National Consumer Commission Quarter 1, 2 and 3 2021/22 Performance

Meeting report

The Chairperson informed the Committee that it would receive a briefing from the National Consumer Commission (NCC) and not by the Department of Trade and Industry (dtic) as had been scheduled when the Committee revised the Committee Programme the previous week. The dtic had indicated that it could not prepare its presentation within the time available to appear before the Committee today.

The Chairperson requested the Acting Chief Operating Officer of dtic to introduce members of the Commission.

Presentation by the NCC on its financial and non-financial performance for the 2021/22 financial year to date (Quarters 1-3)
Ms  Nontombi Matomela, Acting COO, dtic, advised the Committee that Ms Thezi Mabuza, Acting Commissioner, National Consumer Commission, would make the presentation as she had been heading the entity since the departure of the previous Commissioner of the NCC. She was accompanied on the platform by Ms Phillipine Moshidi, the CFO appointed in August 2021 on the retirement of the previous CFO, and by Mr Joseph Selolo, Company Secretary.

Ms Mabuza began with the key highlights of the year, which included the current investigation into the Mufhiwa Building Projects pyramid scheme in which Mufhiwa received just above R27M from participants who transferred money into different bank accounts in the name of Mufhiwa, its director and five
other individuals; participants from South Africa, Botswana and Zimbabwe were involved. The bulk of the money was transferred into various accounts held by the director and spent by her. Only R686 741.48 was preserved.

An investigation was in progress looking Elgin Fruit Juices (Pty) Ltd after a recall of apple
juices from Coca Cola’s Appletiser, Pioneer Foods’ Ceres, Liquid Fruit Juices and Woolworths
Apple Juice. An Investigation was also approved against Grandisync CC following the allegations of
consumption of unsafe noodles by children in Gqeberha.

Administrative fines totalling R 785 000.00 were imposed during the three quarters. 105 Compliance Notices in support of the Clothing and Textile Industry Master Plan were issued. Non-compliant clothing
and textiles goods to the value of R23 447 were to be destroyed or returned to the country of origin.
The value of the Compliance Notices that were issued was R23 447 705.

In Quarter 1: The entity achieved 6 out of 7 targets, that is overall performance of 85.7% of the targets.  
In Quarter 2: The entity achieved 5 out of 7 targets, that is overall performance of 71.4% of the targets.
In Quarter 3: The entity achieved 6 out of 7 targets, that is overall performance of 85.7% of the targets.

Key challenges:

-The NCC had an approved staff compliment of 132 in 2011 and had not been fully funded to fill those positions. At present only 79 positions are funded; 75 are filled and 4 are vacant (including the Commissioner’s position).

 -The NCC could not offer Cost-of-Living-Adjustment to staff for 2020/21 and also for 2021/22, based on reduction of baseline budget. This has led to high turnover of staff in Finance, Supply Chain and in ICT.

-The high number of cases referred to the Tribunal and judgements issued in favour of the NCC, has led to matters being referred to higher courts. The NCC has to procure services of external law firms to represent the NCC in those matters. This led to high legal fees (line items on Consultancy in Financial Statements).

 -The dependence of the NCC on other regulators/ Departments for expertise related to testing of products is affecting the turnaround times for completion of investigation related to foodstuff, especially of high-level investigations.

-The NCC would have to set aside funds to maintain it newly procured ICT infrastructure and would need an increase in its baseline.

(See Presentation)

The Chairperson thanked the Acting Commissioner and invited comments and questions.

Discussion
Mr W Thring (ACDP) asked what systems were in place so that the NCC could be proactive instead of reactive as in the case of the Ponzi Scheme, contaminated foods, and so on. He asked how the NCC determined which consumers were reimbursed and by how much when the Commission intervened, repaying monies spent by consumers. Had the Commission had much success in addressing internet or online fraud? He himself had had two exposures to internet and online fraud recently, one targeting his personal banking account and the second was someone fraudulently claiming to be a SA Revenue Service employee.

Mr Thring asked why there was a target of only 80% for investigations? 80% indicated a distinction but surely one should aim at 100% and not 80%? He noted the number of joint targets within the dtic fold that were not met in the first three Quarters.

Ms N Motaung (ANC) asked about the business compliance targets. Why was the target so low that there were only 15 targets and, of those, only three were achieved in Quarter 1, two in Quarter 2 and seven in Quarter 3? The target was low, but the Commission could not meet it. The same applied to the consumer awareness initiative with a low target that was not met. She asked if there were a reason for such poor achievement in terms of investigations in all Quarters. The reasons given varied from the lack of capacity to complexity of the investigations. Did the NCC lack the staff and skills to execute the mandate of the Commission?

Mr C Malematja (ANC) asked about the pyramid scheme which had acquired R27 million from various people but only R675 000, i.e. 2.5% of the money, had been recovered. Why was the figure so low? He understood that the investigation into the eating of possibly unsafe noodles was ongoing, but five children were reported to have died from eating the noodles and the families needed closure. How long would it take to complete the investigation and what would be the consequences for companies and directors involved?

Mr Z Burns-Ncamashe (ANC) asked about the contaminated food. Those who lived in rural communities were regularly sold food items that had expired. Owing to illiteracy and other factors, the people were not circumspect in dealing with such challenges. To reach targets, could the NCC not engage with structures in the rural areas, such as such as the kings’ palaces and the traditional leaders’ council infrastructure where there were government employees who could help? There were ward councillors in municipalities right across the country and that was another structure that could be utilised. Were those connections happening and, if not, was it not the right time to start establishing such strategic engagements? He appreciated the link with higher learning institutions where the NCC was developing human capital, but the Commission had to go down to people in the rural areas.

He added that the same support for rural people should apply to non-compliant clothing and textile goods that had illicitly found their way into SA, compromising the quality of the real brands. What preventative measures had the NCC employed to protect the Clothing Master Plan as that was the way to go as they addressed key issues important to the Commission.
                               
Mr Burns-Ncamashe appreciated that the Commission was engaged in advertisements but what had the impact of the media coverage been, noting that not everyone had access to electronic or print media. Community radio stations were an invaluable way of reaching people in the rural areas.

Mr S Mbuyane (ANC) queried the expenditure on wages and salaries. There were inconsistencies across the three financial Quarters. What were the reasons? What was the impact of limited staffing on the work of the Commission? What was being done to correct that situation?

Mr D Macpherson (DA) assumed that the mandate required the entity to facilitate the ease of submission of complaints from the public. Could the Commissioner show him how to submit a complaint through the website? He had not been able to find it but he was sure it was very easy. Perhaps the NCC could show him how to submit a complaint via the website?

Ms Mabuza informed Members that the Company Secretary would explain how the NCC was involved in the Government Task team which would make the NCC more proactive in its approach. A major problem was that the participants knew that participation in a Ponzi scheme was illegal and so did not come forward until they were in dire straits. By that time the money was often long gone. The NCC also worked with other organisations and, to some extent, was dependent on them. The Reserve Bank alerted the NCC to irregular deposit taking and banks would freeze bank accounts if the NCC suspected there was an issue with a particular account.

Regarding contaminated food, she understood Mr Thring’s concerns but the NCC could not be pro-active as the owners of the goods were the suppliers and they were obliged to maintain standards and to inform the NCC immediately should there be a need for recall. The NCC also required the Department of Health to alert it if it came across problems with the safety of food or standard of hygiene, etc. The NCC worked closely with the dtic, and other departments, but he NCC only came in at the end, only when standards had been compromised as it was the  job of the NCC to alert the public of such situations.  

Reinvestment occurred when a person had paid the supplier and then the supplier had reneged on the agreement. Then it was the responsibility of the NCC to reinstate the consumer to his or her former position. The NCC had to ensure that the consumer received the amount expended, plus interest up until the NCC brought a case against the supplier. The role of the NCC was not proactive, nor on the criminal side, as that was dealt with by the SA Police Service.

Regarding online fraud, the Company Secretary was working on a joint project in that regard, although its role was not to prosecute offenders but to alert consumers.

Ms Mabuza provided the Committee with an explanation for the lack of achievement of joint targets. There had been no communication on the matter from the dtic until after the year had already begun. The Commission had only been informed of the joint targets in the course of Q1. That problem had been resolved and the entities had been involved in developing the indicators for the current year, working through them with the Minister of Trade, Industry and Competition.

She informed Ms Yako that the Committee could assist the NCC in many ways, such as when Mr Burns-Ncamashe had made a suggestion about new avenues of communication. MPs could also assist when they themselves held meetings as they could invite the NCC to attend, but the most help would come from persuading the dtic and National Treasury to fund the NCC sufficiently.

Ms Mabuza responded to Mr Macpherson’s question on submitting a complaint via the NCC website. She admitted that there was no such facility as the NCC had only commissioned the ICT infrastructure in December 2021 and the IT system was not yet ready.

Replying to Ms Motaung’s query regarding the low numbers on business and consumer initiatives, Ms Mabuza explained that the targets were in relation to the budget, including a travel budget. Business initiatives related to engagements with businesses but at the NCC, only one person was responsible for business communication and that limited how much could be done. There was also only one person in charge of the consumer communication initiative. In Q2, the target for Business Initiatives had not been met as the businesses could not meet on the only days that the NCC person was available. Ms Mabuza did not perform in the area of investigations but could say that there were only five investigators. A high caseload of investigations, i.e., 200 investigations to be completed within a quarter, together with the fact that some of the cases were extremely complicated and the NCC had to rely on other entities for assistance, had a negative impact on the resolution of cases. Another problem was that proper procurement procedures had to be correctly followed within the Commission, even for human resources, and that proved to be a time-consuming process. The NCC had interns who were going to assist in bring warm bodies into the organisation. She wished that the target could be moved to 100% but the NCC was hamstrung by having only five investigators and limited funds.

Ms Mabuza agreed with Mr Burns-Ncamashe’s concerns for the rural communities. Consumer Protection was a concurrent function with provincial consumer protection regulators and the NCC engaged in joint investigations and joint awareness campaigns – hence the joint programme in the Northern Cape.

When it came to clothing and textiles, being proactive would be to stop them at the point of entry, but there the NCC relied on Customs. The NCC’s capacity was far too limited to do much once the goods were in the country. The Companies and Intellectual Property Commission (CIPC) was the agency that became active when there was fraudulent presentation of goods.

She agreed that community stations were an asset and stated that the NCC mostly worked with community radio stations. Often the radio stations could not afford to call the NCC, so the NCC contacted them periodically. In some cases, there were regular consumer protection slots on the radio. When going out to see people, the NCC also saw many other complaints but it had to report them to provincial units to handle the situation, especially when consumer and supplier were in the same province.

Mr Selolo informed Members that for the NCC’s systems to be proactive, the Commission had become part of the governmental task force, known as the SA Anti-Money Laundering team, headed by NPA Asset Forfeiture Unit. He admitted that the group still but needed a dedicated prosecutor. The NCC needed SAPS standing investigators to assist with NCC investigations and investigators.

He explained that the majority of fraud cases used banking platforms and banks had to report suspicious transactions to SARB. The Consumer Act does not allow banks to reveal information to the NCC but it does allow them to be whistle blowers to alert the NCC of all suspicious actions. There had been a considerable rise in the number of Ponzi schemes. Some were copycats but some were very prolific, and it was almost impossible to investigate each one. Once investigated, the NPA Asset Forfeiture Unit was requested to forfeit funds. Sometimes the funds were so low, the cost of mounting a prosecution outweighed the money available.

In the investigation into the R27 million Mufhiwe Ponzi scheme, the NCC attempted to follow the money through banks, but could only find just over R600 000. Because Ponzi schemes were illegal, they were typically involved money laundering. The NCC could follow the money by asking for banks statements, etc, but the NCC did not have the financial forensic expertise and so relied on other agencies that did have the expertise. However, the money did not remain in bank accounts and was sent out of the country immediately or moved into cryptocurrency. Money mules also converted the money into cash. Money disappeared so quickly that investigators only found a small percentage of the money scammed from people in accounts that could be frozen. Because the money was dispersed in such a short time, the task team would assist in following the money quickly before it disappeared.

He added that the NCC was grateful to the banks for their assistance. When banks reported suspicious transactions and the transaction was confirmed as a Ponzi scheme, the bank immediately froze the account. Under the law, everyone who participated in a Ponzi scheme was an offender. Some Ponzi schemes were victimless and the funds were paid to the state. Some schemes had victims but there was so little left of the funds, that it was simply shared equally by all who had lost money. Regarding the purchase of cars or goods or services that were not valid, the law required that the consumer be reimbursed, including interest and but the National Consumer Tribunal determined the final amount. The NCC always presented the highest administrative fees and interest, in addition to the actual purchase price to the Tribunal, but ultimately the Tribunal determined the final amount to be refunded. The actual purchase price was always returned to the victim but the amount of interest could vary.

The investigators dealt with a wide range of consumer goods as well as the money laundering. He believed that there should be specialised investigators and that would ensure investigations would be speedier. However, with only five investigators, they could not specialise as they had to cover everything from cars to food to the internet and they had to learn the context and the technicalities for each new investigation before they could begin the investigation.

Mr Selolo said that the challenge relating to the noodles case was that the NCC firstly had to determine the brand of noodles in order to determine the brand owner. That process took a long time and, even then, the NCC was not sure if it had identified the correct brand. Thereafter processes included laboratory testing etc. that the NCC could not do itself. If the investigation revealed that the owner of the noodles brand had exposed the public to goods that were not safe, the NCC would prosecute the company. The Consumer Protection Act allowed for a fine to be imposed on the company but it determined that those who had suffered as a result of defective goods, were entitled to damages but it did not give the NCC the power to seek those damages. A certificate of prohibited conduct would be issued by the NCC and the affected persons could approach the normal courts to obtain those damages. Ultimately, the consumers would have to approach the legal aid board for assistance to sue the guilty party.
             
He reiterated that the NCC had standing timeslots with community radio shows and each week shared information to educate the consumer.

In addressing illegal textiles and clothing, the NCC had an MOU with SARS that stopped and inspected certain goods and notified NCC of the detained goods. That was very helpful and pro-active. The NCC also worked with SAPS that had a wider mandate than the Commission and could follow consignments to warehouses. There again SAPS notified NCC and that was very helpful. The Commission held training courses for new members of Customs and SAPS and for all members when the laws changed. That ensured that everyone involved had a full understanding of the law and what each agency could do. Some goods passed through customers but could be followed. The confiscated goods were re-exported or destroyed at accredited facilities.

Ms Moshidi responded to the question raised by Mr Mbuyane regarding Compensation of Employees. She agreed that the difference R600 000 between Q1 and Q2 was significant but in Q1, the entity had vacancies while in Q2 and Q3 some positions had been filled, including her position. Some employees exited in Q4 but a new ICT Manager was appointed. Salaries and wages were limited by the budget restrictions under which the NCC found itself. Social contributions raised the amount in Compensation in Q4 as certain items such as leave and service bonuses would have to be saved because some employees had not yet used those benefits. For all of the above reason, the Compensation of Employees was never a regular payment.

She stressed that the limit on the staff establishment was a result of funding shortfalls, which had been a problem since the founding of the NCC. The Commission usually had around 74 warm bodies on its payroll. The staff shortage was addressed via the employment of internships but that would not be sustainable as the more consumers became aware of the business of the NCC, the more staff the Commission would need to undertake investigations.

Mr Macpherson followed up on his question. It struck him as amazing that there were only two things that the NCC should be doing: be accessible to public and receive complaints, and to investigate. However, it could not do either. The website had been incomplete since 2019. How were consumers meant to communicate with the NCC and to send the relevant documents? It was an indictment against the NCC that was like an ice cream store without ice-cream. The NCC had to get to grips with what it was not doing. Imagine how much worse the situation would be if the public could lay complaints. The Committee had to address the situation urgently.

Mr Burns-Ncamashe proposed that the Commission look into the challenges in relation to unemployment and inequality. People were desperate and inequality was widening, and everyone knew that had an historical context. His people had to be equipped with information as “With knowledge, one was empowered”. There were established institutions such as National House of Traditional Leaders and the SA Local Government Association in which almost all municipalities participated. If the Commission institutionalised the current institutional arrangement, that would assist in helping his people to remain vigilant and not be exploited because of their ignorance or desperation.

The Chairperson heard the current refrain that the Northern Cape could not be reached. It seemed the NCC was addressing that problem through collaboration, which it could enhance. When would the IT system be ready to receive complaints through the website?

Ms Mabuza understood Mr Macpherson’s concern. The Commissioner was planning on testing the IT system in July 2022. Although it seemed that the NCC was dragging its feet, it was doing its best. She added that not all consumers could use the internet and so the NCC had set up a toll free number as  a first step in laying a complaint.

She informed Mr Burns-Ncamashe that they were leveraging the relationships but would work on that and report on improved efforts in the next report.

Consideration of Minutes
The minutes of 15, 16, 22 and 23 February were read and adopted by the Committee without amendments or objections.       
The minutes of 1 March 2022 were amended to correct the status of the Chairperson who was no longer an Acting Chairperson and adopted by the Committee.
The minutes of 2 March 2022 were amended in point 2 to indicate the presentation had been by the Special Investigating Unit and “malfeasance” was replaced by the word “maladministration” to facilitate understanding.  The minutes were adopted as corrected. 

Closing Remarks
The Chairperson noted that it was International Women’s Day and that the theme was: ‘Gender equality today for a sustainable tomorrow.’ She called on everyone to break the bias.

The Committee Secretary informed Members that the following meeting would be on Wednesday 9 March 2022 and would be a briefing by the dtic, SABS and RNCS on action taken in response to the Public Protector’s Report.

The meeting was adjourned.