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PRESENTATION TO PRESENTATION TO THE PARLIAMENTARY PORTFOLIO THE PARLIAMENTARY PORTFOLIO

COMMITTEE: COMMITTEE: TRADE AND INDUSTRYTRADE AND INDUSTRY

ANNUAL REPORT 2013-14ANNUAL REPORT 2013-14

FIRST QUARTER REPORT 2014-15FIRST QUARTER REPORT 2014-15

NATIONAL CONSUMER COMMISSION NATIONAL CONSUMER COMMISSION

16 SEPTEMBER 201416 SEPTEMBER 2014

Mr EBRAHIM MOHAMEDMr EBRAHIM MOHAMED

COMMISSIONERCOMMISSIONER

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OUTLINE OF PRESENTATIONOUTLINE OF PRESENTATION

• Overview of annual report

• Strategic objectives

• Achievements against planned targets

• Financial management

• Key challenges and financial projection

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KEY HIGHLIGHTSFY 2013/14

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KEY HIGHLIGHTS

• NCC received an unqualified opinion; • Investigation into meat labelling;• Led to meat labelling regulations being promulgated by Minister.

Other recommendations being followed up;• Horse meat investigation conducted• Investigation into the timeshare industry• Complaints backlog dealt with. (Assisted by Alternate Dispute

Resolution Agents within key industries);• The NCC and the National Consumer Tribunal hosted its first

consumer protection summit.

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KEY HIGHLIGHTS

• Hosted seventeen workshops targeting women, people living with disabilities, SMMEs and community members in Gauteng, KZN, Free State and Western Cape;

• 20 product recall notifications issued;• Participated in the revising of the United Nations Guidelines on

Consumer Protection;• Secured returns, refunds and replacements for consumers;• Motor industry code submitted for accreditation.

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Regulatory Context

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Regulatory Context

• the dti is the custodian of Consumer Protection policy;• NCC is established in terms of Section 85 of the Consumer

Protection Act (CPA);• Jurisdiction throughout the Republic of South Africa. • Core responsibility is to enforce and carry out the functions assigned

to it in terms of the CPA. • The CPA seeks to promote a fair, accessible and sustainable

marketplace for consumer products and services and for that purpose to establish national norms and standards relating to consumer protection.

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Regulatory Context

• It further seeks to provide for improved standards of consumer information, to prohibit certain unfair marketing and business practices, to promote responsible consumer behaviour and to promote a consistent legislative and enforcement framework relating to consumer transactions and agreements;

• NCC has concurrent jurisdiction on Consumer Protection in RSA- jurisdiction is shared with Provincial Consumer Protection Authorities.

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Strategic Objectives

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STRATEGIC OBJECTIVES

The following are the revised strategic objectives :Strategic Objective 1•To promote compliance with the Consumer Protection Act

Strategic Objective 2•To be a well governed and capacitated organisation •NCC has the following divisions in order to give effect to the strategic objectivesoEnforcement and InvestigationsoAdvocacy, Education and AwarenessoResearch oLegaloCorporate Services

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Achievement against Targets

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Achievement against Targetsintroduction

• 49 out of 72 officials, including managers, are involved in operations;• 12 measures/ indicators- 20 targets;• Fully achieved on 8 measures- 16 targets;• 4 targets not fully achieved- more than 50% achieved on 2 targets;• Plans put in place to ensure that targets are achieved in future;• Despite problematic beginning, NCC has stabilised; • NCC received a qualified audit in 2012/13 (prior year);• From a compliance perspective, NCC made tremendous progress on

previously non-existent Internal Audit and Risk Management functions. • Strict internal control measures effected within the Finance Division

and Supply Chain Management unit.

•

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Achievement against Targets-introduction

• Irregular expenditure is being managed effectively;• Irregular, fruitless and wasteful expenditure, deviation and invoice

registers have been implemented as internal control measures; • The asset register and payment processes have been revised;• All 96 findings made by AGSA in the 2012/13 financial year have

been dealt with and monitored;• To improve on service delivery, each Division has introduced

standard operating procedures; • The Audit and Risk Committee has met several times in the course of

the year and engaged in meaningful deliberations with NCC;• Irregular expenditure which stems from transactions entered into

during 2011/12 and only discovered in 2012/13- continue to plague NCC- will be dealt with in financial report.

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Achievement against TargetPerformance indicator & target Achievement Reasons for variance

95% of complaints received registered on an average of three days

100% of complaints received registered on an average of three days

Target exceeded due to improved efficiencies in the registration of complaints.

95% of registered complaints analysedon an average of eight days

98% of registered complaints analysed on an average of six days

Target exceeded due to improved efficiencies in the analysis of complaints. Analysis procedures have been revised and implemented.

60% of complaints resolved on an average of 80 days

86% of complaints resolved on an average of 297 days

The Percentage of complaints target was exceeded due to an increase in the referrals to Consumer Goods andServices Ombud and Motor Industry Ombud. The average number of days targeted to resolve the complaints was not met. This is due to the fact that the quarter one and quarter two resolutionstatistics included carried over and backlog complaints .The resolutionof the backlog was only ring-fenced from September 2013 after the revision of the Annual Performance Plan.

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Achievement against Targets

Performance indicator & target Achievement Reasons for variance

30 investigations and Inspections finalised and approved by the Commissioner

In total, 41 Investigations and Inspections have beenfinalised and reports drafted and approved by the Commissioner

The NCC had to approve more investigations thanenvisaged due to a high number of timeshareentities involved in the investigated businesspractices indicated in complaints trends

100% of complaints Backlog resolved by end February 2014

Backlog of 6045 complaints reducedby 5533.Pending 512. Percentage reduced: 92%

The 08% of pending complaints comprise non-referrals. The non-referral letters had been drafted by theend of the financial year but were undergoing quality control.

Recommendation of 2 codes to Minister

One Industry Code recommended toMinister

The receipt of codes is dependent on industries or sectors applying foraccreditation. However, the NCC has embarked on a process of pro-activelyidentifying sectors where codes are necessary. Consultations with thesesectors have commenced.

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Achievement against Targets

Performance indicator & target Achievement Reasons for variance

One code of good practice developed

Draft section 93 code of good practice for the return of vehicles within the motor industry is still under development

The code for good practice could not be finalised as it is dependent on the accreditation of the Motor Industry Code which has not yet been accredited by the Executive Authority. The accreditation took longer than initially anticipated.

12 Workshops

08 Mall/Train/Exhibitions

1 school Consumer Club Established

17 Workshops conducted.

09 Exhibitions held

1 School Consumer Club at the Sunnyside Primary School was established

Target exceeded dueto high demand from stakeholders

Meetings held withcritical stakeholders

13 Meetings held with various key stakeholders Target exceeded dueto high demand from stakeholders

Target exceeded due to high demand from stakeholders

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Achievement against Targets

Performance indicator & target Achievement Reasons for variance

2 media releases 6 media releases issued Target exceeded due to high levels of product recalls

Participation in Conferences. Participation in Conferences. The NCC addressed the following 6 conferences:The Africa Dialogue Conference held in Zambia; Four conferences held in Durban, Gauteng, Cape Town and Namibia on Complaints Management; and the World Retail ConferenceThe NCC also participated in the seminar hosted byConsumers International on the amendment of UN Guidelines on Consumer Protection.

Target met

12 Media Responses 15 Media responses were issued Target Exceeded due to high demand from the media houses

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Achievement against Targets

Performance indicator & target Achievement Reasons for variance

Annual Report Annual Report prepared, approved and tabled in Parliament

Target met

Internal Newsletters 4 internal newsletters prepared and distributed internally, 1 per quarter

Target met

39% of Vacant positions filled 40% of positions filled in the new approved structure

Target met

Develop high levelICT strategy

Strategy not yet developed. Process underway. Insufficient internal capacity. Will be completed in 2014/15 financial year

Insufficient internal capacity. Will be completed in 2014/15 financial year

Revised risk register and strategy in place

Risk Register and strategy Revised.

Target met

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FINANCIAL MANAGEMENT

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Linking performance withbudgets

STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTSfor the year ended 31 March 2014

Approved Budget Adjustments Final budget

Actual amounts on comparable

basis

Difference between final budget and

actualR R R R R

REVENUERevenue from non-exchange transactions

44 516 000

-

44 516 000

45 477 824

961 824

Revenue from exchange transactions

-

-

-

326 078

326 078

TOTAL REVENUE 44 516 000 - 44 516 000 45 803 902 1 287 902EXPENDITURE

Employee related costs 27 931 198 - 27 931 198 27 954 894 (23 696)

Amortisation and depreciation 647 000 647 000 647 000

Operating expenditure 15 937 802 15 937 802 13 361 911 2 575 891

TOTAL EXPENDITURE 44 516 000 - 44 516 000 41 316 805 3 199 195

Note: The annual financial statements for the National Consumer Commission are prepared on the accrual basis using a classification based on the nature of expenses in the statement of financial performance. The annual financial statements therefore differ from the budget, which is approved on a cash basis.

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Overview of Expenditure

Summary: •The expenditure of R41,317m, if compared to the approved budget of R44,516m, reflects an underspending of R3,199m (7%).

•Underspending was mainly on Goods and Services, where creditor invoices totalling R1,708m were only received and paid after financial year-end, whereas expenses relating to the lease of office space decreased following negotiations with the service provider to this effect.

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Linking performance withbudgets

Name of sub-programme

Item

Final Appropriation

(R)

Actual Expenditure

(R)

Under Expenditure

(R)

Legal Division In the matter between

NCC and NCT Nehawu vs M Mohlala and NCC

250 000 184 288

13 576 52 136

Publication costs 400 000 256 371 143 629

Travel and Subsistence 100 000 43 649 56 351Education and Awareness

Printing and Publication 430 000 302 207 127 793Travel and Subsistence 100 000 28 708 71 292

Enforcement & Investigations

Consultant Costs: Meat Investigation

100 000 62 051 37 949

Travel and Subsistence 400 000 346 188 53 812Total 1 780 000 1 237 038 542 962

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Linking performance withbudgets

Name of sub-programme

Item Final Appropriation

(R)

Actual Expenditure

(R)

Under Expenditure

(R)

Corporate Services

Total

Consultant Costs 1 000 000 868 500 131 500

Travel and subsistence 200 000 40 000 160 000

Computer Services 568 624 458 029 110 595

1 768 624 1 366 529 402 095

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Statement of Financial Performance 2013/14 year

STATEMENT OF FINANCIAL PERFORMANCE31 March 2014

NOTES 2014 2013- Restated R R

REVENUERevenue 9.1 45 498 094 48 296 490 Other income 9.2 372 293 101 667 TOTAL REVENUE 45 870 387 48 398 157 EXPENDITUREEmployee related costs 10 28 045 226 22 991 100 Amortisation and depreciation 12 1 822 520 1 070 544 Operating expenditure 18 15 048 544 20 361 889 TOTAL EXPENDITURE 44 916 290 44 423 533

SURPLUS FOR THE YEAR 954 097 3 974 624

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AGSA Report

Performance Information: •No material findings on the usefulness and reliability of the reported performance information

Budgets•Accumulated surpluses without the approval of National Treasury, in contravention of Section 53(3) of the PFMA

Annual Financial Statements, Performance and Annual Reports•Unqualified Audit

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AGSA’s Report

Irregular expenditure: 26. Irregular Expenditure

2014

2013 Restated

R R

Opening Balance

23 410 046 8 533 591 Add: Irregular Expenditure -Current year

6 919 356 14 876 455

Add: Amounts not condoned

5 873 130 - Less: Amounts recoverable (not condoned)

- -

Less: Amounts not recoverable (not condoned)

(5 873 130) - Less: Irregular Expenditure awaiting condonation

- -

Total

30 329 402 23 410 046

Analysis of expenditure awaiting condonation per age classification Current year

6 919 356 14 876 455

Prior years

23 410 046 8 533 591 Total

30 329 402 23 410 046

Irregular Expenditure (continued)

2014 R

2013 R

Details of Irregular Expenditure (not condoned)

6 919 356 14 876 455

Goods and service with a transaction value between R10 000 and R500 000 were procured without obtaining written quotations from three different prospective suppliers.

6 452

235 593 Invitations for competitive bids not advertised within 21 days as per Treasury Regulation

5 167 996 7 508 344

Procurement process not followed as per Treasury Regulation and PFMA 834 414 2 871 871 Irregular in terms of the PFMA – Preferential scoring system not applied 255 471 839 303 Documentation/contracts stolen 361 861 3 421 344 Prior year - documentation stolen 293 162 - Confirmed amount 6 264 333 11 455 111 Unconfirmed amount 655 023 3 421 344 Confirmed irregular expenditure Condonement (approval) from National Treasury was required for expenses totaling R5 873 130.00 where the required procurement processes were not followed.

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AGSA’s Report

Fruitless and Wasteful Expenditure

2014 R

2013 R

Opening Balance

3 575 439

135 Finance expense

26 872

Unnecessary printing expense

52 020

Legal fees of a personal nature - Former Commissioner

27 622

Call Centre management system - RAM 77 At-R's Construction CC

717 105 Assets paid for and never received

306 195 VAT incorrectly claimed

764 536 Assets no longer in use

125 867 Legal fees of a personal nature - Former Commissioner

45 600

Assets paid for and never received

1 031 770

VAT incorrectly claimed

477 717

Identified in current year, relating to prior year

SARS - Interest and Penalty 26 418

TOTAL 3 601 857 3 575 439

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AGSA’s Report

Emphasis of Matters

Significant Uncertainties

With reference to Note 23 of the financial statements, the NCC: •received legal claims amounting to R2 310 875. The ultimate outcome of these matters cannot presently be determined, and no provision was made in the financial statements for any liability in this regard.•disclosed a contingent liability of R5 224 237. This amount includes the surplus for the year ended 31 March 2013, which is awaiting approval from National Treasury.

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AGSA’s Report

Matters raised:

Procurement and Contract Management

•The preference point system was not applied in respect of all procurement of goods and services above R30 000, as required by Section 2(a) of the Preferential Procurement Policy Framework Act, and Treasury Regulation 16.A6.3(b).

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AGSA’s Report

Matters successfully dealt with from previous audit – 2012/13

•AGSA findings- 2013/14- 31 findings (23 fully implemented- 8 in progress)•disciplinary steps taken against officials who incurred and/or permitted irregular and/or fruitless and wasteful expenditure & payments were made in advance of the receipt of goods or services•CFO resigned•10 disciplinary actions under way- includes 4 senior managers.

Number of action plans Status Percentage

78 Fully Implemented 81%

18 In progress 19%

96 Total 100%

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Key Challenges

Vacancies•As at 31 March 110 positions out of 182 were vacant;•Off the 182 positions, 82 were funded posts. Off the 82 funded posts, 10 were vacant. •Formal restructuring will be undertaken- it is envisaged that most of the vacant/ unfunded posts will be abandoned;Skills•Whilst a skills audit has not yet been conducted at the NCC, it is apparent that a major skills shortage does exist within the entity;•A proper skills upgrade programme is not in place due to lack of funds. In the interim, internal training is provided; Complaints Backlog•Backlogs do occur from time to time;•Overtime has been implemented within Enforcement DivisionIrregular Expenditure•Bulk of irregular expenditure arises from lease;•2 years to expiry of lease contract;•Cost of cancellation and possible relocation is not feasible in the short term.

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Mr Ebrahim Mohamed- Commissioner- E.Mohamed@thencc.org.za - 0837865239

Mr Anton Van Der Merwe- Acting Head of Corporate Services- A.Vandermerwe@thencc.org.za

Ms Prudence Moilwa- Head of Enforcement and Investigations- P.Moilwa@thencc.org.za

Mr Babs Kuljeeth- Company Secretary- N.Kuljeeth@thencc.org.za - 0832739647

Delegation Details

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Thank You