC was training the provincial agencies to abide by the same norms and standards as the national agencies.

The Chairperson asked outstanding matters to be responded to in writing, and the meeting was adjourned.


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