ATC151022: Budgetary Review and Recommendation Report of the Portfolio Committee on Trade and Industry, dated 20 October 2015

Trade, Industry and Competition

Budgetary Review and Recommendation Report of the Portfolio Committee on Trade and Industry, dated 20 October 2015

The Portfolio Committee on Trade and Industry, having assessed the service delivery performance of the Department of Trade and Industry, against its mandate and allocated resources, in particular the financial resources for the period 1 April 2014 to 30 June 2015, reports as follows:

1. Introduction

The Department of Trade and Industry’s (DTI) key strategy is the implementation of the National Industrial Policy Framework through the Industrial Policy Action Plan (IPAP). This serves to drive domestic, regional and international trade and investment to create sustainable jobs. The DTI’s key priorities are derived from the IPAP and the central theme is to facilitate labour-absorption through the reindustrialisation of the manufacturing sector. This is supported by incentives for new and expanding manufacturers, initiatives to improve productivity and competitiveness, and export promotion of locally produced goods.

The development of an enabling environment for business and manufacturers to operate effectively and efficiently to enable job creation and economic development is another key priority for the DTI. The creation of regulatory frameworks related to company and intellectual property legislation and consumer protection provide market certainty and thus support IPAP.

Furthermore, the DTI is responsible for improving trade and investment relations and supporting deeper regional integration in Africa.

In addition, the DTI drives the national broad-based black economic empowerment (B-BBEE) regulatory framework as well as other interventions that promote economic participation of vulnerable and previously disadvantaged individuals. In this regard, the DTI has supported the development of small, medium and micro enterprises (SMMEs) and co-operatives. During the 2014/15 financial year, this function, the applicable legislation, the Small Enterprise Development Agency (SEDA) and related resources have been transferred to the new Ministry of Small Business Development, as announced by President J Zuma in his second 2014 State of the Nation Address. However, the transfer of these financial resources was only reflected during the 2015/16 budget cycle.

In terms of its core functions, the DTI is responsible for overseeing 13 entities and administering 42 Acts[1]. These entities can be divided into three categories according to the type of work they perform, namely the finance agencies, the regulatory agencies, and the specialist agencies (see 1).

A number of pieces of legislation have come into effect or will be doing so in the near future once the DTI finalises their regulations. This will result in the establishment of new entities and councils over the Medium-term Expenditure Framework (MTEF) period.

In this regard, the DTI is in the process of establishing the B-BBEE Commission, which will be responsible for monitoring and enforcing the implementation of the B-BBEE Act (No. 46 of 2013). This entity will reflect effectively from 1 April 2016 under Programme 3, Special Economic Zones and Economic Transformation.

In addition, the National Liquor Authority (a unit within the DTI) and the National Gambling Board will be transformed into trading entities within the DTI in line with the policy proposals contained in the draft National Liquor Policy Review Document and the National Gambling Policy Review Document published in May 2015.

Table 1: List of entities reporting to the DTI

FINANCE AGENCIES

REGULATORY INSTITUTIONS

TECHNICAL INSTITUTIONS

Export Credit Insurance Corporation of South Africa (ECIC)
National Empowerment Fund (NEF)

· Company and Intellectual Property Commission (CIPC)

Companies Tribunal (CT)
National Consumer Commission (NCC)
National Credit Regulator (NCR)
National Consumer Tribunal (NCT)
National Gambling Board of South Africa (NGB)
National Lotteries Commission (NLC)

National Metrology Institute of South Africa (NMISA)
National Regulator for Compulsory Specifications (NRCS)
South African Bureau of Standards (SABS)
South African National Accreditation System (SANAS)

1.1. 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 Budget Review and Recommendation (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 Department 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 the committee requires to undertake this process.

1.2. Purpose of the BRR Report

The purpose of this report is to analyse the financial and non-financial performance of the DTI, and identified entities, against predetermined objectives to inform recommendations for the forward-looking budget for the DTI and its entities. This report assesses performance for the 2014/15 financial year, and the first three months of the 2015/16 financial year, namely from 1 April 2014 to 30 June 2015 within the context of the three-year MTEF.

1.3. Method

The committee met with the Auditor-General on 8 September 2015 to discuss its mandate in relation to the work of the DTI and its entities, as well as the audit findings for the 2014/15 financial year. The committee was also briefed by the DTI on its 2014/15 annual report and performance for the first quarter of the 2015/16 financial year on this day.

For the BRR Report, the committee also considered the performance of the Companies and Intellectual Property Commission (CIPC), the Companies Tribunal (CT), the National Consumer Commission (NCC), the National Credit Regulator (NCR), and the National Regulator for Compulsory Specifications (NRCS) on an on-going basis and for the annual report process. In this regard, the committee held meetings with these five entities to engage on their 2014/15 Annual Reports and their performance for the first quarter of the 2015/16 financial year on 13 and 14 October 2015.

1.4. Limitations of the Report

One of the key limitations of the report is that not all of the DTI’s entities’ annual reports and quarterly spending trends were monitored over the 15 month period. Therefore, there was a reliance on the DTI and the Auditor-General to highlight challenges experienced by the other eight entities. However, all entities, with the exception of the NRCS, received unqualified audit opinions.

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, verified second quarter financial and non-financial information was not available. The key challenge was that the DTI and its entities were still in the process of verifying the non-financial information, which is due at the end of October each year in compliance with Treasury Regulations. Therefore, the report has only captured performance up to the first quarter of the 2015/16 financial year.

1.5. Outline of the contents of the Report

This BRR Report consists of eight sections. 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.

Section 2 sets out the key policy focus areas for the DTI. This includes an overview of the relevant national priorities which the DTI contributes to, as well the DTI’s strategic objectives, outcome-orientated goals and key measurable objectives.

Section 3 provides a summary of the key financial and performance recommendations of the committee as captured in its previous BRR Report and its 2015/16 Budget Report. Where available, the Minister of Finance’s responses to these recommendations, as prescribed by the Money Bills Amendment Procedure and Related Matters Act are captured.

Section 4 assesses the DTI’s financial and non-financial performance against its vote allocation from 1 April 2014 to 30 June 2015. Firstly, it provides an overview and assessment of the DTI’s service delivery. Secondly, the available human resources are discussed. Thirdly, it considers the 2014/15 budget vote allocation in terms of the economic classification and per programme. It also assesses the actual total and programme expenditure for the period ending 31 March 2015, as well as the audit findings. This is followed by a comparison of the DTI’s budgeted and actual expenditure as at 30 June 2015. Fourthly, the report discusses key issues raised by the committee during deliberations with the DTI.

Section 5 discusses the five entities identified by the committee for oversight during this BRR reporting process in terms of their mandates, strategic objectives and core issues previously identified by the committee. In addition, their financial and non-financial performance and their additional forward-looking budgetary and/or performance requirements are assessed.

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.

2. Overview of the key relevant policy focus areas

2.1. Strategic Objectives of the Department

There were no changes in terms of the strategic objectives and goals since the 2014/15 financial year. The strategic objectives of the DTI remain to:

· “Facilitate transformation of the economy to promote industrial development, investment, competitiveness, and employment creation;

· Build mutually beneficial regional and global relations to advance South Africa’s trade, industrial policy and economic development objectives;

· Facilitate broad-based economic participation through targeted interventions to achieve more inclusive growth;

· Create a fair regulatory environment that enables investment, trade and enterprise development in an equitable and socially responsible manner; and

· Promote a professional, ethical, dynamic, competitive and customer-focused working environment that ensures effective and efficient service delivery.”[2]

It is required that all government departments align their strategic objectives to the national priorities/government outcomes, as outlined in the government outcomes. Table 2 provides a representation of the DTI’s strategic objectives for the 2014/15 financial year as they relate to the national priorities. It also depicts which of the programmes contributes to each strategic objective.

In the 2015/16 financial year, the DTI also planned to contribute to Outcome 7: “Vibrant, equitable, sustainable rural communities contributing towards food security for all” as part of its third strategic goal, to “facilitate broad-based economic participation through targeted interventions to achieve more inclusive growth”.

Table 2: Linkages between the DTI’s strategic goals and the government-wide priorities and outcomes for the 2014/15 financial year

Government Outcome	Strategic Objective	Programme	Aim of the Programme
An efficient, effective and development- oriented public service and an empowered, fair and inclusive citizenship	Promote a professional, ethical, dynamic, competitive and customer-focused working environment that ensures effective and efficient service delivery.	Programme 1: Administration	Provides strategic leadership, management and support services to the DTI, and conducts research on industrial development, growth and equity.
Create a better South Africa, a better Africa and a better world	Build mutually beneficial regional and global relations to advance South Africa’s trade, industrial policy and economic development objectives	Programme 2: International Trade & Economic Development	Builds an equitable global trading system that facilitates development by strengthening trade and investment links with key economies and fostering African development, including regional and continental integration and development cooperation in line with the New Partnership for Africa’s Development.
		Programme 7: Trade & Investment South Africa	Increases export capacity and supports direct investment flows through an effectively managed network of foreign trade offices and strategies for targeted markets.
Decent employment through inclusive growth	Facilitate broad-based economic participation through targeted interventions to achieve more inclusive growth.	Programme 3: Broadening Participation[3]	Drives economic transformation and increases participation in industrialisation.
	Facilitate transformation of the economy to promote industrial development, investment, competitiveness and employment creation.	Programme 4: Industrial Development	Designs and implements policies, strategies and programmes to strengthen the ability of manufacturing and other sectors of the economy, to create decent jobs and increase value addition and competitiveness in both domestic and export markets.
		Programme 6: Incentive Development & Administration	Stimulates and facilitates the development of sustainable, competitive enterprises through the efficient provision of effective and accessible incentive measures that support national priorities.
	Create a fair regulatory environment that enables investment, trade and enterprise development in an equitable and socially responsible manner.	Programme 5: Consumer & Corporate Regulation	Develops and implements coherent, predictable and transparent regulatory solutions that facilitate easy access to redress and efficient regulation for economic citizens.

2.2. Measurable objectives of the Department

The DTI in its Annual Performance Plan had listed key interventions for the 2014/15 financial year. The DTI had planned to continue creating an enabling environment to re-industrialise the country, as industrialisation is viewed as a tool through which South Africa can create decent jobs and stimulate economic growth. Industrialisation is mainly supported by the DTI through the IPAP. The key planned interventions were as follows[4]:

· Upscale industrial policy by tabling the annual rolling IPAP to Cabinet and produce quarterly implementation reports.

· Develop two sector-specific action plans in support of local manufacturing arising from broadband implementation and for beneficiation in five value chains to influence and respond to the changing economic environment to enhance manufacturing potential.

· Undertake two key research projects, namely a fluorspar beneficiation and feasibility study for the establishment of a syringe manufacturing plant in South Africa, to facilitate development of interventions to expand value-added activities in existing and new sectors of the economy including beneficiation.

· Propose two key initiatives to promote regional industrial development to deepen regional industrial development in Africa.

· Promulgate and implement the Special Economic Zone (SEZ) Regulations to enact the SEZ Act.

· Enhance technological competencies by supporting 1 458 students and 756 researchers via the Technology and Human Resources for Industry (THRIP).

· Implement the Support Programme Industrial Innovation (SPII) by supporting 20 new projects valued at R46 million.

· Support 250 students by enrolling them for the tool-making apprentice programme.

· Support 200 workers with training through the industrial upgrading programme.

· Support 950 enterprises approved to participate in the Export Marketing and Investment Assistance (EMIA) scheme.

Broadening Participation also forms part of the DTI’s mandate. Through its Broadening Participation Division, the DTI aims to create opportunities in which black South Africans and women can participate more in economic activities. In terms of Broadening Participation, the key interventions were to[5]:

· Implement the B-BBEE Act and Codes of Good Practice.

· Approve 90 incubators for the Incubator Support Programme (ISP) incentive.

The third part of the DTI’s mandate is Trade, Investment and Exports. Key interventions in terms of trade were to[6]:

· Increase manufactured exports under the EMIA by increasing the value of exports to R3 billion.

· Facilitate investment in targeted sectors to the value of R40 billion within the investment pipeline.

· Conclude trade negotiations with regard to the Economic Partnership Agreement (EPA) with the European Union (EU), Southern African Customs Union (SACU)-India Preferential Trade Agreement (PTA), and the Southern African Development Community (SADC) - East African Community (EAC) – Common Market for Eastern and Southern Africa (COMESA) Free Trade Agreement (FTA) (also known as the Tripartite-Free Trade Agreement (T-FTA)).

· Implement African regional development programme in priority development areas in SACU, SADC FTA and in Spatial Development Initiatives (SDI) infrastructure projects.

In terms of the DTI’s consumer and corporate regulation mandate, the following key interventions were identified:

Conduct one Regulatory Impact Assessment (RIA) Report on Intellectual Property (IP).
Develop three policy frameworks on Liquor, Gambling and Licensing of Businesses Bill.
Develop six Bills for approval by the Minister on Promotion and Protection of Investment, Copyright Amendment, Liquor Amendment, Companies Amendment, Gambling Amendment and Licensing of Businesses.

In terms of administration, the following key interventions were listed:

Attract, develop and retain professional and skilled officials focusing on increasing employment of targeted groups and reducing staff turnover.
Pay all eligible suppliers within 30 days.
Conduct 18 multimedia awareness campaigns: Incentive Schemes, Film Promotion, National Liquor Authority, Buy Local Promotion and Export Promotion.
Monitor the implementation of the Service Delivery Improvement Plan (SDIP) for 2012-2015.

3. Summary of previous key financial and performance recommendations of committee

3.1. 2014/15 BRRR recommendations [7]

3.1.1 Increasing resources with the requisite skills to promote South Africa as an investment destination, as well as providing increase of resources for Proudly SA to encourage South Africans to buy locally manufactured products.

3.1.2 Increasing the financial resources to the NCR over the MTEF period, given their additional functions and the critical role it plays in our socio-economic environment.

3.1.3 Consulting the Minister of Finance to develop mechanisms to verify and enforce the public procurement of designated products so that the 75 per cent public procurement decision is implemented to underpin the Industrial Policy Action Plan.

The National Treasury had responded as follows[8]:

Funds amounting to R30 million were proposed for reprioritisation towards the Trade and Investment South Africa programme to increase the international footprint of priority foreign offices in key markets in Africa and in BRICS[9] countries during the 2015 MTEF period.
The NCR’s mandate will expand once the National Credit Amendment Act (No. 19 of 2014) becomes effective. Given the constrained fiscal outlook, the DTI should reprioritise funds within its existing baseline in order to fund the NCR requirements arising from the amended legislation.

3.2. 2015/16 Committee Budget Report [10]

The committee had recommended that the Minister should consider:

In consultation with the Minister of Finance, enforcing the 75 per cent preferential local procurement of goods by the public sector, as stated by the President, to encourage the industrialisation and the beneficiation drive.

In consultation with the Minister of Finance, pursuing the NEF’s motivation to establish a venture capital fund between the public and private sectors to support black entrepreneurs.

Increasing the financial resources to the NMISA, from the 2017/18 financial year, due to its strategic importance to the economy.

Ensuring that the funds ring-fenced for the development of black industrialists are directed towards establishing manufacturing capacity and not towards equity in existing manufacturing projects.

Enforcing rigorous governance practices and strengthening internal control measures in all entities reporting to him, to mitigate against the prevalent practice of irregular expenditure by entities.

In consultation with the Minister of Energy, implementing measures such as the facilitation of the development of renewable energy industries, to improve the energy mix in order to secure a more reliable supply of energy.

In consultation with the Minister of Finance, allocating additional finance to continue supporting manufacturers in their competitiveness in the 2017/18 financial year.

Continuing his advocacy efforts to ensure a favourable resolution for South Africa’s inclusion in the extended African Growth and Opportunity Act (AGOA).

In consultation with the Minister of Economic Development, placing a temporary moratorium on all scrap metal exports to ensure that this does not compromise the industrialisation drive. However, if this is not possible, then to give stronger consideration to more robust monitoring and enforcement measures of scrap metal agents in consultation with the relevant Ministers.

4. Overview and assessment of the department’s financial and NOn-financial performance

4.1. Non-financial Performance for the 2014/15 Financial Year

The Department achieved most of its targets for the 2014/15 financial year. However, some of the targets were not achieved or were partially achieved. The following section shows the performance as well as non-performance areas of the Department.

4.1.1. Administration Programme

The Administration Programme had achieved the following performance highlights:

47 per cent of Senior Management Service positions were occupied by women.
2.8 per cent of employees are people with a disability, against a target of 2 per cent.
Payment of all eligible creditors were made well within 30 days.

However, it had not achieved its target of reducing its vacancy rate to six per cent. By the end of March 2015, the vacancy rate was 8.5 per cent. This was as a result of the Department’s inability to fill posts due to the freezing of posts between October 2014 and February 2015 and the cap on the compensation budget by the National Treasury.

4.1.2. International Trade and Economic Development Programme

The following progress was made in enhancing South Africa’s trade relations:

· The South Africa/ SACU tariff offer for the EAC as part of the T-FTA negotiations had been approved and exchanged with the EAC. Other tariff offers are at an advanced stage. Significant progress had also been achieved in the negotiation of the legal text, which will be the basis for the launch of the Free Trade Agreement.

· The work on infrastructure development under the T-FTA had been supported through contributions to South Africa’s negotiations on the memorandum of understanding (MOU) for the North-South Corridor.

· Work continued to develop SADC standards to address non-tariff barriers (NTBs) that impede trade and to promote trade facilitation. Negotiations had been launched on trade in services, and offers in three sectors (communication, finance and transport) had been approved by Cabinet.

· Targeted efforts to lobby for the extension of the AGOA with South Africa, which included the AGOA Beneficiaries Conference to refine South Africa’s strategy.

4.1.3. Broadening Participation Programme

The Broadening Participation Programme was affected by the President’s announcement to create the Department of Small Business Development, as a number of its staff and programmes were shifted to the new department. Only aspects related to BBBEE programmes and the development of SEZs remained. This programme had achieved the following performance highlights:

Pre-feasibility studies for ten proposed SEZs have been finalised.
Technical feasibility reports were finalised for nine proposed SEZs, with the Dube Trade Port in KwaZulu Natal being designated as an Industrial Development Zone (IDZ) in October 2014.
An application from Maluti A Phofung SEZ in the Free State was approved.
The Department had partnered with the CIPC to develop a system that would enable Exempted Micro Enterprises (EMEs) and start-ups to be issued with B-BBEE certificates using the CIPC’s self-service terminals and online system. The system was expected to be fully functional in the 2015/16 financial year.
The Phase I B-BBEE Codes were gazetted on 11 October 2014 for implementation by 1 May 2015.

The programme had failed to achieve the following targets:

The business case for the establishment of the B-BBEE Commission was expected to be submitted for approval by the Department of Public Service and Administration and National Treasury, and a report on its phased-in operationalisation should have been produced. However, by the end of the financial year, the business case had not been approved by the Department of Public Service and Administration. Therefore, there had been a delay in establishing the B-BBEE Commission.
Twenty Industrial Innovation projects were targeted for support via the Support Programme for Industrial Innovation (SPII), while only seven projects were supported. Furthermore, the value of approved projects was R20 million against a target of R46 million. The SPII is being reincorporated into the DTI for improved management of this programme.

4.1.4. Industrial Development Programme

The following performance highlights were noted for the Industrial Development Programme:

The Automotive Investment Scheme (AIS) approved 50 projects with an investment value of R2.7 billion, this included a R1.6 billion investment by Mercedes Benz South Africa, with linked investments by component manufacturers of R890 million in plant and equipment.
Eighteen sectors, sub-sectors and products were designated for local procurement, significantly raising aggregate domestic demand for goods and services from domestic manufacturers.
Eleven projects were approved in the oil and gas, automotive, communications and agro-processing sectors, with a value of R48.4 million, contributing to the building of domestic industrial capabilities, as part of the National Industrial Participation Programme (NIPP).
Agro-processing investment with incentives to the value of R1.2 billion were supported in a range of schemes, including the Manufacturing Competitiveness Enhancement Programme (MCEP), the Manufacturing Investment Programme (MIP) and the Enterprise Investment Programme (EIP).
Support was provided to seven companies with an investment value of R18.4 billion with a projection of 6 361 new jobs created under the Business Process Services (BPS) programme.

However, the 2015/16 iteration of the IPAP had not been tabled in Cabinet by March 2015 as targeted.

4.1.5. Consumer and Corporate Regulation Programme

The Consumer and Corporate Regulation Programme highlighted the following achievements:

The regulations on the National Credit Amendment Act (No. 19 of 2014) were published, which included regulations for affordability tests to prevent over-indebtedness.
RIAs were conducted on the IP, Liquor and Gambling policies, and included assessments of all treaties to determine whether South Africa is ready to ratify such treaties. The Liquor and Gambling policies were also published for public consultation.
Liquor Norms and Standards, which standardise processes and approaches for liquor regulation across the country and improve cooperative governance, were finalised and published.

The following areas were not achieved:

In terms of the number of Bills developed for the Minister’s approval, the Companies Amendment Bill was not developed by the end of the financial year due to reprioritisation by the DTI of matters for the parliamentary programme.
The IP Laws Amendment Act (Indigenous Knowledge (IK)) regulations were developed; however, they were not approved and published as planned by the end of the financial year.
The SEZ regulations were gazetted and published for comments but were not yet approved and therefore were not implemented.

4.1.6. Incentive Development and Administration Programme

Table 3 below lists the number of firms/projects and the potential jobs supported through the incentive schemes during the 2014/15 financial year.

Table 3: Incentives performance for the 2014/15 financial year

Description	Actual
Description	Number of firms/projects supported	Potential jobs supported
Manufacturing Investment Incentives
Enterprise Investment Programme (EIP) – Manufacturing Investment Programme (MIP)	42	1 195
EIP - Aquaculture Development and Enhancement Programme (ADEP)	11	256
Automotive Investment Scheme (AIS)	50	1 261
12I Tax Allowance Incentive	17	556
Critical Infrastructure Programme (CIP)	9	9 385
Manufacturing Competitiveness Enhancement Programme (MCEP)	335	37 897
Services Investment Incentives
Business Process Services (BPS)	7	6 361

Source: DTI (2015b)

The following performance areas were not achieved:

The target for the value of projected investments from projects approved for the 12I tax allowance was R12 billion, but actual approved investments were only R9.3 billion. Jobs created also fell short of the target at 556 actual jobs against 2 200 targeted jobs.
BPS incentives supported seven projects instead of the ten targeted projects.
In terms of the MCEP, 335 projects were approved against a target of 350 projects, hence jobs created under this incentive were significantly lower than the target. A total of 37 897 jobs were created against a target of 99 600.
The actual jobs created under the MIP were significantly lower than the target, only 1 195 jobs were created against a target of 4 500.
In terms of the Black Business Supplier Development Programme, 783 projects were approved, lower than a target of 1 280 projects.
Only 207 projects were approved against a target of 431 under the Co-operatives Incentive Scheme.
The ISP only approved six incubators against a target of 50 incubators.

4.1.7. Trade and Investment South Africa Programme

The following achievements were highlighted:

· An investment pipeline of potential projects of R43.8 billion for the 2014/15 financial year was facilitated (R25.3 billion from foreign sources and R18.5 billion from domestic sources).

· In October 2014, the United Nations Conference on Trade and Development recognised the DTI as a global winner for attracting investment in sustainable development.

· In March 2015, the DTI received an award at the Annual Investors Meeting in Dubai as the winner in Africa for facilitating the best green investment project.

However, the programme had not achieved its target of increasing manufactured exports by R3 billion under the EMIA programme. It had only achieved a value of R2.8 billion, as there had been a postponement/cancellation of missions due to the Ebola outbreak and localised market access issues in targeted countries.

4.2. Non-financial Performance as at 30 June 2015

For the 2015/16 financial year, the DTI identified 49 performance targets across its seven programmes. It achieved 23 of its quarterly milestones, while there were no milestones for nine of the targets.

4.2.1. Administration Programme

The Administration Programme reported that all eligible creditors were paid within 30 days. Although the vacancy rate at 9.4 per cent remained higher than the quarterly target of 6.5 per cent, the target for the percentage of people with disabilities employed was met and the target for women in senior management positions fell just short of the 47 per cent target at 46 per cent.

4.2.2. International Trade and Economic Development Programme

The International Trade and Economic Development produced two status or progress reports on the work it has been involved in. It highlighted the following progress made:

· The COMESA, the EAC and the SADC met in June 2015 in Egypt at the Third Tripartite Summit to officially launch the T-FTA.

· The text negotiations on the main T-FTA agreement and several annexes had been concluded. The main agreement was open for signature at the Third Summit of Heads of State and Government and the commencement of the Phase II negotiations was announced.

· There has been agreement to implement the grant components of the Cuba Package.

4.2.3. Special Economic Zones and Economic Transformation Programme

This programme achieved one of its four quarterly milestones, namely eight regional clusters and projects were initiated against a target of five, after an unexpected uptake following the National Cluster Roadshow and Provincial consultations. Two other performance targets had no quarterly milestones. The milestone for five black industrialists to be created in key sectors not met, as the policy document and guidelines to approve applications had not been approved at the time. However, the DTI noted that 70 applications had been received in this regard and were being assessed in accordance with existing departmental financial instructions due diligence criteria for viability.

The DTI further highlighted the some progress made under this programme:

· The Coega IDZ, Eastern Cape, signed 12 new investors with an investment value of more than R8 billion. Its main focus ranges from energy, food processing, steel, chemicals, and cement.

· The East London IDZ, Eastern Cape, signed five new investors with an investment value of more than R140 million. Its sectoral focus is logistics, renewable energy, aqua culture and automotive.

· The Richards Bay IDZ, Kwa-Zulu Natal, signed five new investors with an investment value of more than R2.8 billion. Its sectoral focus is energy, byromate, paint and mixed manufacturing.

· The Dube Trade Port, KwaZulu Natal, focuses on mining engineering, logistics, and construction and had approved four investments with an investment value of R280 million.

· Saldanha Bay IDZ, Western Cape, focuses on the Oil and Gas, Logistics, Marine and subsea and Rig Repair sectors. Twenty-six companies have shown interest in locating to the IDZ. Currently, the confirmed rand value is R2 billion from two companies.

· The system for issuing B-BBEE certification for EMEs was launched in April 2015 with the CIPC.

· The amended Codes of Good Practice for B-BBEE were gazetted and came into effect in May 2015. A technical assistance guide to provide clarification, simplification and general understanding of the amended Codes is being developed.

· The SEZ Advisory Board held its inaugural meeting in June 2015.

4.2.4. Industrial Development Programme

The Industrial Development Programme has five performance targets for the 2015/16 financial year. It achieved two of its three first quarter milestones. It had not tabled an IPAP implementation report at the Minister’s Review Meeting during the quarter, as the meeting was only scheduled for July. The following progress had been reported:

· IPAP 2015/16–2017/18 had been approved by Cabinet in April 2015 and launched in May 2015.

· Approval for transformers and the revised instruction note for the designation of power pylons, which now includes power line hardware, monopoles, street lighting poles, lattice towers and masts was secured.

· The proposal for the Solar photovoltaic system components was approved.

· The instruction note on the creation of a rebate provision for electricity meters was issued through the government gazette by International Trade Administration Commission of South Africa.

· The programme contributed to the development of the SADC Industrialization Strategy and Roadmap on Regional Economic Integration which has been approved and adopted by Extraordinary SADC Summit in April 2015.

· The Aerospace Industry Support Initiative supported three aerospace companies with development of new technologies to commercialisation stage.

4.2.5. Consumer and Corporate Regulation Programme

The Consumer and Corporate Regulation Programme only had one quarterly milestone, which was not achieved. This formed part of a new indicator to monitor the impact of its agencies. A monitoring tool is required to be developed for the research and collation of this data but could not be done due to a resource constraint. A deputy director was appointed to do this.

In spite of this, the following general progress was made:

The Liquor and Gambling Policy were both published for public comments. Consultations were held in Cabinet and with stakeholders.
Regulation 45 on the National Credit Act (No. 34 of 2005), which aims to set maximum fees, interest rates and service fees that can be levied, as amended was produced and published for public comment.
The National Lotteries Commission was launched, consequent to the amended Lotteries Act being assented to by the President and proclaimed in April 2014. The Regulations came into operation in April 2015.

4.2.6. Incentive Development and Administration Programme

The Incentive Development and Administration Programme has 21 performance targets for the 2015/16 financial year. Its work and the achievement thereof is highly dependent on the number of eligible applications received per incentive programme and the ability of companies to provide verifiable evidence that their agreed targets were met before funds can be transferred to them.

For the first quarter, this programme met 11 of its quarterly milestones. The performance per incentive programme is provided in Table 4. The DTI highlighted the following achievements:

· Eighteen film productions with Qualifying South African Production Expenditure (QSAPE) of R318 million were approved.

· Through MCEP, 161 enterprises with an estimated investment of R5.9 billion were approved. This incentive supports manufacturers to upgrade their out-dated machinery and equipment, invest in competitiveness enhancing activities and will sustain 28 212 jobs.

· Under the EMIA, 538 enterprises were approved for funding for participation in exhibitions and trade fairs.

Table 4: Incentives performance as at 30 June 2015

Description	Number of firms/projects supported		Value of projected investments		Potential jobs supported
Description	Target	Actual	Target	Actual	Target	Actual
Industrial Financing
Automotive Investment Scheme (AIS)	6	13	R400m	R1.5bn	132	185
12I Tax Allowance Incentive	2	2	R2bn	R906.3m	500	8
Critical Infrastructure Programme (CIP)	3	1	R1.5bn	R107m	900	0
Manufacturing Competitiveness Enhancement Programme (MCEP)	90	161	-	-	27 215	28 212
Broadening Participation
Enterprise Investment Programme (EIP- ADEP)	2	4	R20m	R154.3m	40	205
Incubation Support Programme	20	0	-	-	-	-
Services Investment
Business Process Services	3	0	R200m	R0	625	0
Film and TV production	18	18	R474m	R318m	-	-
Trade, Investment & Exports
Export, Marketing and Investment Assistance (EMIA)	217	538	-	-	-	-

Source: DTI (2015c)

4.2.7. Trade and Investment South Africa Programme

There had been significant progress in achieving its two quarterly milestones. The value of exports facilitated was exceeded by R1.7 billion from sales emanating from the Asia East Region subsequent to missions and national pavilions conducted in the region. Furthermore, an additional R4.1 billion in facilitated investment projects were in the pipeline related to major mining green economy projects.

4.3. Human Resources

Table 5 highlights the key human resource statistics for the DTI as at the end of March 2015.

Table 5: Employment information as at 31 March 2015[11]

	Actual
Approved Posts	1 397
Number of employees	1 421 (including 135 employees additional to the approved structure)
Vacancy Rate	111 (7.9% of approved posts)
Female Employees	833 (58.6% of employees)
Black employees	1 301 (91.6% of employees)
Women in Top and Senior Management Service (TSMS)	122 (48.2% of TSMS)
Employees with Disabilities	44 (2.8% of employees)
Employee Turnover	167 (10.6% of employees[12])

Source: DTI (2015a: 239, 247, 253-254)

4.4. Financial Performance for the 2014/15 Financial Year

The Department’s budget allocation for the 2014/15 financial year was R9.9 billion. The expenditure for 2014/15 was R9.7 billion, representing 98.7 per cent of the total budget. The Department’s expenditure was spent as follows: 68 per cent of the budget was channelled towards incentives, 14 per cent to transfers to entities and 18 per cent was used for the DTI’s operations (see Table 6 below).

Table 6: Overview of expenditure per economic classification

Economic Classification	Final Appropriation (R'000)	Actual Expenditure (R'000)	Variance (R'000)	Expenditure as % of final appropriation
Current payments
Compensation of employees	941 370	889 062	52 308	94.4%
Goods and services	694 905	654 432	40 473	94.2%
Transfers and subsidies
Departmental agencies and accounts	1 358 698	1 358 698	-	100.0%
Higher education institutions	17 462	17 458	4	100.0%
Foreign governments and international organisations	32 700	26 598	6 102	81.3%
Public corporations and private enterprises	6 671 310	6 657 478	13 832	99.8%
Non-profit institutions	150 338	150 338	-	100.0%
Households	5 205	4 935	270	94.8%
Gifts and donations	40	40	0	100.0%
Payment for capital assets
Machinery and equipment	29,736	21 049	8 687	70.8%
Intangible assets	12 246	495	11 751	4.0%
Payment for financial assets	4 719	4 716	3	99.9%
TOTAL	9 918 729	9 785 299	133 430	98.7%

Source: DTI (2015a: 99-101)

4.4.1. Transfers to Entities

The work of the DTI extends through the entities that it oversees, as these are implementing agents of its policies. For the 2014/15 financial year, transfers to the Department’s entities were as follows:

Table 7: Transfers to Entities

Entity	Transfers (R'000)
Companies and Intellectual Property Commission (CIPC)	-
Companies Tribunal (CT)	13 313
Export Credit Insurance Corporation of South Africa (ECIC)	110 370
National Credit Regulator (NCR)	68 845
National Consumer Commission (NCC)	53 376
National Consumer Tribunal (NCT)	40 164
National Empowerment Fund (NEF)	-
National Gambling Board (NGB)	29 797
National Lotteries Board (NLB)	-
National Metrology Institute of South Africa (NMISA)	202 564
National Regulator for Compulsory Specifications (NRCS)	109 734
South African National Accreditation System (SANAS)	35 712
South African Bureau of Standard (SABS)	221 689
Small Enterprise Development Agency (SEDA)[13]	628 650
Total	1 514 214

Source: DTI (2015a: 210, 212)

4.4.2. Expenditure by Programme

At a programme level, there were reasonable variances between the budgeted and actual expenditure. The Administration, the International Trade and Economic Development and Trade and Investment South Africa Programmes were the three programmes with a relative large underspending of their budgeted programme allocations of approximately 8.1 per cent (R63.7 million), 2.5 per cent (R3.7 million) and 2.3 per cent (R8.5 million) respectively.

Table 8: Expenditure by programme for the 2014/15 financial year

Programme	Final Appropriation (R’000)	Expenditure (R’000)	Variance (%)
Administration	790 876	727 080	8.1%
International Trade & Economic Development	146 462	142 792	2.5%
Broadening Participation	946 330	938 622	0.8%
Industrial Development	1 795 004	1 787 719	0.4%
Consumer & Corporate Regulation	283 075	281 122	0.7%
Incentive Development & Administration	5 591 858	5 551 358	0.7%
Trade & Investment South Africa	365 124	356 606	2.3%
Total	9 918 729	9 785 299	1.3%

Source: DTI (2015a: 98)

Programme 1: Administration – Expenditure was R727 million in 2014/15, four per cent higher than the previous financial year when expenditure was R700 million. This increase was due to increases in expenditure on lease payments, capital assets and the write-off of debts.

Programme 2: International Trade and Economic Development – Expenditure increased from R139 million in the previous financial year to R143 million in the current financial year. This two per cent increase was as a result of costs associated with travel and subsistence.

Programme 3: Broadening Participation Division – A decrease in the transfer payments to the Industrial Development Corporation for the Support Programme for Industrial Innovation led to a decrease in expenditure for the programme. Expenditure decreased from R999 million in the 2013/14 financial year to R939 million in the 2014/15 financial year.

Programme 4: Industrial Development Division – Expenditure increased by 12 per cent in the 2014/15 financial year to R1.8 billion from R1.6 billion in the 2013/14 financial year. This was due to increases in transfer payments to the SANAS and the Centres of Excellence.

Programme 5: Consumer and Corporate Regulation Division – Expenditure increased by 10 per cent, from R256 million in the 2013/14 financial year to R281 million in the 2014/15 financial year. This was due to increases in transfer payments to the NGB.

Programme 6: Incentive Development and Administration Division – Expenditure increased by 4 per cent, from R5.4 billion in the 2013/14 financial year to R5.6 billion in the 2014/15 financial year. This is due to an increase in incentive payments to the Automotive Production and Development Programme (APDP), the EIP, and the Film and TV Production Incentive.

Programme 7: Trade and Investment South Africa – The programme experienced an increase in expenditure of 8 per cent, from R328 million in the 2013/14 financial year to R357 million in the 2014/15 financial year. This was due to increases in transfer payments to the ECIC.

4.4.3. Auditor-General’s Report

The DTI achieved a financially unqualified opinion with no findings (clean audit) for the 2014/15 financial year. There were also no material findings on reporting on performance objectives or non-compliance with legislation.[14]

4.5. Financial Performance as at 30 June 2015

The DTI’s budget allocation for the 2015/16 financial year was R9.6 billion. Of this, approximately 60 per cent of the budget goes towards the Incentive Development and Administration, 21 per cent to the Industrial Development, seven per cent to the Administration, four per cent to the Trade and Investment South Africa, three per cent to the Special Economic Zones and Economic Transformation, three per cent to the Consumer and Corporate Regulation, and two per cent to the International Trade and Economic Development programmes.

As at 30 June 2015, the DTI had projected spending of R2.2 billion (22.8 per cent of the annual allocation) but actual spending was only R1.7 billion, representing a 26.2 per cent under-expenditure. All of the programmes experienced significant underspending during the quarter, contributing to the Department’s overall underspending. The largest variances were in the Special Economic Zones and Economic Transformation, and the Trade and Investment South Africa Programmes with variances of 72.1 per cent and 60.1 per cent respectively. However, the largest aggregate under-expenditure was in the Incentive Development and Administration Programme, where R415.4 million was not spent. (See Table 9.)

Table 9: Expenditure by programme as at 30 June 2015

	Revised Budget 2015/16	Year-to-date (YTD)		% budget available
	Revised Budget 2015/16	Cash flow projections		% budget available
	689 740	178 009	157 062
International Trade & Economic Development	164 754	34 700	25 179
Special Economic Zones & Economic Transformation	263 224	64 922	18 108
Industrial Development	1 973 534	608 933	600 355
Consumer & Corporate Regulation	294 496	144 044	140 414
Incentive Development & Administration	5 795 639	1 045 021	629 593
Trade & Investment South Africa	412 328	111 765	44 630
	9 593 715	2 187 394	1 615 341

Source: DTI (2015c)

The DTI’s budget in terms of economic classification mainly goes towards transfer payments. Transfer payments in the first quarter of the financial year amounted to R1.3 billion. The second largest expenditure item was compensation to employees at R193.6 million followed by the payments of goods and services at R116.3 million. Transfers and subsidies were 28 per cent less than budgeted, the payment of capital assets was 26 per cent less than budgeted and expenditure on goods and services was 20 per cent less than budgeted for the quarter. (See Table 10)

Table 10: Expenditure by economic classification as at 30 June 2015

Economic classification	Budget 2014/15	Year-to-date (YTD)		% budget available
Economic classification	Budget 2014/15	Cash flow projections	YTD Expenditure	% budget available
Compensation of employees	897 730	214 125	193 614
Goods and services	570 181	146 380	116 283
Payment for capital assets	41 853	2 655	1 960
Transfers and subsidies	8 083 951	1 824 234	1 303 484
	9 593 715	2 187 394	1 615 341

Source: DTI (2015c)

4.6. Issues raised during the deliberations

Internal constraints as contributing factors rather than only external factors as impediments to economic growth: A view was expressed in the committee that the DTI focused purely on external factors when highlighting the challenges faced by the DTI for the period under review and not domestic factors that may also have contributed to the slow economic growth rate. The Minister informed the committee that notwithstanding internal challenges, one cannot ignore external factors and its impact on the South African economy. He informed the committee that growth in mining economies have been negative due to the end of the commodity super-cycle which massively impacted on these countries’ economic performance. He acknowledged internal factors also contributed to the slow growth but informed the committee that the nine-point plan, mentioned by President J Zuma in the 2015 State of the Nation Address, seeks to address these challenges facing our economy. The Minister was of the view that there has been a substantial stabilisation of the energy situation but the challenges on the labour front is still being addressed. Government was also considering measures to facilitate the entry of investment into the economy.

Ease of doing business and the selection of an investment destination: Recent surveys would suggest that South Africa is slipping down the ranks as a preferred investment destination and in terms of the ease of doing business. The Minister informed the committee that according to the Business Day of 8 September 2015 the United Kingdom views South Africa as the best investment destination in Africa. South Africa must ensure that it is less costly and easier to register companies. He argued that investment in the mining economies is declining but that this does not reflect a general withdrawal of foreign direct investment from other sectors like manufacturing. Economic data reflects the contrary with Unilever recently opening its fourth plant in South Africa. He informed the committee that Unilever was of the view that emerging economies represent the best investment opportunities. South Africa is also the second best performing destination for Hisense outside of China, which indicates the country’s manufacturing capabilities.

Additional measures to be considered by the DTI to insulate South Africa against the impact of the current global economic slowdown: Notwithstanding the IPAP and other measures implemented by the DTI, the committee inquired whether the DTI has considered other measures to mitigate against the impact of the slowdown of the global economy. The Minister informed the committee that evidence suggests that the manufacturing sector is capable of driving a new growth path. The structural changes to the economy must continue as we cannot rely on being exporters of primary mineral commodities only. Due to the structural change in the Chinese economy, a new commodity super-cycle would not have a similar economic impact. Therefore, South Africa must move up the value chain. The Minister expressed a view that going forward, the State has to play an active role in supporting and engendering an industrialisation process. The DTI recognised that the implementation of an industrialisation programme may have challenges but that the State must adopt an approach of critical support for sectors and develop sectoral programmes that would contribute to economic growth and job creation. The DTI has adopted an approach of continuous improvement and is willing to make the necessary changes and address any impediments to the industrialisation drive given the current global economic environment.

Perceived contradictions between the IPAP and the New Growth Path (NGP): A view was expressed in the committee that certain contradictions exist between the IPAP and the NGP. The Minister informed the committee that he is of the opinion that no such contradiction exists and that IPAP is moving in the same direction as the NGP. IPAP initiatives contributed significantly to the manufacturing sector and that investment in the clothing and textile industry as well as the film industry are as a direct result of the DTI incentive programme. Although the Minister accepts that there may be different political conceptual/ideological positions with respect to IPAP and the NGP, he is of the view that these policy documents encourage private and public sector involvement in the economy. The State should provide a supporting and enabling environment for the manufacturing sector, which has been achieved since the launch of IPAP.

The impact of the film incentives on the South African economy: The committee welcomed the positive impact of incentives especially within the film industry but inquired to the number of jobs created in the film industry. The Minister informed the committee that the number of films produced in South Africa have quadrupled with 61 611 job opportunities created in the process. This is as a result of the package of incentives offered by the South African Government to promote its film production and post-production industry. South Africa needs to upscale this programme notwithstanding budgetary constraints and the impact of slow global economic growth.

South African trade relationship with the United States of America (USA): The committee acknowledged that the current global environment is stagnant but it would appear that the USA may be the catalyst to stimulate a global economic recovery. The committee inquired to the status of trade relations between South Africa and the USA so that it may fully benefit from such a recovery. The Minister informed the committee that it was not South Africa’s relationship with any particularly country that would specifically contribute towards better economic performance but economic recovery will be informed by the policy decisions taken to stimulate the economy. The USA has embarked on a reindustrialisation process which was contributing to its economic recovery. Another contributing factor is the availability of cheap energy in the USA. South Africa has just undergone an out-of-cycle review under AGOA with a need to reach agreement on poultry, beef and pork imports from the USA. The Minister informed the committee that AGOA has formed the basis of South Africa’s growing trade relations with the USA.

State of the steel industry: Government has been advocating for a developmental steel price to assist with revitalising industrial capacity and to contribute to government’s beneficiation drive. The current slowdown in growth in China has seen steel production surpass supply causing a global oversupply. The committee inquired that with the current status, what measures were government considering to protect South Africa’s local steel industry. The Minister responded that government, labour and business have come together to discuss efforts to protect the struggling steel sector. The hike of import duties on steel imports was under discussion. Business has turned to government for assistance and asked the International Trade Administration Commission for a maximum of ten per cent import tariff to be introduced on steel products to protect the local industry from the effects of cheap imports. Losing South Africa’s industrial capabilities in steel would have very serious implications for economic growth. Therefore, the Minister informed the committee that government has agreed to increase the tariff from zero to the bound rate of ten per cent to provide some tariff protection. This import levy will apply to imports of galvanized steel, aluminium-zinc coated steel and colour-coated steel and that there should be no retrenchments in these production lines over the next three years. The support for the steel industry should not encourage local steel producers to hide behind tariff protection and return to any form of market power abuse.

Performance of the EIP: The targets set by the EIP were not met. The committee would like to inquire to the reasons for this. The DTI acknowledged that it had not met the employment targets set for the scheme. The applications received by the DTI were mainly capital-intensive projects. The DTI has recognised this challenge and is adapting the incentive to strengthen the conditionality with respect to labour absorption. The EIP has been discontinued and merged with the MCEP. The result has been that here were more applications being received with fewer resources available.

Geographical indicator status of Rooibos tea: The committee asked whether the process regarding the geographical indicator status of Rooibos tea has been completed. The Minister informed the committee that Rooibos tea has secured geographic indicator status under the EPA with the European Union. The same trademark protection will also apply to honeybush and Karoo Lamb. This will become effective when the EPA comes into force.

Investment prospects for the Saldanha Bay IDZ: As part of its oversight the committee visited the Saldanha Bay IDZ, the committee inquired how many investors were in the pipeline for the IDZ. The DTI reported that a significant number of investors have shown interest in investing in the Saldanha Bay IDZ. As a result of Operation Phakisa initiatives, the Transnet National Ports Authority announced an investment of R9.65 billion to enhance the deep-water port’s ability to service the offshore oil and gas industry.

Financial and non-financial control measures at entities: The DTI had recognised that the boards of entities were not performing their fiduciary functions and ensuring good corporate governance. The DTI informed the committee that it had conducted its agency rationalisation project with the aim of assessing the effectiveness of boards as a governing structure for regulatory entities. The findings were that boards do not provide the most effective and optimal governing structure for regulatory entities, and as such a decision was taken to remove boards at regulatory entities and replace them with a Commissioner or a Chief Executive Officer to be supported by a Deputy or Deputies, as the case may be, with relevant governance committees required in line with the PFMA and other governance principles. The DTI was of the view that entities that are distributing resources and funds would still require a board but entities conducting a regulatory role should be brought into the DTI fold. Removing boards in regulatory entities would add more value to fast track service delivery. In order for the DTI to have a permanent oversight structure over entities, it established a structure for audit committees within entities it oversees which meet bi-annually to ensure continuous monitoring, review and evaluation of mechanisms to mitigate against potential risks. With respect to labour relations across the entities reporting to the DTI, it has, on the instruction of the Minister, created one collective bargaining arrangement to address labour challenges within the entities. The DTI informed the committee that it strives to ensure that its entities perform at a higher level thereby ensuring good corporate governance. The Minister welcomed the call from the committee that the DTI play a more active role in overseeing the activities of its entities. In the past, it was viewed by some entities that this was infringing on their independence. The Minister informed the committee that entities must implement the recommendations of the Auditor-General to ensure unqualified audit opinions.

The perceived lack of consequences associated with poor financial management and transgressions at the entities: The committee was of the view that it appeared that no action is being taken against poor financial and non-financial performance at entities. The committee inquired as to the measures considered by the DTI to address this. The DTI pointed out that the Minister and the DTI held quarterly meetings with the entities and the Auditor-General on its findings. Where necessary, the Minister has taken action where there has been financial misconduct within entities.

Concerns with respect to the quality of financial management systems at entities reporting to the DTI: Although the committee acknowledged the improvement in financial management and the non-financial performance of entities reporting to the DTI, it is concerned with the fact that the NRCS received a qualified audit report. The committee would like to inquire to the measures being considered by the DTI to ensure improvement in the financial and non-financial performance of its entities, especially the NRCS. The DTI acknowledged the challenges faced by the NRCS but informed that it is a technical qualification linked to the NRCS’ revenue model for collecting levies, the DTI and the NRCS had begun a process to address these issues. Currently, systems are being put in place to ensure that data is captured electronically to ensure that all levy payers are recognised on the financial systems. Furthermore, the DTI informed the committee that an application had been submitted for the Minister’s consideration to gazette that levy payers declare their production and/or import volumes to the NRCS on a quarterly basis. A legislative review is also underway that would ensure timeous and accurate disclosure of production and/or import volumes and levy payments to the NRCS. The DTI informed the committee that this issue cannot be fixed in this financial year and that it would require a 2-3 year process. The Minister assured the committee that the necessary measures will be put in place to ensure an unqualified audit opinion.

5. Financial and non-financial performance of identified entities

5.1. National Consumer Commission

The National Consumer Commission (NCC) was established by the Consumer Protection Act (CPA) (No. 68 of 2008) and became operational on 1 April 2011. The NCC’s core mandate is to assist in protecting consumer rights by increasing consumer awareness of what these rights are; investigating prohibited conduct by business; and enforcing compliance with the provisions of CPA.

This core mandate falls within the DTI’s strategic objective to “create a fair regulatory environment that enables investment, trade and enterprise development in an equitable and socially responsible manner”. The NCC, therefore, has a critical role to play in empowering vulnerable consumers, including low income consumers, consumers from rural areas and previously disadvantaged individuals, who are often most affected by unfair business practices and least able to address these challenges.

According to the Act, the NCC’s functions include the:

· Development of codes of good practice relating to the provisions of the Act.

· Promotion of legislative reform through consultation with provincial consumer protection authorities, national organs of state, consumer protection groups, alternative dispute resolution agents and suppliers.

· Promotion of consumer protection within organs of state.

· Enforcement of the Act including the investigation and evaluation of any prohibited conduct and offences, issuing and enforcing compliance notices.

· Research to increase knowledge of the nature and dynamics of the consumer market.

· Promotion of public awareness of consumer protection matters.

· Liaison with other regulatory authorities on matters of common interest.

· Provision of advice and recommendations to the Minister.

The NCC’s strategic objectives are to:

· Promote compliance with the Consumer Protection Act; and

· Be a well-governed and capacitated organisation.

5.1.1. Non-financial performance

5.1.1.1. Non-financial performance for the 2014/15 financial year

The NCC had reported a number of achievements, including:

· Increased number of investigations and inspections finalised on non-pressure paraffin stoves and heaters, the labelling of food products, and the timeshare industry (52 against a target of 30 investigations and inspections finalised).

· Increased number of consumer awareness initiatives, such as television and radio interviews and advertising in various media, as well as holding 17 exhibitions against a target of eight exhibitions.

· The development, approval and partial implementation of its ICT Strategy.

However, two of the 11 output areas were not fully achieved for the financial year. The output areas not achieved were:

· The two targeted research reports were produced but the reports were not submitted to the Minister for issuing, as there had been insufficient time set aside to edit these.

· Consumer awareness initiatives conducted, in particular the target to establish one school consumer club was not met, as the NCC had been awaiting the decision from the school governing body. It, therefore, shifted resources to holding additional exhibitions due to stakeholder demand.

Furthermore, the NCC had adjusted some of its targets during the financial year. Two targets related to the submission of the first draft of the annual report and updating the risk register were deleted as these were part of the ordinary business of a Schedule 3 entity. Three others were adjusted, namely:

· Attendance to media enquiries – the target was amended to make it more specific.

· Participation in national and/or international conferences – specific conferences were identified, which the NCC intended to participate in.

· One research report submitted to Minister – the target was adjusted to two research reports and the research topics were stipulated. These were on funeral services and tow truck services.

5.1.1.2. Non-financial performance as at 30 June 2015

The NCC highlighted that in conjunction with the NRCS, it had launched a joint winter safety campaign, which focused on unsafe and non-compliant paraffin stoves affecting vulnerable consumers. This campaign involved inspections within the Kya Sands informal settlement and neighbouring businesses, raising consumer awareness and swapping residents’ noncompliant stoves with compliant ones. In addition, it had been increasing its visibility and had launched the Consumer Goods and Services Code.

However, it had only met six of its 17 first quarter targets. The following key areas were not fully achieved:

· MOUs between the NCC and the Motor industry Ombud (MIOSA), and Consumer Goods and Services Ombud (CGSO) have been drafted and circulated for comments. The MOU with MIOSA was awaiting signature by the parties. However, the MOU between the NCC and CGSO was being amended at the time to include monitoring on corporate governance issues.

· The advertising industry had been identified for development of an industry code. A guideline had been developed for the industry and the drafting of the MoU for the accredited Ombuds had received priority. The second industry would only be identified in the second quarter.

· Code of Good Practice for the interpretation of Rights in section 23 to 28 of the CPA had been approved by the Commissioner after internal consultation was finalised. This were yet to be published for public comments. The scope for the Code of Good Practice for the towing industry was still in draft form and was not yet approved for engagement with the industry. The drafting of the MoU for the accredited Ombuds received priority instead.

· The terms of reference for the Opt Out Register had to be drafted and a tariff structure approved by the Commissioner for submission to Minister for approval. However, this had been delayed when it became apparent that a private-public partnership (PPP) would be the most appropriate vehicle for the Register. A request for approval of funding for a PPP feasibility study was completed and approval is still awaited from National Treasury before the project can continue.

· Not all planned consumer awareness or business workshops were held, as the responsible unit had to deploy its resources towards the implementation of the winter safety awareness campaign. Further workshops had been scheduled for execution during the second quarter.

5.1.2. Human resources

The NCC’s structure has 182 approved posts but only 83 posts are funded. At the end of March 2015, 76 posts were filled. The vacancy rate against the approved structure is 58.2 per cent; while against funded posts, this was only 8.4 per cent.

Table 11: Employment information as at 31 March 2015

	Actual
Approved Posts	182
Number of employees	76
Vacancy Rate	106 (58.2% of approved posts)
Female Employees	39 (21.2% of employees)
Black employees	75 (41.2% of employees)
Women in Top and Senior Management Service (TSMS)	5 (2.7% of TSMS)
Employees with Disabilities	1 (0.5% of employees)
Employee Turnover	5 (2.7% of employees)

Source: NCC (2015:96-97)

The NCC had proposed that the unfunded, non-critical posts be abandoned, as most of the vacant positions are not funded and increases in the budget over the 2015/16-2017/18 period will not be adequate to fund all the vacancies. A number of critical posts need to be created within the organisational structure including inspectors, investigators, researchers and legal experts.

The NCC has had historical issues in terms of staff capacity, knowledge and competence to enforce the Consumer Protection Act and comply with the PFMA. However, its budgetary constraints have inhibited its ability to outsource training and thus in-house training was offered. In the 2014/15 financial year, it had spent R152 000 on training its staff (0.5 per cent of personnel cost)[15]. It had trained 49 of its employees mostly on MS Excel skills to improve the operation of its contact centre and for reporting of performance information.

5.1.3. Financial performance

5.1.3.1. Financial performance for the 2014/15 financial year

The NCC received a transfer of R53.4 million from the DTI, a 17.3 per cent increase from the 2013/14 financial year. It also received interest income of R1.5 million and a supplier discount of R8 080. The NCC spent R51.4 million, leaving a surplus of R3.5 million or 6.3 per cent of total revenue, which is just outside the accepted range of 5 per cent of revenue.

Employee related costs amounted to R32.6 million or 63.4 per cent of total expenditure. Employee related costs increased by 16.3 per cent since the 2013/14 financial year.

In the 2014/15 financial year, operating expenditure was R17.1 million compared to R15 million in the 2013/14 financial year, representing a 13.6 per cent increase in expenditure. There had been significant increases in expenditure on advertising, catering and stationery in line with the ramping up of consumer awareness initiatives as requested by the Minister and the committee.

Table 12: Income and expenditure for the 2014/15 financial year

	2013/14	2014/15	Nominal change (%)
Government grant and subsidies	45 498 094	53 376 000	17.3%
Interest received - investment	358 043	1 522 431	325.2%
Other income	14 250	8 080	-43.3%
Total income	45 870 387	54 906 511	19.7%
Employee related costs	28 045 226	32 605 458	16.3%
General expenses	14 950 959	16 995 786	13.7%
Finance costs	26 418	-	-
Repairs and maintenance	105 823	92 962	-12.2%
Bad debts	(34 656)	10 942	-131.6%
Depreciation and Amortisation	1 822 520	1 736 656	-4.7%
Total expenditure	44 916 290	51 441 804	14.5%
Surplus/(deficit)	954 097	3 464 707	263.1%

Source: Own calculations based on NCC (2015: 59)

The NCC had accumulated irregular expenditure of R30.3 million by the end of the 2013/14 financial year, which had been condoned in the 2014/15 financial year. However, the NCC incurred new irregular expenditure of R7.3 million. This was mainly due to the continuation of contracts which had been identified as irregular by the Auditor-General since the 2011/12 financial year. This related to non-compliance with Treasury Regulations related to procurement and supply chain management and the theft of certain financial and procurement records.

In terms of fruitless and wasteful expenditure, the NCC carried over R3.6 million from the 2013/14 financial year, which had mainly been incurred before this. The NCC had incurred a further R11 300 in the 2014/15 financial year. This was due to catering at an education and awareness event that had not materialised, as the NCC officials were unable to reach the event on time due to the late delivery of the hired vehicle for the event.

Auditor-General’s Report

The NCC received an unqualified audit opinion with findings, as it had disclosed an accumulated surplus of R3.5 million that was retained without approval from National Treasury with no provision for any liability that may result if the request for approval is unsuccessful. The Auditor-General had raised this emphasis of matter since the 2012/13 financial year.

The Auditor-General evaluated the usefulness of reported performance information in relation to the National Treasury’s annual reporting principles and their consistency with the planned programmes, as well as whether this information is valid, accurate and complete (i.e. the reliability of the information). For the 2014/15 financial year, the Auditor-General identified a material finding in terms of the reliability of reported performance information in that there was a lack of adequate and reliable evidence to corroborate the date of registration of the registered complaints.

Furthermore, the Auditor-General found non-compliance in terms of the Public Finance Management Act (No. 1 of 1999); where the accounting authority had not taken effective steps to prevent irregular expenditure. This had also been reported in the 2013/14 financial year. However, effective steps against fruitless and wasteful expenditure had been taken since the 2013/14 financial year.

In terms of internal control, the Auditor-General found that management had not implemented proper record keeping in a timely manner to ensure the accessibility and availability of complete, relevant and accurate information to support performance reporting. This had also been reported in the 2013/14 financial year.

5.1.3.2. Financial performance as at 30 June 2015

The NCC received a transfer of R16.4 million from the DTI, and a further R0.4 million from interest and other income. The NCC spent R12 million, compared to the quarterly budget of R16.4 million. The NCC had a surplus of R4.8 million or 28.6 per cent of total revenue at the end of the quarter. Although this is a large proportion of under-spent funds, spending within the first quarter tends to be low and picks up after the second quarter. However, this also coincides with a lower level of non-financial performance.

Employee related costs amounted to R8.4 million or 70.2 per cent of total expenditure. Operating expenses were R3.1 million or 25.9 per cent of total expenditure.

No additional fruitless and wasteful expenditure had incurred during the first quarter. However, the NCC had incurred R1.6 million in irregular expenditure by the end of June 2015. This was mainly due to non-compliance with Treasury Regulations related to procurement and supply chain management from expenditure related to contracts continuing from the 2011/12 financial year.

5.1.4. Key issues raised by the committee

The following concerns were raised related to the performance of the NCC during the committee’s deliberations:

Measures to prevent future irregular expenditure: The committee was concerned about the matter raised by the Auditor-General with respect to ongoing irregular expenditure from irregular procurement processes in prior financial years. The committee inquired what measures were taken to prevent and curtail future irregular expenditure. The NCC responded that the irregular expenditure relates to the ongoing lease agreement which had not complied with supply chain management policies and directives when contracted in the 2011/12 financial year. This contract constitutes 74 per cent of the ongoing irregular expenditure and was identified by the Auditor-General in the 2011/12 to 2013/14 financial years. The NCC had not terminated the contract prior to the date of expiry, as this would result in fruitless and wasteful expenditure and was too costly. The NCC informed the committee that it had renegotiated, in its favour, the operating lease for the building during the 2012/13 financial year and the lease would expire on 30 September 2016. The renegotiation resulted in a significant reduction in costs over the duration of the lease. The NCC indicated that it is in the processing of assessing if value for money was received from the lease to apply for condonation of this expenditure. The necessary control measures have been implemented, with day to day control measures aligned, to prevent further irregular expenditure.

Reliability of performance information submitted to the Auditor-General: The committee raised a concern that the accessibility to, and the accuracy of information to support performance reporting remains a challenge for the NCC. The committee queried the measures being considered to address this shortcoming. The NCC informed the committee that its ICT environment was unstable, which compromised the availability and accuracy of information provided with respect to performance. Ninety-five per cent of complaints were received through emails, but when the server is down, a disjuncture with the actual time an email was received and the received date stamp given when the system is functional is created. The NCC has developed and implemented a standard operating procedure in consultation with internal audit. This control measure would serve as the necessary check and balance to ensure the reliability of information. With an improved and stable ICT environment, date stamps will be utilised through the referral process value chain. The NCC has recently appointed an IT manager who will be responsible for the control and effective functioning of the referral process value chain.

The status of the contractor responsible for Information Technology systems: The Auditor-General identified Information Technology systems as a major impediment for the NCC. The committee would like to inquire whether the external contractor appointed to address the shortcomings has been appointed for a year, where afterwards IT support would be provided internally, or whether the contractor has been appointed to provide IT support on a continuous basis. The NCC informed the committee that it had already commenced implementing a turnaround strategy to its Information and Communication Technology system which resulted in an improved performance culminating in greater access to its website. Access to internet and email services have significantly improved with limited or no interruptions or downtime. This has resulted in an improvement of access by consumers to the NCC’s contact centre. The NCC informed the committee that a project has been launched focusing on addressing all ICT related contracts and challenges to ensure that the IT service environment is stabilised. An external contractor has been appointed for period of 12 months with the contract concluding on 31 August 2016. This will be a dedicated process ensuring that the necessary skill transfer takes place to ensure that the NCC is self-sufficient and have its own capacity at the end of this process.

Process in dealing with complaints and measurement of customer satisfaction: The committee inquired to the process of dealing with complaints and whether the NCC has data on customer satisfaction. The NCC informed the committee that it does not have data on customer satisfaction. When a complaint is received, it is acknowledged and given a reference number within three working days. The consumer will receive further notification within 8 days of the completion of the analysis process. This information will contain the name of the analyst and whether the complaint has been referred to an ombudsman. The NCC informed the committee that it is permitted to make two types of referrals, one a referral to other alternative dispute resolution agents or ombuds or to the supplier and the other, a non-referral. A non-referral generally relates to matters that fall outside the jurisdiction of the NCC.

Significant increases in certain operational expenditure: The committee noted significance increases in the operational expenditure related to advertising, catering, computer services and stationery, among others. The committee inquired whether these increases had been budgeted for in the period under review. The NCC responded that its operational expenditure does reflect a significant increase in certain items. This is related to the increase in awareness campaigns conducted by the NCC which resulted in the increase in advertising and related catering costs. This also included the cost of marketing material used for the outreach programme. With regard to stationery costs, the NCC replied that as a consumable product, the stationery stocks had been reduced substantially and the NCC had to replenish its stock to the required level.

The process of restructuring: The NCC informed the committee that it is in the process of organisational restructuring. The committee inquired whether this process only related to the unfunded posts. The NCC responded that only 132 posts were initially approved with the establishment of the NCC in 2010. The previous Commissioner appointed 38 people in positions outside the approved structure and appointed them as permanent employees before her departure in these positions. The Minister had subsequently taken a decision to retain all staff and incorporate them into the permanent establishment of the NCC. This led to a new organisational structure comprising 182 posts, of which 83 were funded. In reviewing its needs and requirements as an organisation, the NCC concluded that it does not require all existing unfunded positions and a process of restructuring will be undertaken. The NCC informed the committee that the filling of critical funded posts are essential and that the process of restructuring will be tailored to the requirements of the NCC.

5.2. National Credit Regulator

The National Credit Regulator (NCR) falls under the Consumer and Corporate Regulation Division within the Department of Trade and Industry (DTI). The NCR was established under the National Credit Act (No. 34 of 2005) and is responsible for the regulation of the South African credit industry in terms of consumer protection. It is tasked with carrying out consumer credit education and public awareness campaigns, research, policy development, registration of industry participants, investigation of complaints, and ensuring the enforcement of the Act.

The Act requires the NCR to promote the development of an accessible credit market, particularly to address the needs of historically disadvantaged persons, low income persons, and rural communities. The NCR is also tasked with the registration of credit providers, credit bureaus, debt counsellors, payment distribution agents (PDAs) and alternative distribution agents; and with the enforcement of compliance with the Act as amended.

5.2.1. Non-Financial Performance

5.2.1.1. Non-financial performance for the 2014/15 financial year[16]

In terms of non-financial performance for the 2014/15 financial year, the NCR highlighted the following achievements:

The National Credit Amendment Act (No. 19 of 2014) became effective on 13 March 2015. The amended legislation introduces stricter criteria for conducting affordability assessments and greater consumer protection under debt review.
The draft Regulations in relation to credit life insurance, interest rates and fees, registration thresholds were submitted to the DTI for publication.
The R699 vehicle scheme was investigated, which resulted in three banks being referred to the National Consumer Tribunal (the Tribunal).
Big retailers were investigated and referred to the Tribunal for mis-selling credit life insurance, charging club fees inappropriately and reckless lending.
Refunds to consumers were R176 million affecting over 200 000 consumers.
Forty-eight cases were referred to the Tribunal and 17 were finalised resulting in fines of R3 million.
Twenty-five compliance notices were issued.
There had been a clamp down on illegal adverts in newspapers relating to the extension of credit to “blacklisted” clients.
Raids were conducted in five provinces resulting in the retrieval of a substantial number of ID books, bank and SASSA cards.

The NCR had 13 performance targets, of which eleven were reported to be achieved or exceeded. The remaining two were partially achieved, these were:

Three workshops were planned to be conducted on the affordability assessment regulations. However, only one was conducted as there was a delay in publishing the final Regulations.
Study to review the current levels of the cost of credit was partially achieved. There had been a delay in receiving the legal opinion from the Competition Commission on the approach to be adopted in the review. Thus, the NCR appointed the service provider late. The report was intended to be submitted to the DTI in April 2015.

5.2.1.2. Non-financial performance as at 30 June 2015

The NCR identified 11 performance targets for the 2015/16 financial year. It had achieved nine of its quarterly milestones. The NCR highlighted the following achievements for the first quarter:

The draft credit life insurance regulations were submitted to the DTI for consideration.
A raid focussing on the unlawful retention of bank cards and ID books was conducted in the Free State province and 27 credit providers were raided leading to the retrieval of bank cards and criminal cases being opened.
Four credit providers were referred to the NCT for reckless lending, increasing consent to jurisdiction, overcharging, unlawful credit agreements and charging unreasonable credit life insurance.

It had not achieved the following two milestones:

Three of the four planned investigations were conducted. The non-achievement was due to credit providers not cooperating in supplying the required information, summons were issued to non-cooperative credit providers.
Due to budget constraints the terms of reference to appoint an external service provider to investigate two credit bureaus were not drafted. Management decided to conduct these investigations internally instead.

5.2.2. Human Resources

The NCR is a service based entity, therefore, its ability to deliver against its mandate is heavily dependent on the quality of its human resources. In this regard, human resources are critical.

Table 13: Employment information as at 31 March 2015

	Actual
Approved Posts	169
Number of employees	153
Vacancy Rate	16 (9.5% of approved posts)
Female Employees	98 (64.1% of employees)
Black employees	144 (94.1% of employees)
Women in Top and Senior Management Service (TSMS)	6 (60% of TSMS)
Employees with Disabilities	2 (1.3% of employees)
Employee Turnover	16 (9.5% of employees)

Source: NCR (2015a: 53-55)

The NCR identified that attracting and retaining talent is an ongoing challenge. This is heightened by the fact that the NCR’s core functions – compliance, complaints, investigation and enforcement require a unique mix of knowledge that spans the legal and financial fields. The NCR also competes with other regulators and the private sector for skilled employees.

5.2.3. Financial Performance

The NCR’s revenue consists of a transfer from the DTI; application, registration and other fees from registrants, such as credit providers and credit bureaus; fee income from the National Loans Register and other income.

5.2.3.1. Financial performance for the 2014/15 financial year

For the 2014/15 financial year, the NCR had R103.3 million in income, R8.3 million higher than the previous financial year but R7.5 million lower than the targeted income. The lower income was mainly due to fees from registrants of R12.8 million not being generated as expected. This was attributed to the late implementation of the National Credit Amendment Act. The amended Act requires PDAs and alternative dispute resolution agents to also be registered, which would result in increased fees from applications, as well as annual registration fees. However, the NCR received an additional R5 million from the DTI in the fourth quarter. In terms of other income, the NCR received a grant of R303 558 from the Bank Sector Education and Training Authority (Bankseta) for 20 appointed learners; R110 731 for insurance claims and R69 531 as an electricity reimbursement for a billboard from Ad-outpost.

Table 14: Income and expenditure for the 2014/15 financial year

	2013/14	2014/15	Nominal change (%)
Revenue from exchange transactions
Other revenue	908 329	307 820	-66.1
Interest received	2 165 199	1 380 645	-36.1
Total Revenue from exchange transactions	3 073 528	1 688 465	-45.1
Revenue from non-exchange transactions
Fees from registrants	30 465 187	31 202 448	2.4
DTI transfers	60 691 000	68 845 000	13.4
Other revenue	747 823	1 563 067	109.0
Total Revenue from non-exchange transactions	91 904 010	101 610 515	10.6
Total income	94 977 538	103 298 980	8.8
Expenditure
Personnel costs	57 497 248	68 154 951	18.5
Operating expenses	30 035 200	22 246 012	-25.9
Depreciation and Amortisation	3 628 306	4 261 379	17.4
Impairment costs	237 945	213 534	-10.3
Finance costs	5 321	4 211	-20.9
Administrative expenses	29 616 025	22 451 392	-24.2
Total expenditure	121 020 045	117 331 479	-3.0
Surplus/(deficit)	-26 042 507	-14 032 499	-46.1

Source: NCR (2015a: 64)

The NCR spent R117.3 million, R4 million higher than its targeted expenditure of R113.3 million. Expenditure within a five per cent variance of the targeted amount is generally accepted as minimal; therefore, variances greater than this are discussed below.

The NCR highlighted that it faced a funding challenge. Insufficient funding will affect a number of areas, such as office space, recruitment, investigations and consumer education, and may negatively impact on their service delivery.

Auditor-General’s report

The NCR received an unqualified audit opinion with no findings. In addition, the Auditor-General had not made any material findings in terms of the usefulness or reliability of performance information.

5.2.3.2. Financial performance as at 30 June 2015

The NCR received R45.7 million in income for the first quarter against a budget of R47.2 million. Fees from registrants were 22 per cent lower than anticipated. This was primarily due to less fees being received than budgeted for from annual registration fees and branch fees, a negative variance of 26.2 per cent and 33.2 per cent respectively. However, more income than was budgeted for (an additional R0.3 million) was received from fees for additional branches being opened.

The NCR projected spending of R21.9 million during the first quarter. It spent R23.3 million, a 6.2 per cent over-spending. The NCR attributed this over-spending mainly to timing differences when invoices were received in relation to when these were budgeted for.

Table 15: Revenue and expenditure as at 30 June 2015

	Total Annual Budget (R'000)	YTD Budget (R'000)	Actual (R'000)	Variance (%)	Available budget (%)
Fees from registrants	55 051 554	7 023 965	5 479 320	22.0%	90.0%
DTI transfers	65 727 000	39 436 000	39 436 000	0.0%	40.0%
Other income	3 000 000	764 061	751 334	1.7%	75.0%
Total Income	123 778 554	47 224 026	45 666 654	3.3%	63.1%
Personnel costs	78 781 124	15 175 824	15 346 933	-1.1%	80.5%
Programme costs	22 213 041	3 182 718	3 250 887	-2.1%	85.4%
Administrative costs	17 684 850	3 546 261	4 660 325	-31.4%	73.6%
Total Expenditure	118 679 015	21 904 803	23 258 145	-6.2%	80.4%
Surplus	5 099 539	25 319 223	22 408 509

Source: Own calculations based on NCR (2015b)

5.2.4. Key issues raised by the committee

The following concerns were raised related to the performance of the NCR during the committee’s deliberations:

ICT challenges facing the NCR: The committee noted that the Auditor-General had highlighted the lack of IT security management and service continuity as a major concern. The committee inquired what steps the NCR had undertaken to address this. The NCR replied that it was using an IT system inherited from the former Micro Finance Regulatory Council (MFRC). While the NCR was in the process of developing a new ICT system, it discovered some challenges relating to certain subsystems in the new ICT programme. The NCR then took a decision to manage the implementation of the system and are proceeding cautiously with one subsystem implemented at a time. In the interim, the NCR will continue to use the ICT system inherited from the MFRC until all the subsystems are implemented and fully operational.

Rationale for the decline in fees: The committee noticed the decline in fees generated from registrations. The NCR informed the committee that this decline was associated with the delay in the publication of the Regulations requiring that payment distributing agencies and alternative dispute resolution agencies should be registered with the NCR. The NCR is also looking at alternative sources of income such as increasing the fees of registrants.

Current status of the credit market: The committee inquired to the status of the credit market and the impact of the NCR programmes thereon. The South African credit market was valued at R1.3 trillion and consisted of 23 million active consumers. Forty-five per cent of these consumers were considered to have impaired credit records. With the removal of the adverse credit information in 2014, the figure had dropped to 44 per cent but had subsequently risen to 45 per cent.

Setting of annual performance targets: The committee on numerous occasions had raised a concern that the NCR was setting its performance targets at a level that was too low. The committee inquired whether the NCR had considered raising its target in its next annual performance plan. The NCR noted the concerns raised by the committee with respect to the low performance targets and informed the committee that it was their intention to review their targets upwards in future.

Progress on regulatory improvements: The committee inquired to the status of the development of regulations for caps on credit life insurance and the maximum interest rates on credit, as well as addressing the use and cost of emolument attachment orders. The NCR informed the committee that the Minister had consulted with the Minister on Finance on introduction of credit life insurance caps as prescribed the National Credit Amendment Act (No. 19 of 2014), which is being supported by the Minister of Finance. The DTI will ensure that the draft regulations are submitted for public comment before concluding these. In terms of the regulations on the maximum interest rates of credit, the NCR responded that the process was in its final stages and that the DTI would soon make an announcement on it. In terms of emolument attachment orders, the NCR informed the committee that the DTI made a submission to the Department of Justice and Constitutional Development in respect of the Magistrates Courts Amendment Bill.

Labour relations matters: The committee inquired to the status of disciplinary hearings at the NCR. The NCR informed the committee that one matter has been referred to the CCMA and that the other disciplinary hearing has been completed but the report was still outstanding.

5.3. National Regulator for Compulsory Specifications (NRCS)

The National Regulator for Compulsory Specifications (NRCS) is national regulatory agency.

Its mandate is to protect consumers and the environment against unsafe and harmful products through ‘locking out’ non-compliant products from trade in the domestic market. This is done by means of surveillance at the ports of entry into South Africa and within the country. The NRCS develops and enforces compulsory specifications that promote public safety and protect consumers and the environment.

The NRCS derives its legislative mandate from a number of pieces of legislation including:

The National Regulator for Compulsory Specifications Act (No. 5 of 2008),
The Legal Metrology Act (No. 9 of 2014),
The National Building Regulations and Building Standards Act (No. 103 of 1977),
The Public Finance Management Act (No. 1 of 1999), and
The National Road Traffic Act (No. 93 of 1996), among others.

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

5.3.1. Non-financial Performance

5.3.1.1. Non-financial performance for the 2014/15 financial year

For the 2014/15 financial year, the NRCS had 39 performance targets. Of which, 15 were achieved, including:

Developed and approved the National Building Regulations Strategy.
Conducted in-scope retail inspections: 3 143 in the Chemicals, Mechanical and Materials sector; and 1 212 in the legal metrology domain.
Inspected all declared locally produced canned fish and meat products and frozen fish product consignments, as well as concluded all requests for export inspections and certificates for fish and fishery products and canned meat consignments.
Inspected 1 074 fishery and canned meat processing factories and vessels.
Conducted 13 consumer education events and campaigns.
Trained 301 employees including a Competency Development Programme for inspectors and a Management Development Programme.

Among the performance targets which were not achieved, were:

Only seven of the planned 12 compulsory specifications or technical regulations were approved.
The Research and Development Strategy was approved by the Accounting Authority, and two technical publications were published but not approved by the Board.
No cases were concluded within the 90 day target from a Review Board appeal to the Tribunal Report issuance in accordance with the National Building Regulations and Building Standards Act, as Review Board activities were temporarily suspended.
In line with the NRCS Strategy, resources were used for targeted inspections at all ports of entry. A total of 4 511 inspections were conducted in the automotive sector comprising 2 365 in-scope inspections and 2 146 out of scope inspections where no regulated products were found. This resulted in the targets for in-scope source, border and retail inspections not being met.
In the chemicals, mechanical and materials sector, a number of non-compliant products on the market, which led to resources being channelled towards retail inspections and the targeted in-scope inspections at source and at the border not being achieved.
The 120 working days target to process approvals for Letters of Authority were exceeded in all sectors due to the submission of insufficient documentation and no admissible test reports. In the chemicals, mechanical and materials and electro technical sectors this was also due to an increase in the number of submissions received. The sectors performed as follows: automotive – 99.6 per cent of applications processed within the deadline; chemicals, mechanical and materials – 66 per cent of applications processed within the deadline; and electro technical – 94.2 per cent of applications processed within the deadline.
Due to inadequate human resource capacity, 15 vacancies were filled outside the recruitment turnaround target of three months

5.3.1.2. Non-financial performance as at 30 June 2015

The NRCS had identified 28 performance targets for the 2015/16 financial year. It had achieved 10 of its 25 first quarter targets. It also highlighted that it had embarked on the Winter Campaign with the NCC (see section 5.1.1.2 for more detail.)

The NRCS noted the following key areas that were not achieved:

· No compulsory specifications (VCs) were sent for approval by the Executive Authority. These are developed over a period of 24 months and there are a number of projects under development which will be finalised during the financial year. Two VCs were delayed due to delays in the development of standards.

· Five Review Board cases were finalised; however, the NRCS had a challenge in meeting the set timeframes of finalising cases, due to suspension of services by the Review Board Chair. This matter had been resolved during the first quarter.

· With the change in the NRCS’s approach to inspecting products for compliance with compulsory specifications and technical regulations, the quarterly in-scope inspection targets were not met. The actual performance was as follows:

o Automotive sector: source inspections – 24.9 per cent of the target was met and retail inspections – 25.8 per cent of the target was met.

o Chemicals, Materials and Mechanicals sector: source inspections – 29 per cent of the target was met and retail inspections – 28.5 per cent of the target was met.

o Electro-technical sector: source inspections – 63.1 per cent of the target was met and retail inspections – 169.9 per cent of the target was met.

o Legal Metrology: source inspections – 75 per cent of the target was met and retail inspections – 119.5 per cent of the target was met.

· The 120 days to process LOA applications was not fully met. The variance was mainly attributed to insufficient documentation being submitted and backlogs from the previous year. The performance was as follows:

o Automotive sector: 98.5 per cent of applications were processed within the target.

o Chemicals, Materials and Mechanicals sector: 44.4 per cent of applications were processed within the target.

o Electro-technical sector: 67.6 per cent of applications were processed within the target.

5.3.2. Human Resources

The NRCS’s key employment statistics are highlighted in Table 16 below.

Table 16: Employment information as at 31 March 2015

	Actual
Approved Posts	324
Number of employees	302
Vacancy Rate	22 (6.8% of approved posts)
Female Employees	121(37.3% of employees)
Black employees	265 (81.7% of employees)
Women in Top and Senior Management Service (TSMS)	15 (4.2% of TSMS)
Employees with Disabilities	1 (0.3% of employees)
Employee Turnover	7 (2.5% of employees)

Source: NRCS (2015: 64-65)

5.3.3. Financial Performance

5.3.3.1. Financial performance for the 2014/15 financial year

In the 2014/15 financial year, the NRCS’s income totalled R319.9 million, an increase from the previous financial year’s income of R283.6 million. The DTI’s funding is the second largest sources of funds for the NRCS. For the 2014/15 financial year, amount of R109.7 million was transferred to the NRCS, amount makes up 34 per cent of the entity’s income. The largest share of the Agency’s revenue income is acquired from Levy from Compulsory Specifications, which amounted to R165.5 million translating to 51.7 per cent.

Table 17: Revenue and expenditure for the 2014/15 financial year

	2013/14	2014/15	% Change	Share 2014/15
Revenue
Non-exchange revenue	243 811 820	276 855 560	13.6%	86.5%
Levy from Compulsory Specifications	139 236 692	165 502 808	18.9%	51.7%
Transport Annual Registration fee	1 575 128	1 618 752	2.8%	0.5%
Core funding	103 000 000	109 734 000	6.5%	34.3%
Other revenue
Revenue from services rendered	33 511 745	42 263 859	26.1%	13.2%
Sundry income	6 331 928	783 371	-87.6%	0.2%
Total Income	283 655 493	319 902 790	12.8%	100%
Expenditure
Advertising and marketing expenses	2 496 093	2 310 276	-7.4%	-0.9%
Amortisation of intangible assets	559 547	520 697	-6.9%	0.2%
Contract services	11 791 491	6 983 776	-40.8%	2.5%
Depreciation	2 218 148	2 172 071	-2.1%	0.8%
Employment cost	178 278 802	217 186 399	21.8%	78.0%
Impairment	575 108	-	-	-100.0%
Office rentals and other operating lease expenses	13 874 568	12 260 913	-11.6%	4.4%
Tests and sampling	5 829 178	4 356 623	-25.3%	1.6%
Travel expenditure	13 865 693	10 683 074	-23.0%	-5.0%
Other expenditure	16 458 555	22 037 690	33.9%	7.9%
Expenditure	245 947 183	278 511 519	13.2%	100%
Operating surplus for the year	37 708 310	41 391 271
Interest received	7 186 759	11 022 920
Finance cost	-12 216	-2 069
Surplus for the year	44 882 853	52 412 122

Source: NRCS (2015: 72)

The NRCS spent R278.5 million, leaving a surplus of R52.4 million. The largest expenditure item for the NRCS is employee costs which amounts to R217.2 million (78 per cent of total expenditure) followed by travel expenditure at R10.7 million and office rentals and other operating lease expenses at R12.3 million.

There was significant decrease in expenditure in contract services, office rentals and other operating lease expenses, and tests and sampling services. Increases in expenditure were seen in employment costs and travel expenditure.

Auditor-General’s Findings

The NRCS received a qualified audit for the second consecutive financial year. The Auditor-General’s main concern was in relation to the non-exchange revenue from levies for compulsory specifications. He noted that the levy forms were being sent late to levy payers and were still being received and captured for the January to June levy period, which resulted in levies being recognised in the incorrect financial period and/or records were incomplete for the financial period. The Auditor-General stated that this is a recurring issue that the oversight responsibility has not yet resolved and had been raised in the previous financial year’s audit.

The Auditor-General also identified that the accounting authority had not taken effective steps to prevent irregular expenditure as required by section 51(1)(b)(ii) of the PFMA. The NRCS had incurred irregular expenditure amounting to R7.3 million in the 2014/15 financial years and R5.8 million in the previous financial year.

5.3.3.2. Financial performance as at 30 June 2015

The NRCS received income of R65.4 million during the first quarter against a budgeted income of R42.9 million. This was mainly due to the DTI transferring the first and second quarter funds during the first quarter and interest income. Although there was a 52.3 per cent increase in actual versus budgeted income for the quarter, this only represented 18.3 per cent of the total budgeted income.

Table 18: Financial performance as at 30 June 2015

Description	Total Annual Budget (R'000)	YTD Budget (R'000)	Actual (R'000)	Variance (%)	Available Budget (%)
Income
Transfers from the DTI	91 732	22 933	45 870	100.0%	50.0%
Interest income	51 100	37	3 141	8 389.2%	93.9%
Levies from compulsory specifications	158 941	5 557	5 936	6.8%	96.3%
Services	39 713	10 673	10 084	-5.5%	74.6%
Levy audits	5 000	1 250	0	-100.0%	100.0%
Other income	10 001	2 492	364	-85.4%	96.4%
Total Income	356 487	42 942	65 395	52.3%	81.7%
Expenditure
Compensation of employees	249 612	60 027	50 865	15.3%	79.6%
Goods and services	106 892	29 174	14 037	51.9%	86.9%
Expenditure	356 403	89 201	64 902	51.9%	86.9%
Surplus for the period	83	-49 259	493

Source: NRCS (2015b: 23)

During the first quarter, the NRCS spent R64.9 million against a budgeted expenditure of R89.2 million. This was due to delays in recruiting additional staff and underspending on goods and services. The main areas of underspending included on: consumables and laboratory testing (R2.4 million), local travel (R2.3 million), audit expenses (1.8 million) and insurance (R1 million).

5.3.4. Key issues raised by the committee

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

Cooperation with regional and international accredited testing bodies: The committee inquired whether South Africa accepts testing reports from international testing laboratories as this would contribute to a reduction in process time. The NRCS confirmed that it does accept reports from international testing laboratories accredited in terms of the ISO 17000 standards. However, the tests performed must comply with South Africa’s technical regulations and compulsory specifications for the report to be valid. Furthermore, the NRCS is required to verify that products in the marketplace that have been issued with a Letter of Authority continue to comply with the technical regulations and compulsory specifications. The NRCS has found that companies may lower the standard of a product once a LOA has been issued and products go into production.

Letters of Authority application process: On numerous occasions, the delay in issuing of Letters of Authority has been raised. The committee also recently held a colloquium with industry players to discuss how to balance the impact on business and the need to ensure that consumer safety is not compromised in the process. The committee inquired whether the NRCS could provide a progress report on measures being considered to address this challenge. The NRCS informed the committee that after the colloquium it undertook to investigate the development of a risk-based approach for the issuing of LOAs. A firm of attorneys was appointed to assist in this regard and a report should be finalised by 2016. The NRCS is also exploring other measures to reduce the time period by reorganising its internal processes to expedite the processing of LOA applications. This will be considered but should not compromise the safety of products in the marketplace or adherence to the necessary technical regulations and compulsory specifications. The DTI stressed that the facilitation of job creation opportunities and the consumer protection is paramount to this process. From a policy perspective, the DTI informed the committee that the Minister is currently considering reducing the prescribed time for processing LOAs to balance the need of protecting consumers from unsafe products and the industry from illegal or harmful imports, while at the same time protecting existing and stimulating the creation of new jobs. The processing time for the LOA application process may be reduced to 120 calendar days as opposed to 120 business days.

Reliability of performance information: The committee highlighted the challenges raised by the Auditor-General with respect to the reliability of the performance information and inquired what measures were being considered to address this. The NRCS informed the committee that as a result of the change with respect to inspections the Auditor-General made those findings. The Auditor-General has recognised the effectiveness of the alternative methods employed by the NRCS with respect to inspections. Inspections are done at the ports of entry and at the source to prevent non-compliant products entering the market place. As a result of the change the NRCS did not meet its targets but moving forward the NRCS is in process of defining in-scope and out-of-scope inspections that would assist the Auditor-General in auditing of the performance information. The NRCS informed the committee that they have scheduled an engagement with the Auditor-General to discuss the revenue and performance information matters.

ICT challenges facing the NRCS: The committee raised concerns relating the ICT infrastructure as the NRCS is moving toward E-forms and E-billing. The committee inquired what measures the NRCS was considering to address the ICT challenges before embarking on further innovations. The NRCS informed the committee that the finding with respect to the ICT was in relation to the LOA process, inspections and financial data. Certain measures are being put in place such as increase bandwidth to facilitate the LOA application process. The NRCS also solicits the expertise of members of its ICT governance committee in assisting in conducting a business process analysis of its business units that will result in the development in a master systems plan. Replacing aging computers and hardware, improving access to its website, the ability to electronic applications with the ability to upload testing reports are measures put in place to address the immediate IT challenges. The NRCS has a procurement plan to address its ICT challenges in this financial year.

Processes to prevent fruitless and irregular expenditure: The Auditor-General report highlighted challenges associated with fruitless and wasteful expenditure as well as irregular expenditure. The committee inquired to the measures being implemented to address these challenges. The NRCS informed the committee that the irregular expenditure relates to the lease agreement which was not timeously renewed and was thus classified as irregular inspection. The matter has been address with a lease agreement for five in the process of being signed. The NRCS informed the committee that both expenditures were subsequently condoned as value for money principles were achieved although the correct supply chain management procedures were not adhered to. The NRCS has conducted investigations with regard to fruitless and wasteful expenditure and instituted the necessary remedial measures in this regard.

Resolution of technical audit finding on levies: The committee raised concerns with NRCS’s levy issue that had led to the entity’s qualification by the Auditor-General. The NRCS noted that this was a technical qualification. It is as a result of the levy collection period not matching the entity’s financial year. In the current framework, the NRCS estimates levies based on Statistic South Africa’s data; however, the Auditor-General does not accept these estimates based on the fact that there is no correlation between this data and the regulated products. The NRCS acknowledged the Auditor General’s recommendation of revising the levy period to match its financial year. However, it could not comply with this at the time, hence another qualification in the 2014/15 financial year.

The reasons for not complying with this recommendation was that: 1) it is not feasible to implement the revisions to ensure that the periods match because levy payers reconcile their production and import figures a month after the end of the period; therefore, after the financial year end there would still be outstanding payments; and 2) the NRCS does not have an automated system to capture levies; therefore, levies are received and reconciled manually. A quarterly declaration system is being implemented. However, it is not clear whether this will resolve the challenge.

5.4. Companies and Intellectual Property Commission

The Companies and Intellectual Property Commission’s (CIPC) mandate can be broadly defined as the administration and performance of all the powers and functions assigned to it by the Companies Act (No. 71 of 2008). It also administers all or parts of 15 pieces of legislation referred to in Schedule 4 of the Act. The CIPC’s functions are to:

· Register companies, business rescue practitioners and corporate names, maintain data, regulate governance of and disclosure by companies, and accredit dispute resolution agents;

· Educate and inform the public about all laws, non-binding opinions and circulars, policy and legislative advice;

· Maintain data, and regulate governance of and disclosure by close corporations;

· Regulate conduct and disclosure by share block schemes;

· Register co-operatives, maintain data, and regulate governance of and disclosure by co-operatives;

· Register patents, maintain data, publish patent journal, and administer the Court of the Commissioner of Patents;

· Provide for functioning of the CIPC as the receiving, designated and elected office in terms of the Patent Cooperation Treaty;

· Register trademarks, maintain data, resolve disputes, and provide non-binding advice to the public;

· Register films, and maintain data in this regard;

· Accredit copyright collecting societies, and regulate their governance, conduct and disclosure;

· Record and co-ordinate search and seizure operations, and oversee depots; and

· Prevent and enforce the unauthorised use of state emblems.

5.4.1. Non-Financial Performance

5.4.1.1. Non-financial performance for the 2014/15 financial year[17]

In terms of non-financial performance, the CIPC has reported on 21 performance targets. Only 12 targets were met (57 per cent of its targets). The nine targets that were not met, included:

The targeted turnaround times for processing both manually and electronically filed applications for company registrations were not achieved. This was due to delays in processing applications due to union activities disrupting production and some employees participating in an unofficial go slow. The CIPC had attempted to introduce an incentive scheme to address backlogs but employees were unwilling to participate in this. Other challenges included system issues and high volumes of transactions as a result of the introduction of the new e-services on the website.
The targeted turnaround times for processing both manual and electronic applications for changes in company director details were not met. Overall, there had been a slowdown in processing due to labour unrest, which led to disruptions in the production environment. Furthermore, there had been delays in processing due to the introduction of new processes, such as indexing and scanning of images, the receipt of emailed documents, and high volumes of e-services transactions. Some system challenges also negatively impacted on the performance level, such as: the dispatch date changing every time a registration certificate was printed; some applications not being traceable and some of the applications not having images which made it impossible to process until images were restored.

Only 41 of the planned 45 self-service terminals had been installed and were operational. Four terminals were not operational as the wireless device for one terminal located in the reception area of the Johannesburg Stock Exchange was not connected and the Department of Home Affairs connectivity for three terminals located at the Industrial Development Corporation in Sandton had not been finalised.

5.4.1.2. Non-financial performance as at 30 June 2015

For the 2015/16 financial year, the CIPC has identified 16 performance targets. It achieved 13 of its first quarter’s milestones and one milestone was not applicable for this quarter. It highlighted the following quarterly achievements:

Reintroduction of the call centre and introduction of USSD (Unstructured Supplementary Service Data) services to alleviate the call centre and query resolution system traffic. The USSD services can be used to query the status of registrations and name reservations, CIPC’s banking details, balances owing to CIPC, a company’s registered financial year end and annual returns due dates, as well as reset passwords for the CIPC’s website.
Stabilisation of the labour environment and critical positions have been identified and advertised.
ICT systems have been stabilised and proportion of online transactions continuously increasing. The name reservation function and the auditor and company secretary changes have also been automated.
CIPC is the sole issuing authority of BEE certificates for Exempted Micro-Enterprises.

The following two milestones had not been met:

Less than 75 per cent of currently measured service delivery standards met the targets, as there had been underperformance in the areas of “on-line company registration” and “on-line director changes” due to system challenges.
Only 70 per cent of positions were filled against a quarterly target of 72 per cent due to the moratorium on recruitment.

5.4.2. Human Resources

The CIPC was still in the process of implementing its new organisational structure that was approved in July 2013. Its key employment statistics are reflected in Table 19.

Table 19: Employment information as at 31 March 2015

	Actual
Approved Posts
Number of employees	448
Vacancy Rate	192 (30% of approved posts)
Female Employees	271 (60.5% of employees)
Black employees	382 (85.2% of employees)
Women in Top and Senior Management Service (TSMS)	2 (22.2% of employees)
Employees with Disabilities	7 (1.1% of employees)
Employee Turnover	17 (3.8% of employees)

Source: CIPC (2015a: 72, 74 and 75)

The CIPC had a high vacancy rate of 30 per cent as at the end of March 2015. Filling critical vacancies had been frustrated by the moratoriums on recruitment that were implemented during the 2014/15 financial year. Furthermore, labour relations had been unstable due to ineffective change management in the organisation and labour disputes in this regard. The CIPC had identified the need for an approved Change Management Strategy to be implemented.

A number of HR policies had been developed but had not been approved pending consultation with organised labour. These are expected to be concluded in the 2015/16 financial year.

The Acting Commissioner, Adv R Voller, also noted that the CIPC had been left with key leadership positions not being filled with dedicated staff after the 2014/15 financial year. These were the positions of the Commissioner, the Chief Financial Officer and the Divisional Manager: Compliance, Risk and Governance, as well as the Senior Human Resource Manager. In addition, the Chief Information and Chief Technology Officers had resigned recently.

However, the Acting Commissioner noted that labour relations had stabilised during the first quarter of the 2015/16 financial year, which the committee welcomed. Labour concerns are being addressed through an external facilitator. The moratoriums are being lifted for specific critical positions on a case-by-case basis, in consultation with organised labour.

5.4.3. Financial Performance

The CIPC is self-funded and its revenue is derived from its business activities including annual returns from companies and close corporations; the registration of companies, cooperatives and intellectual property rights and patent administration.

5.4.3.1. Financial performance for the 2014/15 financial year

The CIPC had received R508.3 million in revenue for the 2014/15 financial year, compared to R455.6 million in the 2013/14 financial year (an 11.6 per cent increase in revenue). More than half of the revenue (54.1 per cent) was received from annual return fees and penalties and the remainder from fees (27.2 per cent of revenue), interest income (16.9 per cent of revenue) and other income (1.8 per cent of revenue). Fees were earned for providing:

Corporate information (R19.1 million)
Company registration and maintenance (R64.5 million)
Data sales (R1.8 million)
Intellectual property registration and maintenance (R47.5 million)
Cooperatives registration and maintenance (R5.3 million)

The CIPC had spent R306.5 million in the 2014/15 financial year, compared to R309.9 million in the 2013/14 financial year (a 1.1 per cent decline in expenditure). This translated into a surplus of R201.8 million in the 2014/15 financial year.

Operational Expenditure

The main operating expense was employee compensation, which was R198.9 million in the 2014/15 financial year (64.9 per cent of total operating expenses). The CIPC had budgeted R238.2 million for this. However, the under-expenditure was due to its inability to fill vacancies due to the moratorium on recruitment.

The second largest expense was for consulting and professional fees, which was R38.8 million in the 2014/15 financial year (12.7 per cent of total operating expenses). This was mainly for specialist information technology consultants, licences and services (84 per cent of consultant fees).

The other significant expense was for operating lease charges of R25 million for property (56.1 per cent of operating lease charges), an off-site file storage facility (42.9 per cent of operating lease charges) and vehicles (one per cent of operating lease charges).

Irregular and Fruitless and Wasteful Expenditure

The CIPC had accumulated R98.7 million in irregular expenditure, of which R500 000 had occurred in the 2014/15 financial year due to ICT data connection services that had not followed the prescribed approval process for the procurement process. In the 2013/14 financial year, the CIPC had incurred R2.4 million in irregular expenditure, while R3.3 million of irregular expenditure was approved to be condoned by either the Executive or Accounting Authorities.

The CIPC had incurred wasteful expenditure of R23 000 in the 2014/15 financial year. This was due to interest on the late payment of a supplier. In the 2013/14 financial year, it had incurred R1.4 million in wasteful expenditure. This was mainly due to an ICT licence re-instatement fee of R750 000 and interest on the implementation of the Skills Development Levy and Unemployment Insurance Fund of R581 000.

Planned Capital Expenditure

The CIPC also indicated that it planned a number of capital programmes that had been approved but not contracted. This included its ICT improvement programme (R16.7 million) and the establishment of self-service centres (R3.3 million).

Auditor-General’s Report

The CIPC received an unqualified audit opinion with other matters related to internal control deficiencies in terms of performance information. The Auditor-General reported a material finding in terms of the reliability of reported performance information, as the CIPC could not provide sufficient appropriate evidence on certain critical data fields in support of the reported performance information and its records did not permit the application of alternative audit procedures.

Management had not adequately addressed deficiencies relating to performance information to ensure that performance information was supported by reliable evidence through the corrective action they had implemented. In addition, sufficient controls had not been implemented to ensure that source documentation contained certain pertinent information to support actual achievements.

5.4.3.2. Financial performance as at 30 June 2015

The CIPC had received R133.3 million in revenue for the first quarter, compared to the budgeted income of R116.6 million for this period (a 14.3 per cent increase in revenue). More than half of the revenue (53.6 per cent) was received from annual return fees and penalties and the remainder from fees (29 per cent of revenue), interest income (17.1 per cent of revenue) and other income (0.3 per cent of revenue). Fees were earned for providing:

Data sales and disclosure of corporate information (R5.2 million)
Company registration and maintenance (R19.7 million)
Intellectual property registration and maintenance (R12.9 million)
Cooperatives registration and maintenance (R0.6 million)

The CIPC had spent R87.8 million in the first quarter, lower than the planned quarterly expenditure of R113.9 million (a 23 per cent decrease against budgeted expenditure). This translated into a surplus of R45.5 million for the first quarter.

Table 20: Financial performance as at 30 June 2015

Description	Total Annual Budget (R'000)	YTD Budget (R'000)	Actual (R'000)	Variance (%)	Available Budget (R'000)
Income
Revenue	423 963	105 991	110 073	4%	74.0%
Other	-	-	463	(0%)	-
Interest	42 500	10 625	22 721	114%	46.5%
Total Income	466 463	116 616	133 257	3%	71.4%
Expenditure
Employee costs	243 646	60 912	55 311	10%	77.3%
Operating expenditure	186 831	45 351	28 932	57%	84.5%
Administrative expenditure	21 934	5 484	1 071	412%	95.1%
Depreciation & Impairment losses	8 800	2 200	2 453	(11%)	72.1%
Expenditure	461 211	113 947	87 767	30%	81.0%
Surplus for the period	5 252	2 669	45 490	(27%)

Source: CIPC (2015c: 1)

5.4.4. Key issues by the committee

The following concerns were raised related to the performance of the CIPC during the committee’s deliberations:

The overreliance on service providers with respect to information technology infrastructure development and maintenance: The Auditor-General raised concerns about the reliance on service providers to provide critical information technology functions and the absence of any skills transfer clauses in the service agreements. The committee concurred and inquired what measures were being considered by the CIPC to address this fundamental challenge. The CIPC confirmed that most of the ICT support is done by outside service providers whereas most in the ICT development is done in-house. Although it recognised the importance of reducing its reliance on consulting service and had begun a process that will ensure the appointment of appropriately skilled staff to ensure that maintenance work are done in-house; at this point, it had to rely on the ICT consulting services due to the maintenance required on the legacy system. The ICT system has been stabilised with improvements in terms of its infrastructure, functionality, security and bandwidth. The CIPC will work towards reducing the reliance on consulting services and continue with the modernisation investment in the ICT systems and infrastructure over the medium term to enable the digitisation of records.

Turnaround time associated with registering companies with non-standard memoranda of incorporation: The committee welcomed the ability to do online registration of companies but were concerned that when deviations from the standardised memorandum of incorporation are necessary, an online registration is not possible. The committee inquired to the turnaround time associated with this process. The CIPC responded that the manual turnaround time of 25 day for the registration of a company would apply, as this process is not yet automated to handle non-standard memoranda of incorporation.

Reliability of the performance information: The Auditor-General’s report reflects concerns with regard to the reliability of performance information of the CIPC. The finding was that the CIPC could not provide sufficient evidence in support of its reported performance information. The CIPC explained that it disagreed with the Auditor-General’s view that all of its performance information is unreliable but has implemented the changes proposed by the Auditor-General in relation to date verification and an additional database column.

Completion of a business rescue process: The CIPC in its presentation made reference to completion of business rescue processes. The committee inquired what constitutes the end of such as process. The CIPC informed the committee that there are three processes that would result in the completion of a business rescue process. This included the successful implementation of a business rescue process, the implementation of a major portion of the proposal for business rescue, and when the company is liquidated.

Challenges related to the query resolution model: The committee on a number of occasions raised concerns with the CIPC’s inability to effectively deal with query resolution. The CIPC had moved away from the traditional way of dealing with query resolution with limited success. The committee inquired what measures were being considered to resolve this challenge. The CIPC acknowledged that query resolution remains a challenge. The organisation has reverted back to a traditional call centre and is in the process of developing a new query resolution system, including the use of USSD services that allowed customers to receive basic information regarding their queries. The CIPC informed the committee that it is working towards establishing a fully functional call centre.

Filling of critical positions to enable the CIPC to fulfil its mandate: The salary bill of the State is significant and the filling of positions without value being added should be discouraged. The committee inquired how many critical positions were not filled at the CIPC. The CIPC replied that most of the critical positions not filled are in the Information Technology and Finance sections. Also positions within the call centre are not filled. Internal adverts for these positions have been placed before advertising externally and hopefully these positions will be filled within the next financial year. The CIPC also informed the committee that it will undergo a rationalisation process to determine the core needs of the organisation. Positions not critical to the organisation’s ability to fulfil its mandate will not be filled.

5.5. Companies Tribunal

The Companies Tribunal was established in terms of section 193 of the Companies Act (No. 71 of 2008), and started its operation in September 2012. The Tribunal’s role is to “encourage enterprise development, attract investment, promote ethical business development and enhance South Africa’s global competitiveness”[18] through the promotion of ethical business practices. The Tribunal’s work impacts on the country’s competitiveness with regard to making it easier to do business in the country by providing speedy and effective adjudication and dispute resolution services. The Companies Tribunal is a juristic person, has jurisdiction throughout the country, is independent, and subject only to the Constitution and the law of the Republic. The Tribunal’s mandate is outlined in section 195 of the Act as follows, to:

Adjudicate in relation to any application that may be made to it, in terms of the Act, and make any order provided for in the Act in respect of any such application,
Assist in the resolution of disputes as contemplated in Part C of Chapter 7 of the Act,
Perform any other function assigned to it by or in terms of the Act or any law in Schedule 4.

The Tribunal’s strategic objectives are:

To adjudicate and make orders in relation to any application.
Resolution of disputes in terms of Alternative Dispute Resolution (ADR).
To ensure operational effectiveness and efficiency of the Tribunal.
Effective stakeholder engagement.

5.5.1. Non-financial Performance

5.5.1.1. Non-financial performance for the 2014/15 financial year

The Tribunal had nine performance targets in its 2014/15 Annual Performance Plan. The following targets were changed by the Companies Tribunal during the financial year:

Issue 85% of decisions within 30 working days after date of the hearing: The annual target was revised from 90 per cent to 85 per cent due to capacity constraints. Furthermore, an additional target for dealing with ADR matters was set. The number of Tribunal members has since been increased.
Issue 85% of decisions within 30 working days after date of the allocation: The annual target was revised from 90 per cent to 85 per cent due to capacity constraints. Furthermore, an additional target for dealing with ADR matters was set. The number of Tribunal members has since been increased.
Produce 3 research reports: The target was changed due to capacity constraints.
Approved revenue generation framework: The framework was approved and submitted to the Minister for consideration, but could not be proceeded with as the legal opinion indicated that there is a need to amend the Companies Act to enable the Tribunal to charge fees.
80% of staff of CT to attend training: The target was removed from APP as it was operational.

The Tribunal achieved four of the eight remaining performance targets. It had not met the following areas of performance:

Eighty per cent of decisions and orders were issued within 30 working days after the date of the hearing against a target of 85 per cent.
Forty per cent of cases were finalized in terms of Alternative Dispute Resolution (ADR) after the date of hearing instead of 60 per cent, as the hearing dates for some cases had not been finalised pending negotiation between parties and Tribunal Members.
Only one research report against a target of two had been produced and signed off.
A seminar on understanding the role of the Tribunal was hosted in February 2015 but the report had not been finalised due to capacity constraints.

5.5.1.2. Non-financial performance as at 30 June 2015

For the 2015/16 financial year, the Tribunal identified ten performance targets. During the first quarter, four targets were achieved, four were not met and two were not applicable for this period. The Tribunal highlighted the following achievements[19]:

Seventy-five per cent of ADR cases received were finalized against a target of 70 per cent.
Benchmarking research report on against other jurisdictions with a similar mandate was completed.
An article on implementing Social and Ethics Committees had been published in the Business Day.
Two planned outreach programmes were held in Sedibeng and Wattville, Ekurhuleni.

The Tribunal had also developed a SDIP and Service Charter and introduced an ethics hotline, which is managed by Deloitte, which did not form part of its planned performance targets. However, it had not met the targets in the following performance areas:

Only 85 per cent of decisions and orders were issued within 30 days from date of allocation, instead of the 90 per cent target.
Twenty per cent of the budget had been spent against a target of 40 per cent and fruitless and wasteful expenditure of R9 696.36 had been incurred.
The terms of reference for the electronic case management system had been developed. The timeline for development has been adjusted due to resource limitations.

5.5.2. Human Resources

Of the 28 approved posts, 15 were funded in the 2014/15 financial year, with an additional funded post becoming available in the 2015/16 financial year. Other key human resource statistics are provided in Table 21.

Table 21: Employment information as at 31 March 2015

	Actual
Approved Posts	28
Number of employees	13
Vacancy Rate	15 (53.6% of approved posts)
Female Employees	5 (38.5% of employees)
Black employees	12 (92.3% of employees)
Women in Top and Senior Management Service (TSMS)	3 (23% of TSMS)
Employees with Disabilities	0 (0% of employees)
Employee Turnover	2 (15.3% of employees)

Source: CT (2015b: 46-48)

The Tribunal has employed a further two employees during the 2015/16 financial year, namely an additional finance staff member and a corporate services manager.

5.5.3. Financial Performance

5.5.3.1. Financial performance for the 2014/15 financial year

For the 2014/15 financial year, the Companies Tribunal’s income amounted to R14.8 million. Approximately 90 per cent of that income is a transfer from the DTI. A large portion of the expenditure goes towards the compensation of employees, however, the Tribunal still experiences a shortage of employees. The second largest expenditure item is members’ fees.

Table 22: Financial Performance for the 2014/15 Financial Year

	2013/14	2014/15	% Change
Revenue	11 327 326	14 852 348	31.1%
Transfers received	10 337 000	13 313 000	28.8%
Donations	-	195 615	-
Interest received	989 690	1 343 733	35.8%
Other income	636	-	-100%
Expenditure	8 218 164	13 759 582	67.4%
Other operating expenses	849 725	1 105 166	30.1%
Administrative expenses	585 140	1 356 928	131.9%
Employee related costs	3 881 270	8 123 022	109.3%
Tribunal member’s fees	2 731 145	2 809 156	2.9%
External audit fees	168 305	342 083	103.3%
Depreciation and amortisation	23 226	2 579	-88.9%
Surplus for the year	3 109 162	1 092 767	-64.9%

Source: CT (2015: 60)

5.5.3.2. Financial performance as at 30 June 2015

The Tribunal had received its full grant from the DTI for the 2015/16 financial year during the first quarter. It had spent 19.4 per cent of its annual budgeted expenditure by the end of June 2015.

Table 23: Financial performance as at 30 June 2015

	2015/16 Budget (Rands)	YTD Expenditure (Rands)	Available Budget (%)
Revenue	15 621 000	14 564 102	6.8%
Transfers received	14 221 000	14 221 000	0.0%
Donations	-	-	-
Interest received	800 000	343 102	57.1%
Other income	600 000	0	100.0%
Expenditure	15 621 000	2 877 793	81.6%
Other operating expenses	935 100	253 072	72.9%
Administrative expenses	950 227	136 411	85.6%
Employee related costs	11 044 391	2 069 378	81.3%
Tribunal member’s fees	2 373 282	379 009	84.0%
External audit fees	303 000	4 973	98.4%
Depreciation and amortisation	15 000	34 950	-133.0%
Surplus for the year	0	11 686 309

Source: CT (2015c)

It reported that spending on employee related costs was slightly lower than anticipated, due to some staff resignations received. Depreciation and amortisation was also higher due to additional assets that were donated by the DTI.

5.5.4. Key issues raised by the committee

The following concerns were raised related to the performance of the CT during the committee’s deliberations:

Significant increases relating to administrative and employee expenses: The committee noticed the significant increases over the previous two financial years in relation to administrative and employee costs and requested that the CT clarifies the reasons for this. The CT explained that the increase with respect to administrative costs was related to new services such as advocacy and marketing initiatives being introduced. The appointment of an internal audit committee also contributed to the increased expenditure. With respect to the increase in employment costs, additional staff had been employed for the period under review.

Mandate of the CT: The committee acknowledged the contribution of the CT in serving as a forum for alternative dispute resolution and in reviewing administrative decisions and compliance notices of the CIPC. The committee inquired as to how Parliament could assist the institution to improve the fulfilment of its mandate. The CT responded that it is currently underutilised and could assist in dealing with matters not currently falling within its mandate. Minor disputes related to the Companies Act that are currently referred to the courts could be adjudicated on by the CT. This may require legislative amendments to the Act.

6. Conclusions

Based on its deliberations, the committee drew the following conclusions.

The Committee:

Acknowledged the internal challenges faced by the economy; however, the impact of external factors on the country’s economic performance cannot be underestimated. It welcomed the measures introduced by the President through the nine-point plant to address the internal challenges facing the economy.

Welcomed the Department’s commitment towards continuous improvement and the willingness to make the necessary changes to address any impediments to the implementation of the IPAP, and other DTI initiatives, to mitigate against the current global economic challenges. Certain targeted incentives have changed the economic trajectory of specific sectors, such as the automotive and clothing and textile sectors. Given the current economic environment, it is essential that incentives must be targeted, effective and in certain cases up-scaled to achieve the desired outcome of inclusive economic development and job creation.

Noted the importance of the MCEP and urged the Minister of Trade and Industry to consult with the Minister of Finance to up-scale this programme over the outer years of the MTEF period.

Welcomed the decision of the DTI to review its downstream job creation targets for the MCEP and other incentives to ensure that these are more realistic.

Welcomed the information from the Director-General that recently companies are expected to meet at least BEE level 4 requirements for the MCEP. However, it is of the firm view that the DTI should use incentives, as well as its other programmes, as an instrument to foster transformation of the economy.

Is also of the opinion that the DTI should disburse incentives to companies and entities that show interest to assist government to achieve its national goals and priorities especially in the area of radical economic transformation.

Commended the strategic efforts by the DTI leadership to ensure that South Africa continues to benefit from market access in the United States through the AGOA.

Welcomed initiatives to protect the South African steel industry against the effects of cheap imports. However, the committee is of the view that this support should not be viewed by the local steel industry as an opportunity to abuse its market power. Furthermore, the committee welcomed and encouraged the coordination between the Department of Trade and Industry and the International Trade Administration Commission in this regard.

Commended the DTI for improving its oversight over the governance and financial management of its entity. It also pledged its support for the rationalisation of the boards of regulatory entities. However, it urged the Minister to monitor the resolution of outstanding issues within its entities, particularly related to the IT systems within the Companies and Intellectual Property Commission, the revenue model of the National Regulator for Compulsory Specifications and the governance, capacity and performance issues at the National Gambling Board.

Welcomed the fact that the DTI and some of its entities received an unqualified and clean[20] audit opinion. The NRCS was the only entity to receive a qualified audit opinion. This is as a result of the measures put in place to ensure that the DTI and its entities comply with the requirements as set out in the Public Finance Management Act. The committee noted that the qualified audit opinion received by the NRCS is of a technical nature, but welcomed the Minister’s commitment to address this.

Welcomed the NCC’s efforts to expand its consumer awareness initiatives. Currently, the NCC’s client base was mainly comprised of urban consumers as they were more aware of its services. Future initiatives should focus on areas that are more vulnerable, such as rural areas and previously disadvantaged individuals.

Recognised the critical role that the NCC plays in ensuring that consumer rights were effectively protected. However, the existing skills gap within the organisation could hinder it from achieving this. The committee encouraged the NCC to address its skills gap and to review its organisational structure to ensure that vacant critical posts are identified and filled.

Remained concerned with the setting of annual performance targets. The committee believed that a number of performance targets were set low by the NCR. The committee then welcomed the NCR’s willingness to review the targets in the future through the Annual Performance Plan. Other entities should also increase their performance targets, where reasonable, particularly those that are linked to developing an enabling environment that facilitates job creation.

Welcomed the work of the NRCS in terms of improving the time it takes to issue Letters of Authority. However, this process should not compromise the need to protect consumers from unsafe products and local industry from competition from illegal imports and/or imports not complying with the necessary technical requirements and compulsory specifications.

Welcomed the progress made by NRCS in terms of addressing the findings of the Auditor-General, However, raised concerns with continued irregular expenditure as well as fruitless and wasteful expenditure.

Noted that a number of the entities have ICT infrastructure challenges. The NCR inherited a legacy system from the Micro Finance Regulatory Council and the CIPC inherited its system from the former Companies and Intellectual Property Registration Office. The NRCS is also among these entities, the committee raised concerns related to the ICT infrastructure as the NRCS is moving toward an automated system for some of its processes. The Committee encouraged the NRCS to address the ICT challenges to ensure the smooth operation in the entity and to avoid the challenges it had experienced in the past.

Welcomed the CIPC’s innovative efforts to increase its accessibility to the public is welcomed, as well as its collaborative efforts with the Department of Home Affairs, the South African Revenue Services, Transnet, and banks, among others. Similar collaborative work is necessary across other government departments and entities to reduce the cost and increase the ease of doing business.

Welcomed the progress made by the CIPC to stabilise its labour relations, however it encouraged the CIPC to address critical vacancies that could negatively impact on its service delivery.

Remained concerned about the CIPC’s continued heavy reliance on service providers for the operation and maintenance of its core IT systems. It urged the CIPC to finalise its analysis of a possible move to in-house maintenance of such systems.

Welcomed the contribution by the Companies Tribunal with respect to Alternative Dispute Resolution. It encouraged affected parties to bring matters related to the contravention of the Companies Act for consideration to this institution.

Emphasized the need for the Companies Tribunal to improve its ICT system.

Welcomed the progress made in addressing the vacancy rate. However, it emphasised the need for the employment of strategically skilled staff within the DTI and its entities, through the Human Resources division.

7. Appreciation

The committee would like to thank the Minister of Trade and Industry, Dr R Davies, and his Deputy, Mr M Masina, as well as the Director-General, Mr L October, the Group Chief Operating Officer, Ms J Scholtz, and all other senior managers of the DTI, as well as the entities 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, Mr D Woodington, 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.

8. Recommendations

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

Strengthening the incentive programmes with a view to improve its impact, particularly in terms of job creation; increase industrial competitiveness; and broaden the participation of enterprises in the economy.

Expediting the introduction of the regulations related to Credit Life Insurance Caps and on the maximum interest rate model to protect low income consumers.

Report to be considered.

References

Auditor-General of South Africa (2015) Trade and Industry Portfolio.

Companies and Intellectual Property Commission (2015a) CIPC Annual Report 2014/2015.

Companies and Intellectual Property Commission (2015b) CIPC First Quarter Performance Report 2015/16.

Companies and Intellectual Property Commission (2015c) CIPC Financial Performance Report – 01 April 2015 to 30 June 2015.

Companies Tribunal (2015a) Three (3) Year Annual Performance Plan 2015/16 – 2017/18.

Companies Tribunal (2015b) Annual Report 2014/15.

Companies Tribunal (2015c) April-June 2015/16 Quarterly Reporting.

Department of Trade and Industry (2015a) Annual Report 2014 – 2015.

Department of Trade and Industry (2015b) Presentation on the Annual Report 2014/15 to Portfolio Committee on Trade and Industry. Parliament: Cape Town, 8 September.

Department of Trade and Industry (2015c) First Quarter Performance 2015/16 Key Achievements 1 April – 30 June 2015. Parliament: Cape Town, 8 September.

Department of Trade and Industry (2015d) First Quarter Performance Report 2015/16.

National Consumer Commission (2015a) Annual Report 2014/15.

National Consumer Commission (2015b) 1st Quarter Report 2015/16.

National Credit Regulator (2015a) Annual Report 2014/2015.

National Credit Regulator (2015b) NCR Annual Report 2014/2015 & First Quarter Performance Report 2015/2016. Presentation to the Portfolio Committee on Trade and Industry. Parliament: Cape Town, 13 October.

National Credit Regulator (2015c) Quarter reporting on: 1st Quarter ending on the 30 June 2015.

National Regulator for Compulsory Specifications (2015) Annual Report 2014/15.

National Treasury (2015) Response of the National Treasury to the Portfolio Committees, 2015.

Portfolio Committee on Trade and Industry (2014) Budgetary Review and Recommendation Report of the Portfolio Committee on Trade and Industry, dated 24 October 2014.

Portfolio Committee on Trade and Industry (2015a) Report of the Portfolio Committee on Trade and Industry on their oversight visit to Gauteng, the Eastern Cape, and the Western Cape from 27 January to 5 February 2015, dated 11 March 2015.

Portfolio Committee on Trade and Industry (2015b) Report of the Portfolio Committee on Trade and Industry on Budget Vote 34: Trade and Industry, dated 13 May 2015.

Appendix 1: List of Abbreviations and Acronyms

ADEP	Aquaculture Development and Enhancement Programme
ADR	Alternative Dispute Resolution
AGOA	Africa Growth and Opportunity Act
AIS	Automatic Investment Scheme
B-BBEE	Broad-Based Black Economic Empowerment
BRICS	Brazil, Russia, India, China and South Africa
BRR	Budget Review and Recommendation
CGSO	Consumer Goods and Services Ombud
CIP	Critical Infrastructure Programme
CIPC	Companies and Intellectual Property Commission
COMESA	Common Market for Eastern and Southern Africa
CPA	Consumer Protection Act
CT	Companies Tribunal
DTI	Department of Trade and Industry
EAC	East African Community
ECIC	Export Credit Insurance Corporation
EIP	Enterprise Investment Programme
EMEs	Exempted Micro Enterprises
EMIA	Export, Marketing and Investment Assistance
EPA	Economic Partnership Agreement
EU	European Union
FTA	Free Trade Agreement
ICT	Information and Communication Technology
IDC	Industrial Development Corporation
IDZ	Industrial Development Zone
IK	Indigenous Knowledge
IP	Intellectual Property
IPAP	Industrial Policy Action Plan
ISP	Incubator Support Programme
IT	Information Technology
LOA	Letter of Authority
MCEP	Manufacturing Competitiveness Enhancement Programme
MFRC	Micro Finance Regulatory Council
MIOSA	Motor Industry Ombud
MIP	Manufacturing Investment Programme
MOU	Memorandum of Understanding
MTEF	Medium-Term Expenditure Framework
NCC	National Consumer Commission
NCR	National Credit Regulator
NCT	National Consumer Tribunal
NEF	National Empowerment Fund
NGB	National Gambling Board
NGP	New Growth Path
NIPP	National Industrial Participation Programme
NLC	National Lotteries Commission
NMISA	National Metrology Institute of South Africa
NRCS	National Regulator for Compulsory Specifications
NTBs	Non-tariff Barriers
PDAs	Payment Distribution Agencies
PFMA	Public Finance Management Act
PPP	Public-Private Partnership
PTA	Preferential Trade Agreement
QSAPE	Qualifying South African Production Expenditure
SABS	South African Bureau of Standards
SACU	Southern African Customs Union
SADC	Southern African Development Community
SANAS	South African National Accreditation System
SDI	Spatial Development Initiatives
SDIP	Service Delivery Improvement Plan
SEDA	Small Enterprise Development Agency
SEZ	Special Economic Zone
SMME	Small, Micro and Medium Enterprise
SPII	Support Programme for Industrial Innovation
T-FTA	Tripartite Free Trade Agreement
THRIP	Technology and Human Resources for Industry Programme
TSMS	Top and Senior Management Service
USA	United States of America
USSD	Unstructured Supplementary Service Data
VCs	Compulsory Specifications
YTD	Year to Date

[1] DTI (2015b)

[2] Department of Trade and Industry (2014a)

[3] In the 2015/16 financial year, this programme became the Special Economic Zones and Economic Transformation Programme.

[4] DTI (2013b)

[5] DTI (2013b)

[6] DTI (2013b)

[7] Portfolio Committee on Trade and Industry (2014)

[8] National Treasury (2015:11)

[9] Brazil, Russia, India, China and South Africa.

[10] Portfolio Committee on Trade and Industry (2015b)

[11][11] Excluding 133 approved posts, 124 employees and 32 employees in addition to the approved organisational structure shifting to the Department of Small Business Development.

[12] Including the statistics for the Department of Small Business Development.

[13] SEDA was transferred to the Department of Small Business Development.

[14] DTI (2015a: 92-95)

[15] NCC (2015:95)

[16] Extracted from NCR (2015)

[17] Extracted from CIPC (2015)

[18] Davies, R. (2015)

[19] CT (2015a: 22-23, 30-31 and 2015c: 5-7)

[20] A clean audit refers to an unqualified audit opinion with no emphasis of matters.

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