NMISA & SANAS 2021/22 Annual & Q1 2022/23 Performance, DTIC BRRR

Meeting report

Opening Remarks
The Chairperson stated that the Committee would be receiving a briefing from NMISA (National Metrology Institute of South Africa) and SANAS (South African National Accreditation System) on the Annual Report and the First Quarter Non-Financial and Financial Performance of each entity but she wished to begin with Committee business and so would deal with the BRRR before the presentations.

BRRR (Budgetary Review and Recommendations Report)

The Committee Secretary began with the DA recommendation submitted previously. The secretariat recommended that the point be moved to Concluding Remarks. He had re-worded the input: … as the Department should provide the committee with quarterly metrics on the impact of globalisation on the economy, i.e., contribution to which GDP would impact on prices and jobs created as a result of the policy choice.

The change was agreed to by the DA and the Committee.

The Secretary presented an amendment proposed by the EFF advising the committee that a condition is basically a concluding remark because it is operational regarding funding for Black people in business. The secretariat added a clause that praised the work already done by the funding institutions.
“The committee acknowledged the importance of businesses created to facilitate economic growth in certain geographic regions by leveraging tax and business incentives to attract foreign direct investments and technological advancement in job creation potential should not be underestimated. Measures had to be taken to ensure that they operated optimally.

The Committee agreed to include the point in the concluding remarks.

The Secretary read out a second concluding remark from the EFF which enhanced the concluding remark on SABS.

The Committee agreed to include the point in the concluding remarks.

The Secretary read out a further concluding remark from the EFF that the secretariat had revised: The Committee was encouraged by the financial support provided by the NEF and IDC in promoting entrepreneurial development by supporting small and medium enterprises. However, we will encourage these Development Financial Institutions to continue system applicants through the application process and ensure that they speed up the process of funding-related inquiries.

The Committee agreed to include the point in the concluding remarks.

The Secretary read a third concluding remark submitted by the EFF and re-worded it as follows: The Committee welcomed the progress made in the investigation initiated by the Minister and the SIU in the allegations of corruption and maladministration involving the NLC and also welcomed preservation orders obtained by the SIU in an attempt to recover the stolen funds that had been meant for the upliftment of the community. It would implore the SIU to complete the investigation into the allegations of corruption and maladministration at the NLC. Furthermore, the Committee was encouraged by significant changes underway at the NRC and welcomed the appointment of the chairperson, Dr Barney Pityana, and other board members who have strong governance records.

The Chairperson stated that the concluding remark was included in the one originally proposed by the ANC. The title of Dr Pityana would be checked.

Dr M Tshwaku (EFF) stated that his intention was to say that the SIU should not deal with those who had allegedly acted corruptly until the report had been finalised and signed off by the President.

The Chairperson said that would go against a previous decision of the Committee to get regular reports on the matter from the SIU.

Mr M Cuthbert (DA) agreed with the Chairperson on the first point that the Committee had asked for continuous status updates. To bring Dr Tshwaku into the picture, he said that, as somebody who had been at the forefront of driving the issue on the Committee, the SIU had not realised the scope of the corruption and hence, it had taken much longer for the final report to be issued. The Committee would be in the dark if the SIU continuously found matters and had to investigate them. That would extend the investigation time but they would not update the Committee phase by phase. That would defeat the purpose of transparency and accountability on the part of the SIU. He did not think that the SIU was necessarily wasting money because what the Unit was able to do during each phase of the investigation, once it had prima facie evidence, was to compile that evidence, go to the Special Tribunal where the Unit was able to get preservation orders on assets and on the transfer of money. The Unit was taking action as it moved along in the investigation. Members should not misunderstand and think that it was necessary to wait for the final report before taking action. And then it was up to the relevant government body, which would be the dtic in that case, to bring criminal charges against the individuals and companies complicit in the corruption. The SIU could recommend criminal investigation and criminal charges, which it had done, but laying the charges was up to the Department and the Minister.

Mr Z Burns-Ncamashe (ANC) stated that, while he agreed with Dr Tshwaku, the issue is around prima facie evidence. Where there was prima facie evidence, there was no way that people could not be held accountable. If there was a case to answer, then they had to answer. The other technicalities might not necessarily talk to the substantive matters. As long as the facts of the case were proper and had been established through investigations, Members should not worry too much.

Addressing Dr Tshwaku, Mr C Malematja (ANC) said that the criminals were brutal and very clever. If one took too long after identifying them, they would wipe out all the evidence and then there would be no case. One cannot take long to deal with such people.

Dr Tshwaku said that he did not have a problem with progress reports. The problem was that the people had not been given an opportunity to answer for themselves. He just wanted fairness, but he did want criminals to be arrested. They should not misunderstand him. But one had to follow a process because some of them might just be mentioned in these progress meetings, which put a dark cloud over them. The SIU needed to be very careful in terms of how they crafted those things and reported on them.

The Chairperson believed that the SIU had been careful. The first time the Unit came to the Committee, it had not mentioned the names of the NGOs, because the SIU was still busy investigating. The SIU was following due process when they came to update the Committee. She was confident of that.

Mr Cuthbert added that when the SIU applied for the preservation order, there was a special court hearing, an accelerated court hearing, and one that did not give people the chance to evade the law enforcement authorities, but those people were entitled to legal representation. So that matter would have already been decided upon before they went out and seized the items and announced it in a glitzy press release. So, the people involved were given all their legal rights and legal rights were not infringed upon. It was all done legally and the Committee should not cast any aspersions on the process. If somebody's name was mentioned in the report, it was because it had already been to a court of law.

The Secretary read two points submitted as concluding remarks by the ANC but which covered matters not addressed in the report: the review process of the entities’ governance framework and the sugar industry. Those points could not be included.

He then read out the re-worked version of a recommendation proposed by the DA: The Minister should consider developing a strategy and implementation plan to effectively utilise the current tariff concessions contained in the African Growth and Opportunity Act as it related to the automotive sector, as well as agricultural agro-processed goods and submitting a progress report to the National Assembly within six months after the adoption of the BRRR.

The Committee accepted the recommendation.

The Chairperson called for the adoption of the BRRR.

Mr Cuthbert assumed that he could be assured that the DA’s opposition to the point about the governance strengths of the NLC board members had been captured. He was happy to propose the adoption of the report as it accurately reflected the contents of the meetings.
 
The proposal for the adoption of the BRRR made by the DA was seconded by the ANC. The report was adopted with the only objection being that of the EFF.

Read the approved report: ATC221116: Budgetary Review and Recommendation Report of the Portfolio Committee on Trade, Industry and Competition, dated 16 November 2022

Engagement with DTIC entities
The Chairperson requested the dtic to introduce NMISA and SANAS that would brief the Committee on the 2021/2022 Annual Report as well as the First Quarter Financial and Non-Financial Performance for 2022/2023. financial year

Dr Tshenge Demana, Chief Director: Technical Infrastructure Institutions, dtic, introduced the CEO of NMISA, Mr Ndwakhulu Mukhufhi, and the Acting CEO of SANAS, Mr Tumelo Baleni.

Presentation by NMISA
Mr Mukhufhi stated that the chairperson of NMISA, Jabu Mogadime, was on the platform. He would make the presentation once she had made the initial comments.

Ms Jabu Mogadime appreciated the good relationship with the Committee. She was pleased to say that NMISA had been able to meet its expectations in terms of strategy but the CEO would also discuss the issues that were likely to affect performance and sustainability in the future.

Mr Mukhufhi informed Members that he was close to the end of his second term of office. The CFO, too, would be leaving the organisation in the near future. He also explained that he and the CFO were at the General Counsel of the Meter Convention that took place every four years and that year it was being held in Versailles in Paris. The Convention dealt with matters related to metrology internationally and part of NMISA’s mandate was to ensure the international equivalence of measurement that allowed the negation of technical barriers to trade was enabled with proper measurements supported by competent equivalent measurements to SA’s trading counterparts.

Mr Mogau Sehlapelo, CFO, NMISA, stated that the entity had received an unqualified audit report with no findings. Three different independent external auditors had audited the NMISA’s books over the years. The Committee should note that the unqualified audit was not only related to the area of the financial numbers but also to a number of aspects in terms of the quality of the financial statements submitted, the quality of the performance information, the quality of the supply management, financial health, human resources and the IT infrastructure in the entity which, together with the controlled environment, indicated the effectiveness in leadership and the effectiveness in the board. The organisation, overall, was performing at a level where the controls and the control environment were adequately managed.

Having presented a detailed and comprehensive report, the CEO concluded that the main challenge was the infrastructure as the current buildings required extensive maintenance and were, nevertheless, inadequate for modern technology. A new building was critical.

Mr Mufhufhi summarised the First Quarter Report.

He highlighted the reduction in the budget for the current year, which had impacted negatively on achieving the Annual Performance Plan (APP) of the entity which was trying to re-prioritise as there had to be a reduction in delivery of projects as a result of the budget cut. NMISA was trying to prioritise cutting-edge matters such as green energy. The entity had been pushing a boulder up the hill and was very near the crescent, but the budget cut threatened to send the boulder back down the hill and crush the entity.

(See Presentation)

Ms Mogadime, stressed how well the entity had done over the past ten years but expressed her concern about the reduction in funding. The entity did not object to raising funds but that was not NMISA’s core business.

Discussion
Mr S Mbuyane (ANC) noted that NMISA’s total expenditure of R253.5 million was over R9 million more than the previous financial year. The organogram of the entity showed that 229 posts had been approved but only 159 positions were filled. Why had the entity not filled the vacancies and what was the impact of not filling the vacancies within the entity? What were the key provisions of the relevant Act that NMISA considered critical to review and what action had NMISA taken concerning the matter of a review? What was the status of the recapitalisation and modernisation of NMISA? Could NMISA explain what approach it was considering for the next 20 years and what funds did it have for the construction of a new campus? He complimented the entity on an excellent audit report.

Dr Tshwaku asked what NMISA did. The entity had various units. Was the entity maintaining those or were they developing new units? Was the development of standards not the function of the SA Bureau of Standards? Was there not an overlap in the work that they were doing? Was NMISA the custodian or the keeper of the units or was it the developer of new units? How did new units come about? There was a new standard in France or the USA but was there a possibility that the standard could be named after Nelson Mandela or even Winnie Mandela? He suggested that the Committee should support NMISA in terms of their funding. The Committee should not allow a situation where state machinery collapsed.

He suggested that the Committee should look into NMISA and what it did and then consider supporting the entity and giving it more money so that it can become stable and could modernise. It was all about modernising. The Committee had seen the trend in the SA Bureau of Standards (SABS) that was not moving to a new way of doing things; SABS was still stuck in a pre-1994 way of doing things.

Mr Burns-Ncamashe said that NMISA demonstrated the ability of South Africa in the context of the African Continental Free Trade Area. It was able to have a footprint in a peer-reviewed paper and could serve as a standard to neighbouring countries and contribute quite positively to the body of knowledge, ensuring that the continent was repositioned as a trade destination. The work that NMISA was doing was quite commendable. However, the moment SA's operations started to have an impact at other levels, whether it was at a regional level or a Continental meta-level, it meant that nothing should be left to chance. He was concerned about the budget cuts, although everyone knew the situation of the fiscus. NMISA was a strategic institution that should be supported. He was also not impressed that transfers were not done at the time they should do. The Department had to pull up its socks and make sure that strategic institutions functioned at an optimum level

Mr Burns-Ncamashe implored everybody who mattered to ensure NMISA could do its work in a very efficient way and in full appreciation of the requisite standards. There could not be any compromise, especially when it came to institutions that might have an impact on exports. The Department could not trivialise the efforts of ensuring that South Africa was a trade destination of choice.

Mr W Thring (ACDP) concurred to a large extent with his colleagues. It was a sterling presentation, showing where the entity was five to six years ago, to where it operated at a level of best practice level. The Committee needed to applaud the leadership at NMISA for the sterling and impeccable work done. It would be a tragedy if the standards achieved had to be lowered because of a lack of resources. The Committee needed to review the challenges that NMISA faced financially, even though the entity had been receiving unqualified audits, even internally, which was an indication of the standard to which they held themselves accountable. The Committee could not allow them to fail, as have other entities, because of a lack of resources. He concurred with his colleagues who had indicated that the Portfolio Committee needed to do what was possible to ensure that NMISA did not go in that direction.

The Chairperson congratulated NMISA on its performance, noting that the main challenge was the infrastructure and funding.

Mr Mukhufhi appreciated the support offered by the Committee and assured Members that the management team would endeavour to continue doing everything within their powers as the leadership of the entity to ensure that the performance was kept at that level despite the reduced funding that might materialise.

The CFO explained that he had adjusted the budget in line with the funding. As much as some of the items would have been funded in the previous financial year, coming into the current financial year, he had to make some adjustments to some of the numbers to rebalance the budget.

Responding to Mr Mbuyane’s question on the organogram, the CEO explained that the numbers indicated 159 posts that were filled against 229 posts that were approved. Although they were funded vacancies, only nine were not filled, not the full 70. The way NMISA was developing the process as he had indicated, of implementing an Applied Metrology Unit that was more stakeholder-focused. The customer-centric focus that NMISA was developing, meant that it was calibrating its implementation and employing staff as the unit was being established. Some of the capabilities required were not capabilities that were available in the market; people needed to be trained in a specific area of metrology so students were being developed to fill the unit. In the year that the students were studying, those vacancies would not be funded, but they would be approved and the funds went into the development of required skills. When NMISA needed to fill posts in the unit, it allocated the funding to those positions to absorb the students and continue growing the organisation. That was part of the strategic plan. The development process was aligned to the skills development for the national measurement and standard development sites that, at the end of their honours or PhD or master's studies, those students would spend time with the OEM (original equipment manufacturer to tune the equipment that was tailor-made to NMISA’s standards. Those became the national measurement standards. So, it was a comprehensive process that was governed by the NMISA board.

He added that the audits conducted annually, were not conducted by the AG, but they are by AG-appointed audit firms. In the past years, the auditors changed in line with the audit standards of the AG. Firms served from one to three years. It was certainly not an internal audit of the financial year.

The CEO stated that the use of posts was managed in a deliberate process of development because NMISA had to have a lot of foresight to ensure that it did not have waste, but a deliberate development aligned to the strategic plan that was supported by the human capital development plan, and the recapitalisation or the capitalisation of equipment. NMISA had a process that involved the infrastructure within which equipment was kept, the actual equipment itself, the personal skills, and the individuals that did the job.

Responding to the question about the key areas of the Act that NMISA would like to focus on, he said that the key focus of the Act was to provide stability to industry, from a national measurement standards perspective. The scientific standards developed, kept, and maintained by NMISA were disseminated to industry. So, the focus was on doing that, but with the priorities that the government had set, NMISA proposed that repost sharing of the apt in line with the current mandate, but we would like to have a review that focuses on a little bit more. I do not have the right word for it. But the use of the national metrology Institute by the SOA is to be something that gets included in the act, that the shared services can be provided directly to the SOPs. Some of the challenges we're facing with regards to that are situations with the likes of the saps where they would go on an open, tender for procurement of reference materials or something to that effect that goes out and they eventually get things that are not tailor-made for the South African environment when if this was regulated through the act, we wouldn't be able to foresee what their needs are and develop those needs within a national measurement Institute, then NMISA that then deals with their need in a more directed and specialised manner, which for us to go and start bidding for tenders and all that it takes us away from the core business but when there is a specific engagement that is focused on a specific item, we can deliver that so that's the area that we would like to see. Possibly reviewed and given attention. The second area that I want to highlight is just the close relationship with the legal metrology act and the implementation of legal metrology that is very key because the scientific capabilities that members have referred to need to be put at the disposal of legal metrology in a way that is not hindered by some of the approaches we are taking now. So what we have put forward and the submissions we've put forward is that of bringing the tool closer to one another, specifically, the implementation of the requirements for legal metrology from a scientific metrology perspective, because what we do eventually is we'll go get the ones that we regulate to be the ones that give us the measurements that support that regulation, it sort of creates, what in Excel coding that we do a lot would be a circular reference, um, where it doesn't create for efficient regulation from our point of view. But I think some of the submissions we have made, and we believe that they are being considered, as I say, it is done delay that the process takes that creates some challenges for us. I think. If there is more clarity is required on that, I would not be able to give more details. But moving on to the next question on the status of the recapitalisation. Um, as I have indicated in the presentation, the funding that we received was for conducting a recapitalisation and modernisation of equipment which we have done. And we continue to do and we are requesting that the funding be continued so that we can do that to keep abreast of the funding for the new building. That is the funding that we conducted a feasibility study that we went to the Treasury at the point of conclusion, and there was no funding that was available for the Triple P project that was proposed. And we are currently hoping that we can find different ways we started applying to infrastructure, in South Africa, to look at the infrastructure funding and see if we cannot get the funding through that channel. But it is a very critical need, that even as we are managing with the skills that we have, in the organisation to maintain at that internationally recognised level, we can see that it is not sustainable in the long term. We need to future-proof the organisation and the capability that the state has developed.

The Chairperson informed the CEO that he was running out of time and should wrap up. He could answer the questions that he had not managed to answer in writing.

The CEO noted the time. He would respond to Dr Tshwaku’s questions about what NMISA did as an entity and explain the process of naming the standards that NMISA developed in writing. The comments were appreciated, audits were external, not internal.

The Chairperson reminded the CEO to respond to the remaining questions in writing.

Presentation by SANAS
Ms Lindi Thlou, Acting Chairperson, SANAS, greeted the Committee.

Annual Report
Mr Tumelo Baleni, CEO, SANAS, presented a detailed report on the mandate and function of SANAS as well as the achievements per programme. During the 2021/22 financial year, SANAS had committed to 14 annual targets and had achieved 13 of those targets, equating to an overall performance of 93%. The shortfall was in the target relating to developing a new accreditation programme focused on Business Incubators
and Accelerators in collaboration with the Small Enterprise Development Agency (SEDA). SANAS had achieved all four planned quarterly targets, which included the development of Technical Requirements (Drafts 1, 2 and 3) as well as the sourcing of Technical Assessors by the end of Quarter 4 but there were inadequate measurements in place to confirm an achievement of 70% of the project. To resolve the problem going forward, SANAS included milestones in its project plan to determine the percentage progress.

SANAS had achieved an unqualified audit report for 2021/22 with no findings. Revenue had increased by 20.98% in 2022 due to the increase in assessments being conducted following the Covid-19 pandemic restrictions in the previous year. In addition, there were new applications received from Conformity Assessment Bodies (CABs), the number of which had grown by 4.6% to1987, exceeding the planned quarterly target of 1935. and had exceeded the Annual Performance Plan target. The surplus had increased because assessments were conducted remotely for almost 75% of the year, which had resulted in a substantial saving in travel and accommodation. Onsite assessments had resumed for the 2023 financial year. Employee-related costs had increased by 13%, largely due to the filling of vacancies, including the positions of the Chief Financial Officer and the Executive for Strategy and Development.

First Quarter Report
Mr Baleni stated that SANAS had achieved a 75% performance rate, missing out on the target of ensuring all eligible payments were processed timeously; obtaining a 72:28 ratio of SANAS income versus government grant; taking 13 working days to issue certificates and scopes of accreditation. That was disappointing and he acknowledged that the entity had to do better

However, SANAS had shown its metal in international engagements. In June 2022, SANAS hosted the World Accreditation Day, in partnership with the Southern African Development Community Accreditation Service (SADCAS) and Mauritius Accreditation Service. At the end of that month, SANAS participated in the 28th African Organisation for Standardisation (ARSO) General Assembly meetings in Cameroon. Also in June, SANAS hosted an Accreditation Information Session, “Farm to Fork” which focused on the role accreditation plays in food safety. SANAS also successfully hosted the virtual mid-year meetings of AFRAC, including the annual peer evaluator training session. SANAS successfully hosted the virtual annual meeting of SADCA, including the General Assembly during which SANAS was re-elected to host the Secretariat for a further 3-year period.

(See Presentation)

Discussion
Mr Mbuyane praised the report and the improved performance of the past financial year. His concern lay with the wasteful expenditure and he asked for clarity about that expenditure as well as the irregular expenditure that had been incurred. What was happening about the CEO position? Why was it not being filled? He asked whether SANAS had an education and awareness programme, especially in the rural provinces as he had not heard about that in the presentation.

Mr Thring noted that a report from StatsSA showed an underutilisation of 20% in the production industry. What role, if any, did SANAS have in reducing the underutilisation of manufacturing production in the country?

Mr Baleni referred Mr Mbuyane to the slide on the education and awareness programme, although he agreed that more could be done. SANAS was focussing on communicating via community radio in specific areas that the entity had identified. Plan. It was critical that SANAS continuously promoted the value of accreditation and created awareness of the SANAS brand, while also focusing on customer growth and retention. However, he stated that SANAS had to be aware of its mandate and awareness and education were not its core mandate.

In 2021/22, there had been no irregular expenditure.

He responded to Mr Thring’s concern. The specific focus of SANAS was to support the local manufacturing of medical supplies. Accreditation was important because it attained a higher level of trust.

Ms Nadine Thomas, CFO, SANAS, explained that the fruitless and wasteful expenditure was from prior years and had been confirmed in the year under review. The irregular expenditure was a result of irregular contracts from prior years. An application had been made for

In response to Mr Thring’s question, Mr Mpho Phaloane, Executive for Accreditation, SANAS, did not know about the underutilisation the report was talking about. As the CEO said, SANAS focused on assisting manufacturing and industry but there were many reasons why manufacturing capability might be under-utilised from the poor market and lack of skilled staff. He needed more information to give a specific response concerning the role of SANAS.

Ms Thlou assured the Committee that the process of appointing a CEO was in process.

The Chairperson requested that matters of irregular expenditure be resolved before the next financial report.

Closing Remarks
The Committee Secretary informed Members that the following meeting would be on Tuesday 22 November 2022: Briefing by the Free State Department of Economic, Small Business Development, Tourism and Environmental Affairs on the status of implementing the Maluti-A-Phofung SEZ; Briefing by the Free State Economic Development Agency on the status of the Botshabelo and Phuthaditjhaba Industrial Parks. The agenda for Wednesday, 23 November 2022 was as follows: Briefing by the NCC on its 2021/22 Annual report and its 2022/23 first quarter performance.

The Chairperson thanked SANAS and the Members.

The meeting was adjourned.