National Consumer Tribunal & National Consumer Regulator 2020/21 Quarter 4 Performance

Meeting report

Opening remarks
The Chairperson welcomed the Committee and indicated that, as the presentations had been circulated, both presentations would be made before being followed by questions and discussion.

He invited Ms Nontombi Matomela, Acting COO, Department of Trade, Industry and Competition (dtic), introduced the team leaders of the dtic entities that were to brief the Committee: Prof Joseph Maseko, Chairperson of the National Consumer Tribunal (NCT) and Ms N Motshegare, CEO of the National Consumer Regulator (NCR).

Presentation by the National Consumer Tribunal
Prof Maseko indicated that Adv Nelson Lolwane, COO and head of the organisational part of the NCT and responsible for finance, ICT and operations, would make the presentation.

Adv Lolwane stated that the cutback of the budget to provide funds for the Covid-19 response by government had impacted on the achievement of the programme for the year, 2020/21. However, the NCT had very easily moved into a policy of working at home as all officials had laptops and the Tribunal was connected to a sophisticated electronic system. Even opportunities to work in the office was controlled electronically to organise limited access to the office according to the Covid-19 protocols. Around nine officials operated from the office on a daily basis. Wellness support was offered to all staff members.

A key issue was finding UP Money guilty of operating a pyramid scheme and fining the company R1 million. The judgement had received wide media coverage which assisted in conveying the message that pyramid schemes would not be allowed to operate in the country.

A key challenge for the NCT was that the Access Strategy could not be implemented as planned due to the impact of the lockdown. Other challenges were the budget cuts as well as the fact that municipalities and Thusong Centres had concluded the required memoranda of understanding (MOUs) with the NCT. The risk of and exposure to Covid-19 remained a significant area of concern due to its potential impact on the workplace.

The 9th successive clean audit for the organisation was attained for the 2020/21 financial year and was based on three important principles: strict adherence to well-developed policies and procedures; skilled and motivated staff who ensured compliance with the policies and procedures; a highly skilled core management team.

The NCT maintained close relationships with the NCR, particularly in developing the opt-out system to prevent consumers being unwillingly flooded with advertisements.

All judgements of the NCT were available on the organisation’s website.

(See Presentation)

Presentation by the National Consumer Regulator
Ms Nomsa Motshegare, CEO, was accompanied by Mr Obed Tongoane, Deputy Chief Executive Officer, and Mr Mandla Mokoena, CFO and Mr Lesiba Mashapa, Company Secretary.

Mr Mokoena stated that the NCR received income mostly from the dtic, R71 million, and fees of R47 million, both of which were lower than originally budgeted for in the 2020/21 financial year. The reduced budget had impacted negatively on some planned activities.

IN the quarter ended March 2021, the NCR had nine performance targets: five were exceeded, two achieved and two were not achieved. The NCR achieved 78% of its quarterly targets. The presentation listed the Imbizos (Community Outreach Programmes), including the names of the traditional authority who had enabled each imbizo. 103 workshops were conducted with government departments, municipalities and state owned entities, such as Human Settlement, Economic Development, offices of the premiers, regulators, hospitals and municipalities in the various provinces.

Ms Motshegare stated that more than 40 raids had been conducted on micro lenders in all the provinces in the past two years, in collaboration with South African Police Service and South African Social Security Agency (SASSA) to retrieve ID books and cards, bank cards and SASSA cards. Enforcement action taken included opening criminal cases, arrests and referral to the Tribunal for prohibited conduct.

(See Presentation)

Discussion
Mr D Macpherson (DA) queried the raids on loan sharks. How many people had been arrested, how much money had been confiscated, what had the consequences of the arrests been and how many prosecutions had taken place and been successful?  How far was the NCR in implementing the National Credit Amendment Bill? It was three years since all the hype when the Bill was passed by Parliament. A lot of expectation had been created by the dtic and the then Committee? If the NCR was not ready to implement, why was it not?

Mr Macpherson stated that the Committee had been told that a wider scale Amendment Bill was being developed to deal with the ever-changing technology progress in the lending space. Where was that Bill in the view of the NCR? What information had the NCR provided to the dtic in preparation for such a Bill? Had the NCR been able to determine the impact of the Credit Amendment Act on credit lending, i.e. the cost of credit, on lower LSM consumers?

Mr Z Burns-Ncamashe (ANC) appreciated the effort of the NCR to roll out awareness to the rural provinces and for not rolling out only to the cosmopolitan provinces, as was usually the case. Over 17  million of the country’s population lived in the rural provinces and engaging with rural communities and ward committees was very important to the government’s democratic ethos. He spoke at length of the importance of reaching out to rural provinces and communities. He had no questions; only reflections.

Mr S Mbuyane (ANC) asked why some stakeholders had not signed the Memoranda of Understanding with the NCT by the end of the fourth quarter? Why had some of the credit bureaux not submitted an annual report to the NCR?  What were the capacity restraints of the NCR that had prevented the NCR from taking action against the credit bureaux?

He noted an under-expenditure in General Expenses owing to the non-delivery of laptops which had been required to allow employees to work from home during the pandemic. How had employees been able to work without laptops?

Mr Mbuyane asked about the challenges confronting the NCR in the implementation of the National Credit Amendment Act? What were the challenges confronting the NCR in the process of implementation? He commended the public awareness programme. What challenges had been identified in the difficulties of ensuring an intake of disabled persons?

The Chairperson stated that the Committee Research Unit had raised several interesting questions. The Unit noted in the quarterly report that only 90% of the posts at the NCT were filled. What had been the impact of the 10% vacancy rate on the functions of the Tribunal? Why had the target of the NCT ensuring that there were no debtors awaiting payment been replaced by a new target, that of the implementation of the access strategy in the fourth quarter? How had the delay of the implementation of the National Credit Act Amendment project impacted on the NCT?

The Chairperson also raised the Research Unit’s questions in respect of the NCR. Which stakeholder had been unable to sign the MOU with the NCR by the end of the first quarter 2020/21 and for what reasons? Six credit bureaux had not submitted annual compliance reports but no action had been taken because of capacity restraints. What were the capacity restraints in respect of taking enforcement action on credit bureaux? The under-expenditure in General Expenses was attributed to the delayed delivery of laptops. How had employees been able to work remotely without laptops? What funding options were being explored to address the challenge in funding the implementation of National Credit Amendment Act? Had issues been highlighted in the Risk Register in the current financial year, how had they been dealt with and what preventative measures had been put in place?

Prof Maseko responded to the issue of vacancies at the NCT, saying that people had been seconded to the NCT as recruiting and appointing a substantive person took a long time but the work had to be done regardless. In addition, it had been necessary to make savings on the budget in the 2020/21 financial year. Positions had been frozen temporarily to ensure that the entity remained a viable going concern. Freezing positions, had put massive pressure on officials but after the financial year-end, appointments had been made and the need to work 16-to 20-hour days had been reduced and senior managers were currently finishing their work by midnight and not working into the early hours of the morning.

He added that the non-implementation of the National Credit Act Amendment (NCAA) did not affect the NCT as it would simply deal with cases flowing from the implementation of the NCAA as soon as the President promulgated the Act. A service provider had already been appointed and the NCT was preparing for the time when that happened. Debt intervention cases would happen only after promulgation. The cases would flow from the NCR and the NCT would be ready.

 
Adv Lolwane responded to the question about the finalisation of the MOUs. The NCT had been extensively involved in the process, firstly by drafting the MOUs to ensure the correct information was included and to ensure that consumers could sign the MOUs without the NCT getting involved. After much debate, the NCT had created a draft  for the four identified areas of Limpopo, Northern Cape, Eastern Cape. The NCT had engaged extensively with the regions, albeit electronically due to the pandemic. Some of the entities had sent the document to their legal counsel for checking of the legalities. The NCT had made the required amendments and the MOUs had been sent out but the documents were still with the legal departments of partner entities. The NCT would have to find other ways of getting the process moving again.

Adv Lolwane stated that the NCT had had two disabled employees but they had been interns and both interns had obtained employment elsewhere at higher salaries. The NCT was considering a better package for interns, although interns were people without experience. The NCT had contacted various organisations for disabled persons and people with disabilities were actively encouraged to apply for positions by encouraging applications from disabled persons in the advertisements.

Ms Motshegare said that the NCR had submitted its business plan to the dtic and had indicated that it would look for a cost-effective method of implementation of the NCAA. The NCR had spent R7 million on ICT infrastructure together with NCT to prepare for implementation of the NCAA.

She added that the impact of legislation on credit lending had been to lower the interest rate for short-term credit. At the time of the Act, the interest rate for a credit agreement was a maximum of 5% but the credit provider had to reduce it to 3% if the creditor entered into a second credit agreement in the same financial year. Interest rates on unsecured credit had been lowered from about 50% to 27% per annum. Rates had been coming down in line with the repo rate.

In respect of the non-submission of compliance by credit providers, Ms Motshegare explained that the NCR had two employees in that department but one had been hospitalised with Covid-19 during the time of submissions, leading to capacity issues at the time. The MOU between the NCR and the Financial Sector Authority was signed late as the Authority had needed to check with its legal department. The MOU had been signed off in April 2021.

Mr Lesiba Mashapa responded to Mr Macpherson’s question on the credit raids. He explained that prior to a raid, inspectors were sent to identify micro-lenders and their premises where IDs were being retained. In terms of the current legislation, the NCR had to have evidence of irregular or illegal activities taking place before a raid could be conducted. He projected photographs of the old and new ID cards and SASSA cards seized during a raid in Mpumalanga. The inspectors would work with the SAPS and SASSA to obtain evidence and would then compile a report which would be sent to the NCT.  He promised to supply the Committee with statistics on prosecutions in writing by the end of the week.

Ms Motshegare said that laptops had been ordered from overseas as they were HP laptops but owing to the global demand on laptops, there had been a huge delay in the delivery. The laptops should be delivered in September. In the meantime, some employees had been able to work from home as they had laptops while others had to work from the office on a rotational basis. Those were challenges that confronted the NCR in the past financial year.

Mr Mandla Mokoena clarified the issue of the laptops. Some laptops had been delivered in the course of the year but some were still outstanding. It was not the entire order that was outstanding.

Ms Motshegare stated that in terms of exploring funding options, the NCR was looking at reviewing registration fees, which it had not done during the height of the pandemic as individuals and organisations had been struggling under the Covid lockdown. The NCR had begun to draft regulations which it would send to the dtic. Some of the administrative funds would to go to awareness campaigns, as was done by credit regulators overseas.

Mr Obed Tongoane, Deputy CEO, responded to Mr Mbuyane’s questions. With regards to the recruiting of disabled persons, he stated that the Human Resources departments was ensuring that disabled people were encouraged to apply for all positions when they were advertised. The risk register had highlighted Covid-19 as the premium risk. The NCR had come up with relevant containment methods, establishing a compliance committee; compliance managers and officers had been appointed, and the NCR had ensured that the work environment was fully equipped to cope to health-related protocols. An additional office had been identified to allow for additional space for social distancing. All other protocols were observed.

He stated that funding was the second most important risk. The NCR had been unable to fill critical positions owing to funding challenges. Another risk in terms of human capacity was the poaching of staff, especially the poaching of registrars, by the banks and other such organisations that had more financial muscle than the NCR when recruiting staff. In responding to Mr Burns-Ncamashe’s comments, he stated that, in addition to holding imbizos in rural areas, the NCR was intending to work with the South African Local Government Association (SALGA) and a mobile van had been equipped with all the equipment needed to offer mobile services. The van would cross the land as an extension of the NCR.
 

Ms Motshegare added that the risk register highlighted five major risks: Covid-19 pandemic; funding; ICT; business continuity; fraud and corruption. The NCR had action plans to mitigate the risks.

The Chairperson stated that the Committee was encouraged by the high attainment of targets by the two entities.

Prof Maseko noted that the NCT had not been called to the Portfolio Committee for quite some time. He appreciated the questions posed by the Members as they gave the entity a sense of direction as to where the Portfolio Committee wanted it to go.

Ms Motshegare thanked the Chairperson for the opportunity to engage with the Portfolio Committee.

Concluding remarks
The Chairperson noted that the local government elections had effected a complete change to the Committee Programme.

The Secretary said that the parliamentary programme had been amended to ensure a constituency period from the end of the week. The programming committee would meet that Thursday to determine dates for the parliamentary programme. The Committee would not meet the following day as the National Assembly would be sitting and, apart from certain strict exceptions, Committees would not be permitted to meet again until November 2021.

The Chairperson reminded Members that he had alerted them to the possibility of changes to the Committee Programme. An updated programme would be sent to Members after the Programming Committee had deliberated on 9 September 2021.

The meeting was adjourned.