2. Budgetary Review and Recommendation Report of the Portfolio Committee on Trade and Industry, dated 17 October 2018

The Portfolio Committee on Trade and Industry, having assessed the service delivery performance of the Department of Trade and Industry (DTI), against its mandate and allocated resources, in particular the financial resources for the period 1 April 2017 to 30 June 2018, reports as follows:

  1. Introduction

This Budgetary Review and Recommendation (BRR) Report is the final report in this Fifth Term of Parliament. It therefore offers the Portfolio Committee on Trade and Industry the opportunity to contextualize this report from the first year of this Term. The DTI is critical in creating an enabling, inclusive and competitive environment that attracts investment and promotes trade thereby contributing positively to economic growth and employment creation. Over the past four years, the Committee’s assessment of the DTI focused on measures/interventions that the DTI had put in place to create that enabling environment particularly trade promotion, investment incentives, broad-based black economic empowerment interventions such as support for black industrialists, the development of special economic zones and the revitalisation of industrial parks. 

Over the past four years, the DTI has allocated over 70 percent of its budget to incentives aimed at broadening participation, promoting manufacturing, creating competitiveness, and promoting investment in critical infrastructure. These incentives include the Black Industrialist Scheme, Automotive Investment Scheme, Manufacturing Investment Programme, Agro-Processing Support Scheme, Manufacturing Competitiveness Enhancement Programme, Special Economic Zones (SEZs) Fund, and Critical Infrastructure Programme among others. These are the incentives that the DTI has used to leverage investment into the country. Particularly in the 2017/18 financial year, the DTI secured investment worth R84,4 billion that will contribute to job creation in the country. In this, regard the DTI exceeded its target of R40 billion.  

The sharp thrust of incentives, which were allocated 73 percent of the budget in the 2017/18 financial year, continues to impact positively on stimulating private sector investment especially in manufacturing and agro-processing. This enhances the national transformation imperatives to create an inclusive economy. Black Industrialists have had access to the incentives, which addresses the supply side challenges. However, there is a need for a greater focus on access to markets, as well as on opportunities to supply locally produced goods to the public sector. This would underpin localisation aligned to the designation policy. The Special Economic Zones roll-out continued to provide much needed impetus to driving a productively, inclusive economy.

During this period, strengthened parliamentary oversight has contributed immensely to the improved performance of many entities reporting to the DTI. Where weaknesses have been identified, they have been promptly addressed. The decisive intervention made by the DTI to address the lapse in testing protocols reported on with respect to the South African Bureau of Standards (SABS) is an attempt to restore the Bureau’s credibility. The significant reduction of backlogs in processing Letters of Authority (LOAs) in the National Regulator for Compulsory Specifications (NRCS) is welcome. However, the Committee would like to see more progress in terms of its Information and Communnication Technology (ICT) system, which underpins the risk-based approach to accelerating the processing of LOAs without compromising the health and safety of South Africans.

Given the commitment to good governance and the mandate of creating an enabling environment for job creation, the DTI’s endeavours in integrating the technical evolution in ICT should continue but on a higher trajectory.

Given the fiscal constraints, the Committee is of the opinion that the allocation of resources could be factored in to the second or third year of the Medium-Term Expenditure Framework to address aging infrastructure of the National Metrology Institute of South Africa (NMISA), additional or upgraded testing equipment required by the SABS and the development of the ICT system by NRCS.

  1. Mandate of the Committee

Section 5 of the Money Bills Amendment Procedure and Related Matters Act (No. 9 of 2009) requires the National Assembly, through its committees, to annually assess the performance of each national department over an 18-month period. A committee must submit a report of this assessment known as a BRR Report. The overarching purpose of the BRR Report is for the committee to make recommendations on the forward use of resources to address the implementation of policy priorities and services, as the relevant department may require additional, reduced or re-configured resources to achieve these priorities and services. This Act gives effect to Parliament’s constitutional powers to amend the budget in line with the fiscal framework.

The BRR Report process enables the Committee to exercise its legislative responsibility to ensure that the DTI and its entities are adequately funded to fulfil their respective mandates. However, as the Budget Office is still in the process of becoming fully functional, the Committee was unable to exercise its full powers on providing detailed budgetary recommendations. The Committee looks forward to a fully operational Budget Office, which will substantively contribute to the budgetary support it requires to undertake this process.

  1. Purpose of the BRR Report

The purpose of this report is to analyse the financial and non-financial performance of the DTI, and its identified entities, against predetermined objectives to inform recommendations for their forward-looking budgets. This report assesses performance for the 2017/18 financial year, and the first three months of the 2018/19 financial year, namely from 1 April 2017 to 30 June 2018 within the context of the three-year Medium Term Expenditure Framework.

  1. Method

The Committee met with the Office of the Auditor-General (AG) on 13 September 2018 to discuss its mandate in relation to the work of the DTI and its entities, as well as the audit outcomes for the 2017/18 financial year. The Committee was also briefed by the DTI on its 2017/18 annual report and its performance for the first quarter of the 2018/19 financial year on 13 September 2018.

The DTI has 14 entities and all entities should be robustly reviewed and engaged with on their financial and non-financial performance. Notwithstanding this, the Committee only considered the performance of the NRCS. This was due to the Committee’s very tight programme in which many Bills had to be considered, therefore the Committee was unable to consider any other entities at this stage. The NRCS was selected due to the negative audit outcomes it had received on an ongoing basis over the past four financial years. On 12 September 2018 the Committee held a meeting with the NRCS to engage on its 2017/18 Annual Reports and its performance for the first quarter of the 2018/19 financial year.

  1. Limitations of the Report

One of the key limitations of this report is that only the DTI and one of its entities’ annual reports and quarterly spending trends were considered for the 15-month period. Therefore, there was a reliance on the DTI and the AG to highlight challenges experienced by the other 13 entities. Six entities, namely the Companies and Intellectual Property Commission (CIPC), the National Consumer Tribunal (NCT), the National Gambling Board (NGB), the Companies Tribunal (CT), the National Consumer Commission (NCC) and the National Credit Regulator (NCR), had received unqualified audit opinions from the Office of the Auditor-General. Furthermore, the Export Credit Insurance Corporation of South Africa (ECIC) received an unqualified audit opinion with findings of a technical nature, while the NRCS received a qualified audit opinion.[1] The Office of the Auditor-General also reported that two of the auditee’s outcomes were still pending, namely for the National Lotteries Commission (NLC) and the SABS, and were likely to contain findings. It should be noted that the National Empowerment Fund (NEF), the NMISA and the South African National Accreditation System (SANAS) are audited by external auditors.

In addition, the BRR Report is intended to cover an 18-month period including the previous financial year’s annual report and the first six months of the current financial year. Due to the timing of the BRR Report, second quarter financial and non-financial information were not available. The key challenge was that the DTI and its entities were still in the process of compiling the preliminary performance information, which must be submitted to the Department of Planning, Monitoring and Evaluation and the National Treasury by the end of October. The verified information would only be available in January of the following year. Therefore, the report has only captured performance up to the first quarter of the 2018/19 financial year.

  1. Outline of the contents of the report

This BRR Report consists of the introduction (Section 1) and three parts. Section 1 briefly provides an overview of the DTI’s core functions, the mandate of the Committee, the purpose of this report and the method followed in preparing this report, as well as the limitations of the report.

Part A focuses on the assessment of the DTI for the period under review. It contains three sections. Section 2 sets out the key policy focus areas for the DTI. This includes an overview of the DTI’s strategic objectives, outcome-orientated goals and key measurable objectives. Section 3 provides a summary of the key financial and non-financial performance recommendations of the Committee as captured in its previous BRR Report and its 2017/18 Budget Report, as well as the progress made in terms of these. Section 4 assesses the DTI’s financial and non-financial performance against its vote allocation from 1 April 2017 to 30 June 2018. This covers the DTI’s service delivery, and its 2017/18 budget vote allocation against the actual expenditure for the period ending 31 March 2018, as well as the audit findings. This is followed by a comparison of the DTI’s budgeted and actual expenditure as at 30 June 2018. This section also outlines key issues raised by the Committee during deliberations with the DTI.

Part B considers the financial and non-financial performance of the NRCS for this BRR reporting period in terms of its mandates and strategic objectives. In addition, its financial and non-financial performance and its additional forward-looking budgetary and/or performance requirements are assessed. This is covered in Section 5.

Part C consists of Sections 6 to 8. Section 6 provides the Committee’s concluding remarks followed by a note of appreciation in Section 7. The report then closes with the Committee’s recommendations for the National Assembly’s approval in Section 8.


  1. Overview of the key relevant policy focus areas
  2. Strategic Objectives

The DTI’s strategic objectives, which guide its work,  and are as follows:

  • Promoting a professional, ethical, dynamic, competitive and customer-focused working environment that ensures effective and efficient service delivery.
  • Building mutually beneficial regional and global relations to advance South Africa’s trade, industrial policy and economic development objectives.
  • Facilitating broad-based economic participation through targeted interventions to achieve more inclusive growth.
  • Facilitating transformation of the economy to promote industrial development, investment, competitiveness and employment creation.
  • Creating a fair regulatory environment that enables investment, trade and enterprise development in an equitable and socially responsible manner.

In terms of its core functions, the DTI is responsible for overseeing 14 entities and administering 42 Acts[2]. These entities can be divided into three categories according to the type of work they perform, namely the financial agencies, the regulatory agencies, and the technical institutions (see table 1).

In addition to overseeing the DTI, the Committee oversees these entities, as a number of the DTI’s strategic objectives are implemented through these entities.

Table 1: List of entities reporting to the DTI






  • Export Credit Insurance Corporation of South Africa
  • National Empowerment Fund
  • Broad-based Black Economic Empowerment (B-BBEE) Commission[3]
  • Company and Intellectual Property Commission
  • Companies Tribunal
  • National Consumer Commission
  • National Credit Regulator
  • National Consumer Tribunal
  •  National Gambling Board of South Africa
  • National Lotteries Commission


  • National Metrology Institute of South Africa
  • National Regulator for Compulsory Specifications
  • South African Bureau of Standards  
  • South African National Accreditation System






  1. 2017/18 BRRR recommendations

“The Committee recommended that the Minister should consider:


3.1.1.Establishing a monitoring mechanism, in consultation with the Minister of Finance, and other relevant Ministers, to ensure compliance with local designations and implementing appropriate sanctions for non-compliance.

3.1.2.Strengthening the oversight on the implementation of the audit plans and key control measures of the Department and its entities.

3.1.3.Additional funding for the SABS in the outer of years of the Medium Term Expenditure Framework to upgrade critical ageing technical infrastructure”.[4]

With respect to progress made on these recommendations’ the DTI reported that in terms of the monitoring mechanism to ensure compliance with local procurement, the DTI had had regular meetings with the National Treasury to discuss matters related to the development of local content policy the issuing and amendment of instruction notes, as well as on specific tenders designated for local production. In procuring products designated for local production, organs of state are compelled by law to source such products locally at a prescribed level of local content. Failure to comply would be transgressing Regulation 14 of the 2017 Preferential Procurement Regulations which requires compliance on local production and content. The AG has commenced auditing expenditure on tenders designated for local production and audit opinions are being issued on this matter. From March 2015 to April 2018, almost R63,3 billion has been locked into the country as a result of local content requirements.

Furthermore, the DTI acknowledged the role played by Proudly South African (PSA) which has put in place a tender monitoring system to ensure compliance of designated tenders with local content requirements. Where there are lapses,  PSA informs the DTI. The DTI intervenes by asking procuring entities to either retract or amend the tender in line with local content requirements. The National Treasury and the AG are also notified of the DTI's action or correspondence. If the tender complies,  PSA shares procurement opportunities with its members to bid for tenders.

In terms of the DTI’s oversight of the entities’ audit plans and key control measures, the DTI reported that the entities that had audit findings in the previous financial year were required to develop clean audit plans. These plans are presented to the entities’ audit committees and then tabled at the DTI’s Chief Audit Executive Forum quarterly. DTI representatives are also appointed to sit on some of the entities’ audit committees, as deemed necessary.

With regard to the additional funding for the SABS, a request for additional funding was made to the National Treasury. However, due to the current fiscal constraints, this was not approved by the National Treasury. In the current financial year, the DTI has reprioritised R100 million from its own budget to the SABS as part of the adjustment budget process. This will enable SABS to upgrade some of its aging infrastructure.

  1. 2018/19 Committee Budget Report

“The Committee recommended that the Minister should consider:

3.2.1.Engaging with other Ministers to ensure the adoption of a coordinated approach to overcome the impediments that have arisen with respect to tenders related to designated products and sectors being awarded but not followed through with the related orders.

3.2.2.Engaging with the Auditor-General to ensure the finalisation of the audit outcomes by the Auditor-General for local public procurement.

3.2.3.Additional funding for the Manufacturing Competitive Enhancement Programme and the tabling of a long-term plan in the current financial year.

3.2.4.Finalising the South African Automotive Master Plan and the Automotive Industrial Development Plan.

3.2.5.Capitalising on the positive business environment to accelerate the productive investment initiatives and promoting increased competitiveness particularly in South Africa’s comparative advantages.

3.2.6.Amending the Broad-Based Black Economic Empowerment legislation to ensure that the Broad-Based Black Economic Empowerment Commission is able to effectively monitor and enforce the provisions of the Act.

3.2.7.Strengthening public-private partnerships as well as developing constructive social compacts with civil society so that the country sustains its economic development”.[5]


This section provides a comparison between what the DTI targeted in its Annual Performance Plan (APP) against the Annual Report for the 2017/18 financial year, as well as the first quarter of the 2018/19 financial year. Furthermore, it outlines other areas of performance, mainly internal administrative areas that the DTI is required to report on. It then provides an overview of the AG’s audit outcomes. Lastly, it highlights the key issues raised during the Committee’s deliberations.

  1. Overview and Assessment of the Department’s Financial and Non-financial Performance for the 2017/18 Financial Year[6]
  2. Non-Financial Performance

For the 2017/18 financial year, the DTI had 25 performance targets as outlined in its APP. Of the 25 targets, 22 targets were achieved while three were not achieved. This translates to 88 percent achievement of targets. The table below provides a breakdown of achievement of targets by programme and an overview of the targets that were not met.

Table 2: Performance by Programme


Performance Indicators/Targets


Targets Achieved/ Exceeded

Targets NOT achieved


Achieved: 5

Not achieved: 1

  • The percentage of staff turnover was 3,8% against a target of 6,8%.
  • Percentage of people with disability employed was 3,6% against a target of 3,5%.
  • Percentage of women employed in senior management was 51% against a target of 50%.
  • All creditors were paid within 30 days as planned.
  • 54 Outreach exhibitions were done against a target of 49.
  • 63 outreach engagements were undertaken against a target of 65. This was as a result of events that were postponed due to unforeseen circumstances.

International Trade and Economic Development

Achieved: 3

  • 2 status reports on progress for the T-FTA[7] and CFTA[8] negotiations were produced as planned.
  • 2 status reports on progress of implementation of the SADC-EU EPA[9] were produced as planned.
  • 14 status reports were produced on engagements with Global Fora. This target was exceeded by 10 reports.


Special Economic Zones and Economic Transformation

Achieved: 4

  • 116 interventions to support Black Industrialists in the IPAP[10] Sectors, 50 of the interventions were financial and 66 were non-financial. This target was exceeded by 46 interventions.
  • 2 SEZs submitted to Minister for designation as per the target.
  • 2 implementation reports on the Industrial Parks submitted to Minister as planned.
  • 2 reports on implementation of the B-BBEE Amendment Act and Regulations submitted to the Minister as planned.


Industrial Development

Achieved: 3

  • The Annual Rolling IPAP 2018/19 submitted to Minister for tabling in Cabinet by March 2018 as planned.
  • 4 implementation reports on IPAP tabled at Minister’s Review Meetings held on 10 April 2017, 15 September 2017 (Quarter 1 and 2 were tabled) and 26 March 2018 (Quarter 3 and 4 were tabled).
  • 4 designation requests prepared for Minister i.e. Pumps and Medium Voltage (MV) Motors; and Industrial Lead Acid Batteries. Rail Permanent Way sector Pipe Fittings and Specials were prepared.


Consumer and Corporate Regulation

Achieved: 2

Not achieved: 1

  • 3 SEIAS[11] reports on Gambling, Liquor and Credit Amendment Acts developed for Minister’s approval as planned.
  • 28 education and awareness workshops on policies and legislation conducted and report produced for Minister’s approval, this was against a target of 24.
  • 5 Amendment Bills on the Gambling, Liquor, Credit, Copyright and Performers’ Protection Acts were not developed for the Minister’s approval.[12] This was due to the:
  • Liquor and Gambling Amendment Bills being redrafted to address constitutional issues.
  • Credit[13], Copyright and Performers’ Protection Amendment Bills are still being processed by Parliament.

Incentive Development and Administration

Achieved: 4

  • R36,8 billion investments were leveraged from approved projects/enterprises against a target of R15 billion. This is 145% more than the target.
  • 15 401 new jobs were supported from approved enterprises against a target of 3 000. This target was exceeded by 12 401 new jobs.
  • 28 209 jobs were retained from approved enterprises against a target of 3 000. This target was exceeded by 25 209 retained jobs.
  • 848 enterprises/projects approved for financial support across all incentives against a target of 800.


Trade Export South Africa

Achieved: 1

Not achieved: 1

  • R1,1 trillion facilitated export sales against a target of R3,75 billion.
  • 656 companies assisted under the EMIA[14] Scheme in supporting value-added exports against a target of 784. This performance was 16% less than the target.

Investment South Africa

Achieved: 1

  • R84,4 billion investment pipeline secured against a target of R45 billion. Exceeding the target by R39,4 billion.


Source: DTI (2018a)

  1. Financial Performance

The DTI’s budget/appropriation was R9,3 billion for the 2017/18 financial year, of which R9,2 billion or 99 per cent was spent. Total underspending for the financial year amounted to R94,9 million (1 per cent) of the total budget. The DTI’s actual spending by programme against the budget for the financial year is depicted in the table below. Mostly, the programmes’ expenditure aligned with the budget except for underspending in the Administration (R37,2 million), the Special Economic Zones and Economic Transformation (R13,2 million), and the Investment South Africa (R3,6 million) Programmes.

Table 3: Financial Performance by Programme

Programme name


Actual expenditure



Appropriation (R’000)

Final appropriation (R’000)

Actual expenditure (R’000)

Under expenditure (%)


699 139

814 571

809 902

772 696


International Trade and Economic Development

116 024

119 818

121 135

121 121


Special Economic Zones and Economic Transformation

97 589

118 410

108 937

95 699


Industrial Development

1 722 245

1 819 277

1 842 932

1 838 839


Consumer and Corporate Regulation

295 381

298 629

298 782

298 706


Incentive Development and Administration

6 895 186

5 674 419

5 636 659

5 600 528


Trade Export South Africa

454 588

425 204

456 696

456 154


Investment South Africa

69 244

72 859

68 144

64 505



10 349 396

9 343 187

9 343 187

9 248 248


Source: DTI (2018a)


The DTI reported that the under-expenditure of approximately 5 percent in the Administration Programme was as a result of delays in the finalisation of  the procurement of  ICT related goods and services through the State Information Technology Agency (SITA). In Programme 3, the Special Economic Zones and Economic Transformation, recorded a variance of 12,1 percent, the under-expenditure was as a result of the B-BBEE Commission’s set-up related processes that had not yet been finalised. In Programme 8, Investment South Africa, the under-expenditure of 5,3 percent resulted from the setting-up processes of provincial One-Stop Shops that had not been finalised by the end of the financial year.


  1. Expenditure by Category

Most of the budget, approximately R7,6 billion (82,6 percent of the budget), goes to transfers and subsidies, while R1,6 billion (17,4 percent of the budget) remains for the DTI’s operations. The operational expenditure consists of compensation of employees; payment of goods and services; payments for capital assets; and payments for financial assets. The figure below depicts the DTI’s expenditure by category.


























Figure 1: Expenditure by category in the 2017/18 financial year

Source: DTI (2018a)


The compensation of employees portion of the budget is mainly the salaries paid to the DTI’s employees, including the salaries paid to “locally recruited personnel” who are employed in foreign offices to assist with the trade and investment mandate. The DTI reported that the average number of employees had reduced from 1 483 in the 2015/16 financial year to 1 335 in the 2017/18 financial year. This is mainly due to the moratorium placed on the cost of employees’ budget.


  1. Transfers to DTI entities

The work of the DTI extends through the entities that it oversees. During the 2017/18 financial year, 14 entities reported to the DTI. Of the 14 entities, three are fully self-funded, namely the CIPC, the NEF and the NLC. Compared to the previous financial year, transfers to the ECIC, the NCR, the NRCS, the SABS, and the SANAS increased, while there were decreases in transfers to the NCC and the NMISA. The B-BBEE Commission is currently funded directly from the DTI’s budget, as they are not yet listed.


For the 2015/16, 2016/17 and 2017/18 financial years, transfers to the DTI’s entities were as follows:



Table 4: Transfers to Entities

Name of public entity

Amount transferred (R’000)




Companies and Intellectual Property (CIPC)




Companies Tribunal (CT)

14 221

15 069

15 822

Export Credit Insurance Corporation of South Africa (ECIC)

199 969

171 566

188 272

National Consumer Commission (NCC)

54 596

56 643

52 614

National Credit Regulator (NCR)

66 727

69 577

73 056

National Consumer Tribunal (NCT)

46 029

46 151

48 459

National Empowerment Fund (NEF)




National Gambling Board (NGB)

31 983

30 121

31 627

National Lotteries Commission (NLC)




National Metrology Institute of South Africa (NMISA)

250 895

264 193

252 803

National Regulator for Compulsory Specification (NRCS)

91 732

86 418

128 745

South African Bureau of Standards (SABS)

217 752

212 361

302 494

South African National Accreditation System (SANAS)

26 025

22 208

30 313


999 929

974 307

1 124 205

Source: DTI (2018a)


The DTI highlighted that the capital budget appropriated for NMISA since 2013 formed part of the Economic Competitiveness Support Package that ended on the 31 March 2018. However, the DTI would continue to support NMISA with a capital budget beyond 31 March 2018 for purposes of procuring their own building.


  1. Audit Outcomes

The Office of the Auditor-General (AG) annually conducts an audit assessment of the DTI’s financial and non-financial performance reporting. In terms of non-financial performance, the following programmes were assessed to determine whether their reported performance information was useful and reliable:


  • Programme 2: International Trade and Economic Development,
  • Programme 3: Special economic Zones and Economic Transformation,
  • Programme 6: Incentive Development and Administration, and
  • Programme 7: Trade Investment South Africa


The outcome of this assessment was that the AG “did not identify any material findings on the usefulness and reliability of the selected programmes”[15].


In terms of the DTI’s financial reporting, the AG noted that the DTI had obtained a clean audit report. However, the AG noted that the DTI had a material impairment amounting to R32,5 million due to the potential loss of irrecoverable receivables. The DTI clarified that this impairment amount is a required accounting treatment. The DTI’s impairment policy allows for impairment of debt that is outstanding for over a year and/or has been referred to the state attorney. Therefore, debt that is impaired is not an actual loss but forms part of the impairment provision should it meet one of the criteria above.


The DTI further explained that the majority of debt relates to incentive debts which arose prior to 2015. This was due to applicants misrepresenting themselves when claiming. The DTI has over the years strengthened and implemented additional controls to reduce the occurrence of fraudulent or misrepresented claims. The remainder of debtors in the provision relate to officials who left the employ of the DTI but have debt relating to bursaries, leave without pay, and salary overpayments. The DTI assured the Committee that it was still actively pursuing these debtors. Only when recovery of these debts becomes remote or unlikely or costly, then these amounts will be written off.


  1. Financial and non-financial performance as at 30 June 2018


  1. Non-financial Performance

The DTI had 18 targets for the first quarter of the 2018/19 financial year and achieved all of its targets. A description of these targets per programme are provided below:


Table 5: Performance targets by programme


Performance Indicators/Targets





  • The percentage of staff turnover was 0,9% against a target of 1,7%.
  • Percentage of employed people with disabilities was 3,6% against a target of 3,4%.
  • Percentage of women employed by the Department in senior management was 52% against a target of 49%.
  • All creditors were paid within 30 days as planned. This target was exceeded because 65% of the creditors were paid within 15 days.

International Trade and Economic Development


  • 4 status reports were produced on engagements at Global Fora namely, a report on the BRICS[16] engagement, a report on the United Kingdom (Brexit) engagements, a report on the G20 engagements and a report on the AGOA[17] engagements. This target was exceeded by 3 reports, the target for the quarter was 1.

Special Economic Zones and Economic Transformation


  • 20 interventions to support Black Industrialists (non-financial support) in the IPAP Sectors against a target of 19.

Industrial Development


  • The Annual Rolling IPAP 2018/19 was launched as planned.
  • 1 implementation report on IPAP was prepared for the Minister’s Review Meetings. This report was prepared ahead of time, in the 4th quarter of the 2017/18 financial year.

Consumer and Corporate Regulation


  • A SEIAS report on the Companies Amendment Act was developed for Minister’s approval was achieved.
  • 1 progress report on the development of the Gambling, Liquor, Credit, Performers’ Protection, and Copyright Amendment Bills was developed as planned for the quarter.
  • 6 education and awareness workshops on policies and legislation conducted and report produced for Minister’s approval.

Incentive Development and Administration


  • R3,1 billion investments were leveraged from approved projects/enterprises against a target of R2 billion. Approved projects include projects in the Black Industrialists Programme, Automotive Investment Scheme, and the Film and Television incentives. This target was exceeded by 55%.
  • 2 161 new jobs were supported from approved projects against a target of 2 000. This target was exceeded by 161 new jobs.
  • 8 085 jobs were retained from approved enterprises against a target of 4 000 jobs. This target was exceeded by 4 085 retained jobs.
  • 178 enterprises/projects approved for financial support in EMIA and SSAS[18] against a target of 150.

Trade Investment South Africa


  • R2,1 billion facilitated export sales against a target of R750 million.
  • Assisted 284 companies under the EMIA against a target of 205.

Investment South Africa


  • R27,5 billion investment pipeline secured against a target of R12 billion. Exceeding the target by R15,5 billion.

Source: DTI (2018b)


  1. Financial Performance

The DTI’s budget for the 2018/19 financial year is R9,5 billion. In the first quarter, the DTI fell short of its projected expenditure by 18,8 percent. It had projected spending of R2,1 billion; however, it only spent R1,7 billion for the first quarter.


Table 6: Budget and Expenditure for the first quarter of the 2018/19 financial year


Budget 2018/19 (R’000)


Budget available (%)

Budget (R'000)

Expenditure (R'000)

Variance (%)


760 643

185 140

176 998



International Trade and Economic Development

124 936

24 100

22 953



Special Economic Zones and Economic Transformation

165 412

61 641

24 292



Industrial Development

1 622 568

585 307

640 572



Consumer and Corporate Regulation

314 588

155 495

154 690



Incentive Development and Administration

6 009 016

859 562

470 366



Trade Export South Africa

411 602

239 423

227 228



Investment South Africa

53 846

13 669

11 535




9 462 611

2 124 337

1 728 634



Source: DTI (2018b)


Underspending totalled R395,7 million. At a programme level, there was underspending across all programmes ranging between 4 percent and 61 percent with the exception of the Industrial Development Programme in which there was overspending of R55 265 (9,4 percent).


The DTI attributed most of its under-spending to non-compliant claims received on the incentive programmes. Successful applicants agree on a set of conditions that must be met before a claim can be submitted and paid. These conditions may include the number of jobs to be created. Therefore, a claim would be deemed to be non-compliant where these conditions are not met. The other reason for under-spending was the delay in the listing of the B-BBEE Commission which had not yet been finalised.


  1. Expenditure by economic classification

The DTI’s budget in terms of the economic classification mainly goes towards transfer payments and subsidies[19]. Transfer payments in the first quarter of the financial year amounted to R1,7 billion. The second largest expenditure item was compensation to employees at R213,9 million followed by the payments of goods and services at R140,8 million. Transfers and subsidies were 20,7 percent less than budgeted and the compensation of employees was 10,5 percent less than budgeted for the quarter. This is usually the case for the first quarter, expenditure for the DTI usually gains momentum in the second quarter of each year. Furthermore, the underspending in the compensation of employees is as a result of vacant funded positions that have not yet been filled.


Table 7: Budget and Expenditure by Economic Classification as at 30 June 2018

Economic classification

Year-to-date (YTD)

Cash flow projections (R’000)

Expenditure (R’000)

Variance (R’000)

Variance (%)

Compensation of employees

289 081

213 995

25 086


Goods and services

153 095

140 844

12 251


Payment for capital assets





Transfers & subsidies

1 732 161

1 732 696

358 696



2 124 337

1 615 341

572 052

26 2

Source: DTI (2018b)


  1. Issues raised during the deliberations

The following concerns were raised in relation to the performance of the DTI during the Committee’s deliberations:


4.3.1.The economic impact of incentives on the economy: The Committee welcomed the financial support provided by the DTI to qualifying companies in various sectors of the economy and acknowledged that the impact of this support is also influenced by other economic players. Notwithstanding this, the Committee enquired what the economic impact of these incentives had been, particularly in relation to job creation. Furthermore, the Committee requested that the DTI should clearly state in any future reports the economic impact in terms of return on investment, and the number of jobs created, as well as the successes and failures associated with incentives. The DTI acknowledged the importance of assessing the economic impact of incentives and that the next administration should be aware of the challenges and impact of incentives. Furthermore, the Committee acknowledged the contribution of incentives in the broader economy but raised concerns about the absence of a long-term view. The DTI informed the Committee that it would welcome a long-term view on incentives. Currently, the DTI is finalising the South African Automotive Masterplan which will be operational until 2035.


4.3.2.   The status of mineral beneficiation in South Africa: The Minerals Beneficiation Strategy provides a framework that seeks to translate the country’s comparative advantage of its mineral resource endowment to a national competitive advantage. The strategy is aligned to the national industrialisation programme, which seeks to promote the creation of decent employment; to diversify the economy, including the promotion of the green economy; and to enhance the diversity, value, volume and quality of export products. Further, the strategy will contribute towards strengthening the knowledge economy to support the overall competitiveness of the economy. Although South Africa has achieved the first three stages of upstream beneficiation; it failed to move to stage four, downstream beneficiation. This is as a result of the structure of the economy, the anti-competitive behaviour of monopoly firms, high cost structures, and the failure to attract sufficient public and private investment in manufacturing industries. The DTI informed the Committee that because of the low levels of demand in our economy it was not always economically viable to beneficiate. None of the African markets are big enough to industrialise and beneficiate their mineral resources on their own. One of the key drivers of demand is the domestic per capita income level, as well as government expenditure. South Africa is faced with the majority of its population being excluded from the formal economy; high unemployment, low demand for locally produced products; and business still trying to supress wage levels, which according to the DTI does not bode well for economic growth. A high aggregate demand would drive aggregate supply and thus industrialisation.


4.3.3.   The role of the DTI in dealing with the technical recession: The Committee raised its concern with regard to the announcement that South Africa had officially entered a “technical recession”. The DTI is a key role player in the promotion of structural transformation and the provision of a predictable, competitive, equitable and socially responsible environment, conducive to investment, trade and enterprise development, and broadening participation in the economy among others. Given the DTI’s mandate, the Committee enquired whether the DTI would be developing and implementing any measure that would mitigate the recession. Subsequent to this meeting, the President announced the Economic Stimulus and Recovery Plan[20], which outlined measures to address challenges facing the economy to stimulate growth and job creation, as well as restore investor confidence. These measures included the use of trade measures within World Trade Organisation (WTO) rules to protect poultry and other sensitive sectors, addressing administrative costs, re-prioritising funding towards investments in revitalising industrial parks in townships and rural areas, and infrastructure expansion and maintenance.


4.3.4.   Localisation as an instrument to increase demand: The Committee supports localisation as a policy tool for industrial development which would assist in growing the economy and the manufacturing sector. However, government agencies/state owned entities are not buying locally manufactured goods where available. The Committee was of the view that this could have been a contributing factor to the current contraction in the economy. The Committee enquired what measures the DTI could implement to ensure compliance with local public procurement requirements. The DTI informed the Committee that the main driver of demand for imported products is from the retail sector. Currently, no legal instruments exist that would compel retailers (and the private sector generally) to purchase locally. The current economic conditions present an opportune time for an accord with the retail sector as our retailers are facing increased competition from international retailers. The DTI informed the Committee that they would be meeting with the Chief Executive Officers (CEO) of the retail sector to attain an accord for them to buy locally. This was discussed with organised business duing Phase 1 of the Job Summit negotiations and will be deliberated on further during Phase 2.


4.3.5.   Slow progress with supplier development: The Committee noted the slow progress in supplier development. Developing local manufacturers would localise manufacturing in the supply value chain that would enable them to supply components to larger, international manufacturers. If effectively implemented, it would have assist the emergence of small-scale black businesses into the market.


4.3.6.   The status of the AGOA: The Committee acknowledged the importance of AGOA in building a strong and growing mutually beneficial trade and investment relationship between South Africa and the United States (US). This legislation enabled South Africa to increase exports of value-added products to the US, thereby contributing positively toward its national imperatives to boost industrialisation and create jobs. The Committee expressed its concerns around current threats associated with South Africa’s continued free trade access to many markets in the US.


One of the threats was that the South African Poultry Association (SAPA) and the South African Pork Producers Organisation (SAPPO) were appealing the lifting of the health restrictions on imported US poultry and pork. If successful, could trigger another challenge to South Africa’s continued participation in AGOA. The Committee enquired whether the DTI was opposing the appeal of SAPA and SAPPO as a “friend of the court”. The DTI informed the Committee that the poultry industry had gone to court to set aside the decision to lift the 15 year-old anti-dumping duties for a quota of 65 000 tonnes of chicken parts a year and also to lift health restrictions which continued to block poultry, pork and beef imports.  If successful, it would have dire consequences for the economy, as the DTI was of the view that in order to extend AGOA and its benefits for another 10 years it had to make some compromises. The DTI informed the Committee that they had clearly expressed to their US counterparts that South Africa presented no threat and that South Africa would be worse off without AGOA. In respect of the court case, the Committee welcomed the DTI’s decision to provide the relevant information to the Court which highlighted the fine balance South Africa needed to achieve to remain part of AGOA. Another concern for the Committee was the impact of the proposed 25 percent tariff on steel and aluminum products and its potential impact on the South African auto sector.


In addition, Section 104(a)(1)(A) of AGOA required sub-Saharan African countries to commit to the protection of property rights. The Committee enquired that given the current discourse with respect to land reform, how the DTI was providing the necessary assurance to the US that South Africa did comply with AGOA. The DTI informed the Committee that as a result of the Protection of Investment Act (No. 22 of 2015), there is a 100 percent commitment that there would be no expropriation of any industrial investment.


4.3.7.   The benefits derived by South Africa from being part of the BRICS group: The Committee enquired what benefits were derived from South Africa’s membership of BRICS and whether this had contributed to achieving its economic aims of reducing poverty, unemployment and equality. The DTI informed the Committee that South Africa’s continued partnership with BRICS countries is critical for growth as our domestic demand is low. It provides additional markets for South African exports with Russia becoming the biggest market for South African citrus produce. Furthermore, new investments from the Republic of India and the People’s Republic of China in the automotive sector are as a direct result of South Africa’s membership.


4.3.8.   Status of Bilateral Investment Treaties: The Committee noted that an agreement had been reached with China to terminate the Bilateral Investment Treaty. The Committee enquired what the implications on future trade deals with China would be and when a new agreement would be finalised. The DTI responded that South Africa was in negotiations with China on a new model Bilateral Investment Treaty that is aligned to the Protection of Investment Act.


4.3.9.   The progress made in terms of the closure of facilities as a result of the listeriosis crisis: The DTI informed the Committee that when the outbreak of listeriosis was discovered and traced back to Tiger Brands and Rainbow Chicken Limited (RCL), the NCC, in terms of section 60(2) of the Consumer Protection Act (No. 68 of 2008), immediately issued the manufacturers concerned with recall notices that all processed meat products were to be withdrawn from all retailers, and that the identified plants be closed down. Compliance notices were also issued to these plants in terms of the National Health Act (No. 61 of 2003).


The DTI noted that RCL fully cooperated with government in its efforts to end the listeriosis outbreak, upgraded its facilities, and strengthened food safety measures and procedures, as a result of this its plants are fully operational. However, Tiger Brands had not complied with the necessary requirements and thus their three plants had not been reopened yet. Tiger Brands, as a result of deregulation, were arguing that there were no clear compulsory food standards. These food standards had been developed but government received strong push back from the industry, and therefore it was not operational.


The DTI informed the Committee that the Minister of Health had announced that the listeriosis in our food chain had been effectively addressed. In addition, the DTI also published, for public comment, compulsory specifications for processed food. Once all comments were received, the DTI would engage with the Departments of Health, and of Agriculture, Forestry and Fisheries to ensure alignment with all legislation, regulations and standards, to avoid duplication of food safety measures, as well as to address fragmentation of inspections.




  1. National Regulator for Compulsory Specifications


  1. Introduction

The NRCS falls under the Industrial Development Programme within the DTI. It was established on 1 September 2008, as a national regulatory agency. Its mandate is to promote public health and safety, environmental protection and fair trade through the administration of compulsory specifications and/or technical regulations. It protects consumers and the environment against unsafe and harmful products. Thus, it is meant to ‘lock out’ non-compliant products from being traded in the domestic market by approving products and ensuring compliance by means of surveillance at the ports of entry into South Africa and within the country.


The NRCS’ four strategic objectives are to:


  • Develop, maintain and administer compulsory specifications and technical regulations,
  • Maximise compliance with all specifications and technical Regulations,
  • Inform and educate NRCS’s stakeholders on the mandate of the NRCS, and
  • Ensure an optimally capacitated institution.


  1. Performance for the 2017/18 financial year


  1. Non-financial Performance for the 2017/18 financial year

In the 2017/18 financial year, the NRCS had 12 key performance indicators. Of the twelve  indicators, seven were achieved or exceeded, four were not achieved, and one was not applicable. The target that was not applicable related to the finalisation and communication of the Review Board’s decisions. The NRCS reported that no cases had been heard by the National Building Regulations Review Board during the year, as the validity of the Board had been awaiting a court judgment. The Board had been empowered by the National Building Regulations and Building Standards Act (No. 103 of 1977) to serve as an appeal body for municipal decisions regarding the approval of building plans. The matter had been  finalised in June 2018 and the court ruled that the Board indeed did not meet constitutional requirements. However, it decided that the four matters before the Board should be concluded before it was dissolved.


In the Chemicals Materials and Mechanicals Unit, 69,6 percent of LOAs were processed within 120 calendar days. While in the Electro-technical Unit, 74 percent of LOAs were processed within 120 calendar days. However, it should be noted that this is a significant improvement compared to the previous financial year when 37 percent of LOAs were processed within 120 calendar days. Furthermore, for the Automotive Business Unit (pre-market approvals), there was a significant achievement of 96,4 percent of applications approved within 120 calendar days.


Targets are described in the table below.


Table 8: Performance targets by Strategic Objective

Strategic Objective

Performance Indicators/Targets


Targets Achieved/ Exceeded

Description of unachieved targets

Strategic Goal 1: Develop, maintain and administer compulsory specifications and technical regulations (TRs)

Achieved: 0

Not achieved: 2


  • 5 Compulsory Specifications were developed against a target of 8. This target was not achieved as a result of delays in stakeholder engagement to finalise some of the compulsory specifications and delays in determining new levies for compulsory specifications. 
  • Review Board decisions finalized and communicated to all parties within 30 calendar days after the date of the hearing: This target was inapplicable as no cases were heard during the financial year.

Strategic Goal 2: Maximise compliance with all specifications and TRs

Achieved: 4

Not achieved: 2

  • 21 446 inspections were conducted against a target of 18 989 inspected. This target was exceeded by 13%.
  • Inspected 100% of all declared consignments and productions of canned fishery and meat products as planned.
  • Conducted 2 130 inspections on locally produced frozen products, fish and canned meat products in factories and vessels.
  • 1 Agreement was reached with a self-compliant company as planned.
  • Only 77% of all approval for gaming applications processed within the set timeframe against a target of 100% approvals. This is due to 96 backlogged applications that were carried over from the 2016/17 financial year.
  • 81% of all approval applications processed within 120 calendar days against a target of 100%. This was due to Backlogs in the Electro-technical Unit, applications submitted without all the required information, and failure to cancel applications where applicants do not submit the supporting documents.

Strategic Goal 3: Inform and educate our stakeholders about the NRCS

Achieved: 2

  • 20 Consumer education campaigns were conducted against a target of 12. Achievement of this target was exceeded by 67%.
  • The Stakeholder Engagement Strategy was approved by the CEO as planned.


Strategic Goal 4: Ensure an optimally capacitated institution

Achieved: 1

Not achieved: 1

  • The 6% vacancy rate target was achieved.
  • Implementation of the ICT Master System Plan (MSP): the system was not implemented. This target was not achieved because the MSP was referred back to the ICT Department for further consideration.

Source: NRCS (2018)


  1. Financial Performance

In the 2017/18 financial year, the NRCS’ budgeted income was approximately R405,9 million, actual income was more than what was budgeted for at R430,9 million. The largest share of budgeted income was to be acquired from services rendered, in particular levies for compulsory specifications amounting to R185,9 million. The funding through transfers from the DTI was the second largest source of income for the NRCS at R128,7 million for the financial year. Other sources of income included: income from services rendered amounting to R65,1 million, and other income totalling R20,3 million. In all the various streams of income from services rendered, the NRCS acquired more income than the budgeted amount. (See table below.)


Expenditure for the financial year was projected at R346,4 million while actual expenditure was R56,8 million (14,1 percent less than the budgeted expenditure). The R56,8 million underspending was attributed to underspending in all the expenditure categories. However, employee costs, tests and sampling, and advertising and contract services (associated with the delayed procurement of an ICT system) were the largest contributers to the under-spending. While there was significant under-spending on employee costs, this cost item remains the largest in terms of its share of total expenditure, accounting for 81 percent of total expenditure for the financial year. This shows an increase from the previous financial year where employee costs accounted for 79 percent of total costs. This significant increase in employee costs had been noted by the Committee as a challenge, despite the entity being a service-based organisation, and the NRCS had been requested to develop measures to address this. The NRCS had appointed a service provider to conduct an organisational review. The review of the organisational structure and job grading are part of the scope of this project. Furthermore, as and when positions become vacant they would be advertised and filled at the correct grade to address some of these anomalies.


Table 9: Financial Performance





Approved budget (R)

Actual income/ expenditure(R)


Levies for compulsory specifications

198 283 726

185 935 906

214 553 121

Transport annual registration fee

1 831 127

2 099 232

2 171 988

Government grants and core funding

86 418 000

128 745 000

128 745 000

Revenue from services rendered

50 790 456

52 496 445

65 114 734

Other income

21 827 230

36 629 418

20 322 220

Total Revenue

359 150 539

405 906 001

430 907 063


Advertising and marketing expenses

1 307 452

4 160 900

2 193 066

Contract services

8 650 347

14 323 650

9 044 088

Depreciation and amortisation

4 271 857

4 382 074

5 085 212

Employee related costs

258 177 098

296 733 883

280 262 025

Impairment loss

3 188 602



Finance cost

259 695


183 818

Office rentals and other operating lease expenses

12 411 127

15 244 564

12 776 783

Tests and sampling

3 263 463

9 868 728

4 042 926

Travel expenditure

15 617 554

20 000 883

17 879 558

Other expenditure

19 473 139

38 506 319

14 929 812

Total Expenses

326 620 334

403 221 001

346 397 288


32 530 205

2 685 000

84 509 775

Source: NRCS (2018)


  1. Human Resources

The NRCS had 315 funded posts, with 297 posts filled, this resulted in a 6 percent (18 posts) vacancy rate as at the end of 2017/18 financial year. Business units with relatively larger numbers of vacant posts included the Chemicals Materials and Mechanicals (5 vacant posts), Foods (3 vacant posts), and Legal Metrology (3 vacant posts) Units. There were 12 appointments and transfers to the NRCS and 4 employment terminations for the financial year. Other business units had 2 or less vacant posts. In addition to the filled posts, the NRCS had employed one person in the Foods Business Unit and a project manager in the IT Services Business Unit on one-year contracts. Due to the ongoing Organisational Review Project, the NRCS was only filling determined critical positions. All other vacancies would be filled after the Organisational Review Project was completed as a new organisational structure would be developed.


The employment equity breakdown is provided in the table below. There had been no employees with disabilities employed at the NRCS as at the end of March 2018.


Table 10: Employment equity breakdown as at 31 March 2018

Racial Breakdown
























Source: NRCS (2018)


The largest share of the NRCS’ employee costs goes to professionally qualified employees (63 percent), followed by senior management (21,5 percent), and skilled employees (13,9 percent). Top management account for 1,2 percent of total employee costs. A total of 92 employees’ salaries exceeded the grade determined by the job evaluation. The NRCS explained that in the 2014/15 financial year, wage agreements provided for employees to be moved one grade up where the Competency Development Programme had not been implemented and that all managers were to be placed on post level 6 and above.


With respect to labour relations, there was no collective agreement between the trade union and the NRCS for the financial year. During this period, there had been one written warning, three disciplinary hearings due to unacceptable behaviour, and two suspensions for a period of more than 30 days with a cost of R408 483 to the NRCS. 


  1. Audit Outcomes

The NRCS received a qualified audit for the 2017/18 financial year. According to the AG, the main reasons for the qualification were as follow:


  • Inappropriate and insufficient evidence for accounting for non-exchange levies for compulsory specifications, which resulted in inefficiencies in the internal control environment and an inability to account for revenues in the specified accounting period.
  • The NRCS submitted financial statements which were not prepared according to the prescribed reporting framework (section 55(1)(b) of the Public Finance Management Act (No. 1 of 1999)). The auditors had alerted the NRCS to the misstatements in the financial statement; however, the financial statements were not adequately corrected.
  • There had been irregular expenditure of R696 844, and the AG stated that this was as a result of a lack of effective and appropriate measures to prevent irregular expenditure as prescribed in section 55(1)(b)(ii) of the Public Finance Management Act.
  • The NRCS had not taken effective and appropriate steps to collect revenue due to it as prescribed in section 55(1)(b)(i) of the Public Finance Management Act.


  1. Financial and non-financial performance as at 30 June 2018


  1. Non-financial Performance

For the first quarter, the NRCS had nine performance targets. Of those targets, six were achieved or exceeded while three were not achieved. The targets that were not achieved related to the same challenges that the NRCS had had in the past financial year. In particular, the processing of applications for LOAs in the Electro-technical Unit. It had processed 82 percent of the applications in gaming within 30 calendar days and 68 percent of other applications within 120 calendar days. This was due to backlogs within the Electro-technical Unit as well as applications that were submitted without all the required documents or test reports.


The NRCS had also not achieved its target of conducting three education campaigns during the first quarter. It had only conducted two campaigns.


In terms of targets that were achieved, the NRCS performed as follows:


  • Hundred percent of all declared fishery consignments were inspected within the set timeframe.
  • Exceeded the target of 5 200 inspections in the Automotive, Electro-technical, Chemicals Materials and Mechanicals and Legal Metrology Units and performed 5 205 inspections for the quarter.
  • Exceeded the target for inspections of facilities and frozen fish by conducting 613 inspections against a target of 525 for the quarter.


  1. Financial Performance

For the first quarter of the 2018/19 financial year, its budgeted income was approximately R99,8 million; however, actual income was 45 percent more than budgeted at R144,9 million. The funding through transfers from the DTI was the largest source of income for the NRCS at R77,6 million. The NRCS indicated that it had requested and received its second quarter funding before the end of the first quarter. The second largest share of budgeted income was acquired from levies from compulsory specifications amounting to R43,4 million. The actual income from these levies and services was 46 percent more than budgeted.


The NRCS had spent R84,3 million compared to budgeted expenditure of R99,4 million. Total expenditure was 11 percent below budget. Compensation of employees accounted for 83 percent of total expenditure. Expenditure on goods and services was 31 percent below the budgeted amounts. 


  1. Human Resources

By the end of the first quarter, there were 296 employees against an approved structure of 329 posts, of which 315 were funded. In the period under review, the NRCS reported a vacancy of 6 percent based on budgeted posts. However, there were 33 vacant posts in total based on the structure of the organisation, therefore the vacancy rate was 10,3 percent.


During the period under review, there were two grievances, one had been resolved; and there were three disciplinary cases.


Furthermore, it appeared that the NRCS may have been experiencing labour challenges. It was noted in the quarterly report that “the labour environment in NRCS remains fragile, characterised by lack of trust, and inability to meet organisational targets”. This was concerning because the entity was already experiencing capacity constraints, and further labour challenges may put the performance of the NRCS at an even greater risk. It was therefore critical that this matter be addressed urgently given the importance of the NRCS to the South African economy and to human health and safety. 


  1. Key issues raised by the Committee on the NRCS

The following concerns were raised related to the performance of the NRCS during the Committee’s deliberations:


5.4.1.   Progress on the ICT modernisation project: The Committee commended the NRCS’ management for detecting the conflict of interest with the awarded tender and acting promptly in a responsible manner to address this. Furthermore, it emphasised the need for the NRCS to clearly understand the ICT solutions it required and to ensure that appropriate solutions are procured. In this regard, it should consider engaging with other state entities such as the CIPC that had developed an efficient ICT system  to assist in developing the system. The NRCS responded that it had readvertised for the ICT system in September 2018. It reported that it had improved its existing capacity to drive the ICT modernisation project, and have the support of a highly qualified ICT steering committee that had been appointed over the last few months. It also had a high-level Audit, Risk and Compliance Committee that was overseeing the progress on the project. Furthermore, there is an internationally acclaimed ICT company that is assisting the NRCS by providing technical advice on the project. The NRCS agreed that collaborating with other government entities is critical for developing a new ICT system but its challenge has been the legacy systems that it has been operating on.


5.4.2.   Turnaround time for LOAs: The Committee was concerned that despite the turnaround times for LOAs being significantly reduced over time, there was continued criticism regarding the impact of these delays on international trade. The NRCS informed the Committee that the current turnaround timeframe is 120 calendar days. This had previously been 120 working days. Furthermore, the NRCS clarified that most of the complaints come from companies that try to import without an approved LOA. This leads to their goods being stopped at the port of entry for inspection and being stored while the LOA application is being considered. This created delays and additional storage costs for these importers. The process should be that importers first apply for a LOA before importing their goods.


5.4.3.   Enforcing compliance with unregistered companies and the informal market: The Committee enquired how the NRCS was dealing with compliance of unregistered companies and products sold in the informal market, such as at spaza shops. The NRCS responded that part of their mandate is to do market inspections on affected products. When they find companies that are unregistered, they approach the companies and immediately register them. In addition, they are working with the NCC and other regulators to conduct raids on the informal market to ensure compliance across the board. However, they emphasised that this was limited to products that had to comply with compulsory specifications.


5.4.4.   Retention of surpluses: The Committee enquired whether the NRCS retained its surpluses and the reasons for these surpluses. It was of the view that retained earnings should be used to address the ICT modernisation project. The NRCS explained that much of the surplus is due to delays with implementing the ICT modernisation project and from additional income due to increased efforts to ensure compliance by companies in paying their levies and fees. However, these funds cannot be retained without approval from the National Treasury. The NRCS, therefore, had to justify to the National Treasury why the funds should be retained. They were of the view that the retention of surpluses was essential as far as it was necessary to ensure that this critical project can be implemented. At the time of the engagement with the Committee, the NRCS had not yet received feedback from the National Treasury in this regard.


5.4.5.   Management of the wage bill: The Committee enquired what measures were being undertaken to reduce the highexpenditure on human resources. The NRCS iterated reported that the organisational review process would align its processes and human resource capacity to its mandate. This process would address some of these challenges. However, the wage bill is informed by the nature of the work that the NRCS does, which is market surveillance. Therefore, national coverage is important and requires human resources to perform the necessary inspections. The DTI explained that, due to historical unrest at the NRCS, the wage settlement between management and the union had led to the current high salary scales that may not be optimum. However, due to legal constraints, these could not be reduced.


5.4.6.   Filling of critical posts: The Committee asked whether any vacancies of critical posts had been advertised or filled. The NRCS informed the Committee that they were in the process of filling the critical positions. The Chief Information Officer position had been interviewed in September 2018. Furthermore, they were in the process of appointing a Chief Operating Officer.


5.4.7.   Resolution of Audit findings: The Committee was concerned that there had been an increase in the number of  audit findings. The NRCS attributed this to the extent and depth of the audit, as it had recently been outsourced by the AG to an external audit firm. Consequently, some of the issues that were acceptable before are no longer.


The Committee enquired how the NRCS was addressing these findings, in particular the revenue qualification. The NRCS reported that it was working with the AG on how to resolve the revenue qualification. The AG acknowledged that the NRCS was moving in the right direction to resolve this qualification. However, the AG estimated that this can only be resolved within the next two financial years.


The Committee remained concerned that this matter had been ongoing for at least five years. The NRCS emphasised that the nature of the qualification from the AG had changed over the past four years. However, the AG and the NRCS’ management in July 2016 finally managed to reach a common understanding and a position to which the AG has committed. The revenue qualification is now in relation to the known companies/regulated entities. Due to the misunderstanding between the two parties, the matter had been taken to the Accounting Standards Board. In the meantime, management had implemented some manual controls which are assisting in resolving the revenue qualification. As at the end of the 2017/18 financial year, the AG noted progress and were of the view that should management continue with these efforts, the qualification would be resolved in two years. However, the NRCS’ CEO has committed to resolving the matter in the current financial year. A committee has been set up to manage this project for the entire financial year. The NRCS was also in consultation with the National Treasury, the Office of the Accountant-General and the DTI, in finding a solution to the qualification. The positives coming out of the project were: (i) most known companies were now registered on the financial system, except 143 companies that management was trying to locate and register; (ii) the compliance rate had increased from approximately 52 percent to 81 percent as at the end of September 2018 for the calendar year ending December 2017.


5.4.8.   Matters of investigation: The Committee enquired what the status of the certification process for the Gauteng e-toll instruments and the investigation regarding the Ford Kuga fires was. In terms of the e-tolls, the NRCS reported that this had not been concluded, as this is a new legal metrology environment. There had been agreement on interim measures to manage the e-tolls but the final verification process was still underway. The technical regulations and any subsequent approval will be for the accuracy of the vehicle classification system, e-tolls are per class of vehicles and the system of categorisation of vehicles need to be covered by technical regulations.


In terms of the Ford Kuga investigation, the NRCS reported that the compulsory specification has limitations as it did not cover the entire motor vehicle. The NRCS had identified the systems and components covered by the compulsory specification that under normal working situations are subjected to elevated temperatures. These components include braking systems, replacement brake pads, brake fluid and elastomeric cups and seals. The NRCS has engaged with Ford Motor Corporation South Africa (FMCSA) where they advised that the cause of fires related to the engine cooling system. It is for this reason that the later Ford Kuga model’s cooling system was redesigned and included amongst others, a bigger expansion tank. Accordingly, the NRCS met on two occasions with the NCC to discuss the status of the investigation. The NRCS, based on the engagements with the NCC, was convinced of the approach which the NCC had used which included consideration of standards which are applied across the world as well as an independent fire investigation. The NRCS also further engaged FMCSA in order to sample a vehicle model as well as replacement friction material (Brake pads) so that the same could be tested according to the requirements of the relevant compulsory specification. As at 12 October 2018, the NRCS had secured a service provider to conduct the tests, identified the two Ford Kuga models to be tested, and the part numbers of the brake pads to be tested.






  1. Conclusions

Based on its deliberations, the Committee drew the following conclusions:


6.1     The Committee welcomed the work done by the Department of Trade and Industry, the National Treasury and Proudly South African in promoting the implementation and ensuring compliance of local public procurement requirements in support of localisation. It is imperative that the State-Owned Enterprises, all national departments and all spheres of government comply with and implement public procurement guidelines linked to the designation policy. The Committee welcomes the effective participation of the National Treasury, and national departments such as Public Enterprises, Transport and Health. The measures implemented by the Office of the Auditor-General will play an important role to enable the Committee but also the Department of Trade and Industry and the National Treasury to strengthen compliance with and enforcement of this policy. The outstanding audit outcomes for procurement by all spheres of government must urgently be finalised by the Office of the Auditor-General. Findings related to non-compliance with the local public procurement legislation should be referred to the National Treasury and the Department of Trade and Industry to strengthen the oversight of government expenditure to support the local economy.


6.2     The Committee welcomed the clean audit the Department of Trade and Industry  achieved in this financial year as well as its unqualified audit findings achieved during this Fifth Parliamentary Term. The unqualified audits achieved by the Companies and Intellectual Property Commission, the National Consumer Tribunal, the National Gambling Board, the Companies Tribunal, the National Consumer Commission and the National Credit Regulator are a reflection of their commitment to implement the audit findings of previous financial years. The Committee acknowledged the technical nature of the audit finding expressed in the report of the Office of the Auditor-General on the Export Credit Insurance Corporation.


6.3     The Committee noted the progress made with respect to the processing of Letters of Authority. However, the Committee remained concerned about the turnaround time in the processing thereof. The Committee would like to emphasize that given the nature of the products that require Letters of Authority, and the potential impact on the health and safety of South Africans, their processing should not be compromised  by expediency. The Committee welcomed the action taken by the National Regulator for Compulsory Specifications with regard to the fraudulent procurement process with respect to the ICT modernisation project. However, the Committee was concerned that the further delay in the ICT modernisation project would compromise the Letters of Authority process.


6.4     The Committee acknowledged the need for recapitalization and additional funding for entities such as the National Metrology Institute of South Africa, the National Empowerment Fund and the South African Bureau of Standards, and the delay thereof due to fiscal constraints. However, it encouraged the Department to continue engaging the National Treasury with respect to additional funding for the outer years of the Medium-Term Expenditure Framework.


6.5     The Committee highlighted that when the National Credit Amendment Bill is finalised and signed into law, entities such as the National Credit Regulator and the National Consumer Tribunal, whose mandates would be expanded as a result of this legislation, would require additional resources.


6.6     The Committee welcomed the progress made with respect to the implementation of the Black Industrialist Programme. However, the Committee would like to encourage the Department to continue assisting Black Industrialists to access markets as well as opportunities with respect to local procurement to ensure economic inclusion. This should ensure that the Programme fits into the Broad-based Black Economic Empowerment Framework and creates employment opportunities for all on a broad basis. The Department should also provide data in relation to progress and failures of the Programme.


6.7     The Committee acknowledged that South Africa is in a technical recession and is concerned about the impact on manufacturing, economic growth, and job creation. The Committee welcomed the measures introduced by the President in the Economic Stimulus and Recovery Plan, to mitigate against its impact. Despite the current global economic trade wars, South Africa should remain firm in implementing its incentive programmes to ensure that it achieves its goals of an inclusive economy.

6.8     The Committee requests the Department to provide it with an overview of the policies and programmes that cause constraints to economic growth.


  1. Appreciation

The Committee would like to thank the Minister of Trade and Industry, Dr R Davies, and the Director-General, Mr L October, the acting Group Chief Operating Officer, Ms N Matomela, the Parliamentary Liason Officer, Ms S Naidoo, and all other senior managers of the Department, as well as the National Regulator for Compulsory Specifications and their management, for their cooperation and transparency during this process. The Committee also wishes to thank its support staff, in particular the Committee Secretaries, Mr A Hermans and Mr T Madima, the Content Advisor, Ms M Sheldon, the Researcher, Ms Z Madalane, the Committee Assistant, Ms Y Manakaza and the Executive Secretary, Ms T Macanda, for their professional support and conscientious commitment and dedication to their work.  The Chairperson wishes to thank all Members of the Committee for their active participation during the process of engagement and deliberations and their constructive recommendations reflected in this report.


  1. Recommendations

Informed by its deliberations, the Committee recommends that the House requests that the Minister of Trade and Industry should consider:


8.1     Engaging the Minister of Finance with a view to making funding available for maintenance, upgrading and investment in new technology for the technical infrastructure institutions, such as the South African Bureau of Standards, the National Metrology Institute of South Africa and the National Regulator for Compulsory Specifications, to improve efficiency and ensure modernisation during the outer years of the Medium-Term Expenditure Framework.

8.2     In consultation with the Ministers of Finance, of Economic Development, of Small Business Development and of Public Enterprises, developing additional mechanisms to facilitate the demand side for local, competitively sustainable goods, products and services.

8.3     Conducting an analysis of the impact of the benefits and challenges associated with existing trade agreements.


The Democratic Alliance and the Freedom Front Plus abstained.


Report to be considered.










Auditor-General South Africa (2018) Budgetary Review and Recommendations Report – PFMA 2017-18: Briefing to Portfolio Committee on Trade and Industry. Cape Town: Parliament, 13 September.


Department of Trade and Industry. (2018a) Annual Performance Report 2017/18 Financial Year. Pretoria, Department of Trade and Industry.


Department of Trade and Industry. (2018b). First Quarter Performance Report 2018/19.


National Regulator for Compulsory Specifications (2017) Annual Performance Plan 2017/18 – 2019/20.


National Regulator for Compulsory Specifications (2018) Annual Report 2017/18.


National Treasury (2017) Annual Report Guide for National and Provincial Departments. Internet. Available from <https://oag.treasury.gov.za/Publications/20.%20Annual%20Report%20Guide/Departments/Dept%20Annual%20Report%20Guide_April%202017.pdf>.


National Treasury (2018) Estimates of National Expenditure: Vote 34 Trade and Industry.

Government Printers. Pretoria.


Portfolio Committee on Trade and Industry (2017) Budgetary Review and Recommendation Report of the Portfolio Committee on Trade and Industry, dated 18 October 2017.


Portfolio Committee on Trade and Industry (2018) Report of the Portfolio Committee on Trade and Industry on Budget Vote 34: Trade and Industry, dated 10 May 2018.


Ramaphosa, C. (2018) Statement by President Cyril Ramaphosa on economic stimulus and recovery plan. Internet. Available from < http://www.thepresidency.gov.za/speeches/statement-president-cyril-ramaphosa-economic-stimulus-and-recovery-plan>


[1] Auditor-General South Africa (2018)

[2] DTI (2018a)

[3] However, the B-BBEE Commission has not been listed as a public entity yet.

[4] Portfolio Committee on Trade and Industry (2017)

[5] Portfolio Committee on Trade Industry (2018)

[6] DTI (2018a)

[7] Tripartite Free Trade Area between the Common Market for Eastern and Southern Africa, the East African Community, and the Southern African Development Community (SADC)

[8] African Continental Free Trade Area

[9] The SADC-European Union Economic Partnership Agreement

[10] Industrial Policy Action Plan

[11] Socio-Economic Impact Assessment System

[12] The Committee noted that during the 2017/18 financial year, the development of the Companies Amendment Bill for approval by the Minister had been removed from the APP; however, work was still underway on this Bill.

[13] The Credit Amendment Bill referred to is the bill initiated and drafted by the Portfolio Committee on Trade and Industry.

[14] Export Marketing & Investment Assistance

[15] DTI (2018a: 109)

[16] Brazil, Russia, India, China and South Africa

[17] African Growth and Opportunity Act

[18] Sector Specific Assistance Scheme

[19] These mainly include the payment of incentives, transfers to entities and other transfer payments.

[20] Ramaphosa (2018)