Presentation to the Portfolio Committee on Trade and Industry on the NRCS’ Second Quarter Performance
Report for the 2016-17 Financial Year
29 November 2016
Mr Edward Mamadise Acting Chief Executive Officer
1
NRCS representation
Mr. Edward Mamadise Acting Chief Executive Officer
Ms. Reshma Mathura Chief Financial Officer
Ms. Meisie Katz General Manager Foods and Associated Industries
Mr. Bongani Khanyile General Manager Electrotechnical
Mr. Mandla Mkhabela Chief Information Officer
Mr. Edward Matemba Manager: Strategy and Risk
2
Scope of Presentation
Strategic Overview of the NRCS Strategic Goals, Mission, Vision Legislative mandate Regulated industries Highlights
Performance against Targets Non-Financial Performance Financial Performance
Challenges
3
NRCS Strategy, Mission and Vision
NRCS Strategic Goals Mission & Vision
4
To ensure an optimally
capacitated institution
To develop, maintain and administer compulsory
specifications and technical regulations
To maximise compliance with all specifications
and technical regulations
To inform and educate our stakeholders
about the NRCS
Mission
• To develop compulsory specifications and technical regulations, and maximise compliance of regulated products and services
Vision
• A credible and respected regulator for the protection of the public, the economy and the environment
5
National Regulator for Compulsory Specifications Act
(Act No. 5 of 2008)
Legal Metrology Act
(Act No. 9 of 2014)
National Building Regulations and Building Standards Act
(Act No. 103 of 1977)
The Foodstuffs, Cosmetics and Disinfectants Act
(Act 54 of 1972)
Mandate of the NRCS is derived from the following Acts.
Legislative Mandate
Industries regulated by NRCS
6
Industry Sector Product regulated / Service rendered Automotive Vehicles, Replacements components, Manufacturers Importers and
Builders Chemicals, Materials and Mechanicals
Building materials (Cement. Treated timber, Safety glass and other safety glazing material). PPE (Safety Footwear, Swimming aids, personal flotation devices, respirators
Electro-technical Electrical appliances and products, Electronic appliances and products
Foods and Associated Industries (FAI)
Fishery products, canned meat and processed meat
Legal Metrology Calibration of measuring instruments, weights, measures and gaming equipment
Building Regulations Ensure uniform interpretation of National Building Regulations and Standards Act, administer review Board
Key highlights
NRCS conducted 12 434 inspections 6 274 fishery and associated products consignment/productions 6 160 inspections for automotive, electro-technical, chemicals, materials and
legal metrology related products.
Non- Compliant Products NRCS found non-compliant products estimated at R123 million. The non-compliant
products included Fishery Products (Prawns), CFL’s, power supplies, pumps and filters, battery chargers, adaptors, lamp holders and paraffin stoves.
Electro-technical - non-compliant products was approximately R6,1 million, with Durban Port of Entry accounting for approximately 99%. Non-compliant products included CFL’s, luminaires, cord extension sets, incandescent lamps and adaptors. Durban Port of Entry accounting for approximately 99%.
Foods and Associated Products - The estimated monetary value of these non-compliant products was R75,4million.
Legal Metrology - The total monetary value of products tested R480 million. The value of products found non-compliant R 39 million
7
Progress on Commitments made to the Portfolio Committee
8
BACKLOG SHORT-TERM INTERVENTIONS - UPDATE
9
COMMITMENT Progress to date
Separation of administrative from technical processes
• Developed and implemented Admin and Technical Evaluation checklists and processes.
Develop and piloted risk-based approach
• Low Risk: Renewals, Local Manufacturers and Low Risk Application ito. Products, Companies and Countries.
• Medium Risk: Products, Companies and Countries • High Risk: Products, Companies and Countries • Different approval routes used based on risk classification.
Human Resources • LOA approvals section resources have increased from 5 to 7 inspectors.
• Additional 2 candidate inspectors – Short-listing completed, recruitment process underway.
• 4 more positions are being created to further increase the staff complement to 13 inspectors.
Targeted to process 2500 applications by end October 2016
• Approved 1317 applications from 14 September to 30 October • Total workload by end October – 5231 with a backlog of 1615 • This intervention has been intensified to target processing more
applications by mid December and following months.
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Manual Implementation status
• Implemented RBA on Low Risk Applications.
• Implemented RBA on Renewal Applications.
• Piloting RBA on Medium Risk Applications.
• Piloting RBA on POE inspections.
• Piloting RBA on Retail inspections.
RISK BASE APPROACH - UPDATE
NRCS Systems Improvements Progress – SHORT TERM INTERVENTIONS
• The NRCS appointed a service provider to improve current CRM system for a period of six months.
• Business requirements received from business and built into the system
• The building was completed and ICT is currently doing quality assurance before testing.
• User Testing is planned for the first week of December 2016 and thereafter implementation by the 16 of December 2016.
NRCS Systems Improvements Progress – LONG TERM INTERVENTIONS
• The business Case for the Long Term intervention was approved by the CEO.
• A business requirement document was finalised with business and submitted to SCM.
• Business and ICT had engagements with providers locally to look at similar systems in order to enhance the process.
• The SCM process is currently on the Bid Specification Process stage.
• Bid to be advertised in January 2017
13
NRCS Systems Improvements Progress – SHORT AND LONG TERM INTERVENTIONS
Document NRCS processes and identify areas of Improvement
Benchmark with similar entities for best practices
Re-Engineering of NRCS processes in line with
NRCS Strategic Objectives
& Implement an ICT Solution that meets NRCS
requirements
6 Months – 18 Months 68% Complete
08/1
6
09/1
6
12/1
6
01/1
7
11/1
6
10/1
6
06/1
7
01/1
8
12/1
7
10% Complete Completed Tasks
-Appointment of Service provider (6 Months period)
System Optimisation -Fix Errors on system -Allocate user roles System Enhancement -Gather Requirements -Document and Sign off
Completed Tasks -Project Approval
-Engagement with Local vendors
SHORT TERM – CURRENT SYSTEM IMPROVEMENTS
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Task Name Duration Start Finish % Complete
CRM Short Term intervention 150 days Thu 6/16/16 Wed 1/11/17 68%
-Appointment of Service provider 30 days Thu 6/16/16 Wed 7/27/16 100%
System Optimisation 30 days Mon 8/1/16 Fri 9/9/16 100%
-Fix Errors on system 30 days Mon 8/1/16 Fri 9/9/16 100%
-Allocate user roles 7 days Thu 9/1/16 Fri 9/9/16 100%
System Enhancement 42 days Thu 9/1/16 Fri 10/28/16 100%
-Gather Requirements 12 days Thu 9/1/16 Fri 9/16/16 100%
-Document and Sign off 3 days Wed 10/26/16 Fri 10/28/16 100%
Develop requirements into CRM 40 days Mon 10/31/16 Fri 12/23/16 96%
-Product Information 40 days Mon 10/31/16 Fri 12/23/16 98%
-Service Request information 40 days Mon 10/31/16 Fri 12/23/16 98%
Post System Implementation 3 days Mon 1/9/17 Wed 1/11/17 0%
LONG TERM – NRCS MODERNIZATION PROJECT
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Task Name Duration Start Finish %
Complete
NRCS Modernization Project 128 days Mon 5/23/16 Wed 11/16/16 10%
Proposal by Current Service Provider 17 days Mon 5/23/16 Tue 6/14/16 100%
Prepare a Business case 5 days Mon 5/23/16 Fri 5/27/16 100% Table Business Case with CEO 1 day Tue 5/31/16 Tue 5/31/16 100% Engage with Other Business Committees 1 day Tue 6/7/16 Tue 6/7/16 100% Brief Oracle on NRCS Requirements 1 day Tue 6/14/16 Tue 6/14/16 100% Presentation by Oracle to all Teams 1 day Tue 6/14/16 Tue 6/14/16 100%
Benchmarking Exercise 122 days Mon 6/13/16 Tue 11/29/16 47%
Engage Vendors and other Regulators 122 days Mon 6/13/16 Tue 11/29/16 47%
Benchmark with Other Regulators (Funded by DOE) 10 days Wed 11/16/16 Tue 11/29/16 0%
Request for information - RFI 164 days Mon 7/4/16 Thu 2/16/17 32%
Tender Specifications 56 days Mon 2/20/17 Mon 5/8/17 0%
Appoint Service Provider 30 days Wed 5/17/17 Tue 6/27/17 0%
Implement Project with Selected partner 179 days Mon 7/3/17 Thu 3/8/18 0%
Actual Performance Against set targets (Non-Financial performance)
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Strategic Goal 1: To develop, maintain and administer compulsory specifications and technical regulations
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Performance Indicator / Measure
Annual Target Quarter 2 Target Quarter 2 Actual Performance
Variance Reason for Variance
Number of new VC’s/Tech
Regulations submitted to the
dti for approval.
2 Compulsory
Specifications/
Technical
Regulations
0 Compulsory
Specifications/
Technical
Regulations
0 VC/TRs submitted to the dti for approval/1st gazetting
None
Number of VC’s/Tech
Regulations reviewed and
Review Reports produced
6 VCs/TRs
reviewed and
Review Reports
produced
1 2 Compulsory Specification reviewed
+100% Technical Specialists assigned with VC development duties to assist in meeting target and the projects spilled over from 2015/16 financial year
Number of Feasibility Studies
conducted 2 Feasibility
Studies
conducted
1 4 feasibility studies
conducted on
Smoked fish and live
bivalves
+300%
Administer Review Board: % of
Review Board decisions
finalised within 30 calendar
days
100% 100% 100% None
SG 2: To maximise compliance with all specifications and technical regulations: Automotive
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Performance Indicator / Measure
Annual Target
Quarter 2 Target
Quarter 2 Actual
Variance Reason for Variance Corrective Action
Number of Source
Inspections
conducted by the
NRCS automotive
business unit
3200 960 1214 +26% Implemented the recovery strategy due to non-achievement of Quarter 2 targets
Number of retail
inspections
conducted
800 240 340 +41,7%
Total: 4000
1200 1554
+29,5%
Percentage of automotive approval applications processed within the set timeframes.
100% 100% 95,39% (1 013 out of 1 028)
-4.61% Not all required documents/ information was submitted Increase in the number of Tyre Homologation applications
NRCS implementing the revised procedure to cancel applications with outstanding information. The adoption of the RBA to Tyre Homologations
SG 2: To maximise compliance with all specifications and technical regulations: Chemicals, materials and mechanicals
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Performance Indicator / Measure
Annual Target
Quarter 2 Target
Quarter 2 Actual
Variance Reason for Variance Corrective Action
Number of Source
Inspections CMM
business unit
2860 800 532 -33,5% Inspectors assisting with
approval applications.
CMM started with group
inspections and the second
phase in the
implementation of the
dormant VCs.
Resources dedicated to
Retail Inspections
Number of retail
inspections 3200 900 1182 +31%
Total: 6060
1700 1 714 +0,8%
Percentage of CMM approval applications
90% 90% 52% -38% Incorrect test reports for Safety Footwear Delays in the implementation of Treated Timber and Safety Footwear VCs
SG 2: To maximise compliance with all specifications and technical regulations: Electro-technical
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Performance Indicator / Measure
Annual Target
Quarter 2 Target
Quarter 2 Actual
Variance Reason for Variance
Corrective Action
Number of Source
Inspections -
electro-technical
business unit
2640 792 602 -24% Utilising inspectors within the approvals domain, in order to eradicate the backlog
None- Year to date target achieved
Number of retail
inspections
1760
528 629 +19%
Total: 4400
1320 1231 -6,7%
Percentage of Electro-technical approval applications processed within 120 calendar days
80% 80% 24% (issued 572 out of 2452 within 120 days)
-69% Backlog within the Electro-technical Unit Inadequate human resources High number of applications received
NRCS piloting Risk Based Approach (RBA) to Approval. RBA categorising applications based on the risk of the product, company, country of origin and whether it’s new application or renewal. There are three risk categories which are high, medium and or Low risk. Management have embarked on a process to increase staff compliment by 6 new inspectors from 7 to 13.
SG 2: To maximise compliance with all specifications and technical regulations: Legal metrology
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Performance Indicator / Measure
Annual Target Quarter 2 Target
Quarter 2 Actual Performance
Variance Reason for Variance
Corrective Action
Number of Source
Inspections 4151 1141 1 398 +22,5% Dedicated
resources to non-compliant manufacturers and Ports of Entries
Year to date target achieved
Number of retail
Inspections 1250 350 263 -25% Total: 5401 1 491 1 661 +11%
Percentage of
type approval
applications
100% - within 120
calendar days 100% - within
120 calendar
days
100% (47 out of 47)
No Variance No variance
Percentage of gaming approval applications
100% of all
applications
processed within
30 calendar days
100% of all
applications
processed
within 30
calendar days
53% processed within 30 calendar days (93 out of 175)
-47% Inadequate capacity (One on maternity leave)
SG 2: To maximise compliance with all specifications and technical regulations: Foods and associated industries
22
Performance Indicator / Measure
Annual Target Quarter 2 Target
Quarter 2 Actual Performance
Variance Reason for Variance
Corrective Action
Percentage of Inspections conducted on locally produced canned fishery and meat products
100% 100% 100% Inspections conducted Canned Fish: 697 Canned Meat: 925
No Variance
N/A N/A
Number of inspections conducted on locally produced Frozen products
1045 frozen fish inspections
262 frozen fish inspection conducted
259 inspections conducted
-1% N/A
Percentage of inspections conducted on all declared Imported canned fish, meat and frozen fishery
100%
100% 100% Inspection Conducted Canned and Frozen Fish: 1 463
No Variance
N/A N/A
SG 2: To maximise compliance with all specifications and technical regulations: Foods and associated industries
23
Performance Indicator / Measure
Annual Target Quarter 2 Target
Quarter 2 Actual Performance
Variance Reason for Variance Corrective Action
Percentage of inspections conducted on requests received for fish & fishery and canned meat export products consignments
100% 100% 100% Exported Inspections product: 2 930
No variance
N/A N/A
Number of Inspections conducted on fishery and canned meat processing factories and vessels
1090 320 266 Facilities inspections
-16,9 Land based facilities are inspected by the NRCS as scheduled. The number of requests received in the quarter was less than the planned target.
SG 3: To inform and educate our stakeholders about the NRCS
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Performance Indicator / Measure
Annual Target Quarter 2 Target Quarter 2 Actual Performance
Variance Reason for Variance
Number of
multimedia awareness
ccampaigns
12 Internal and
4 external
electronic
publications
3 Internal and 1
external
electronic
publications
3 internal and 1 external newsletters published
No Variance
N/A
Number of
stakeholder consumer
education events and
campaigns
2 multimedia
awareness
campaign
1 multimedia
awareness
campaign
1 multimedia awareness campaign
No Variance
N/A
Number of stakeholder consumer education events or campaigns
12 NRCS
consumer
education
events or
campaigns
3 NRCS
consumer
education
events or
campaigns
3 Consumer education events hosted
No variance N/A
Strategic Goal 4: To ensure an optimally capacitated institution
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Performance Indicator / Measure
Annual Target Quarter 2 Target
Quarter 2 Actual Performance
Variance Reason for Variance
Corrective Action
A capacitated
organisation
with relevant
systems to
support business
Percentage (%
of vacancy rate
of approved
and funded
posts
6% - Average annual vacancy rate 8%
N/A N/A
Build IT platform
and systems that
supports and
improve business
Developed,
approved and
implemented
ICT Master
System Plan
Develop and
approve ICT
Master
System Plan
Needs analysis
conducted on
the Master
System Plan
Needs analysis conducted and NRCS in the process of finalising Request for Information documents for ERP and Modernization project
No Variance
Financial Performance
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Financial Overview: Income Statement
27
Actual Budget Actual Budget Actual Budget Full year Budget
Transfers from the dti 42 959 25 926 43 459 60 492 86 418 86 418 86 418
Interest Income 3 125 2 368 900 5 321 1 800 7 914 13 600
Levies from Compulsory Specs 14 024 6 791 77 028 72 798 91 052 79 606 181 178
Services 11 915 13 711 12 854 12 218 24 770 26 001 50 205
Levy Audits 1 250 - 1 250 8 184 2 500 8 184 5 000
Other Income - (96) 2 225 510 4 451 286 38 201
Total Income 73 274 48 699 137 716 159 523 210 990 208 410 374 603
Compensation of Employees 64 708 57 233 69 130 64 271 133 838 121 503 270 778
Goods and Services 27 862 13 877 22 136 14 866 50 248 29 446 103 669
Total Expenditure 92 571 71 110 91 266 79 137 184 087 150 949 374 447
Surplus / (Deficit) (19 297) (22 411) 46 450 80 387 26 903 57 461 156
Income statement Q1 Q2 YTD
Financial Overview: Revenue
28
(50,000)
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Transfers fromthe dti
InterestIncome
Levies fromCompulsory
Specs
Services Levy Audits Other Income Total Income
43,459
900
77,028
12,854 1,250 2,225
137,716
86,418
13,600
181,178
50,205
5,000
38,201
374,603
Revenue Q1, Q2, Year to date
Q1 Q1 Q2 Q2 YTD YTD YTD
Financial Overview: Revenue
29
31%
1% 56%
9%
1%
2%
ACTUAL REVENUE Q2
Transfers from the dti
Interest Income
Levies from Compulsory Specs
Services
Levy Audits
Other Income
Financial Overview: Expenditure
30
73%
27%
ACTUAL EXPENDITURE Q2
Compensation of Employees
Goods and Services
Financial Overview: Expenditure
31
(50,000)
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Actual Budget Actual Budget Actual Budget Full yearBudget
Q1 Q2 YTD
(19,297) (22,411)
46,450
80,387
26,903 57,461
156
Income, Expenditure, Surplus
Total Income Total Expenditure Surplus / (Deficit)
Financial Overview: Expenditure
32
13% 2%
63%
2%
20%
EXPENDITURE PER GOAL
Programme 1: Administration
Strategic Goal 1: To develop, maintainand administer compulsoryspecifications and technicalregulations
Strategic Goal 2: To maximisecompliance with all specifications andtechnical regulations
Strategic Goal 3: To inform andeducate our stakeholders about theNRCS
Strategic Goal 4: To ensure anoptimally capacitated institution
Progress on Revenue qualification
33
Recap: Revenue Qualification
34
Grap 23 – Non-exchange Revenue
Revenue recognition based on a taxable event
Taxable event different from the timing of revenue
NRCS Act, NRCS Regulations
Taxable event is the import / manufacture of regulated products
Unclear timing of revenue
Weak on punitive measures
Systems and controls
Systems and processes that allow for timely recognition of revenue
Integrated information
Integration of information internally (Surveillance, Approvals and Revenue)
Third party integration
Recap: Revenue Qualification Plan
35
Internal control improvements
NRCS Modernisation
• ERP system implement-ation
• Business process re-design
SARS Collaboration
• Information sharing and system integration
Legislative options
Legal opinion re: NRCS Act
• Amendment to the Act, or
• Engage the dti on the NRCS Act
LOA Conditionality
• Quarterly volumes forecast
• Introduce LOA validity period
Revenue Qualification Plan: Progress
36
Plan Progress to date
NRCS Modernisation • ERP system implementation • Business process re-design
• Modernisation concept has been developed. • Request for Information for procurement process at an advanced
stage, pending advertisement • Implementation strategy to be discussed with ICT Steering
Committee. • Business process redesign is dependent on the modernisation
approval
SARS Collaboration • Information sharing and
system integration
• HSS codes project with SARS will be finalised end November. • Way forward: Roll out to all NRCS regulated commodities (Planning
phase)
Legal opinion re: NRCS Act • To determine if the NRCS Act
needs to be amended
• Clarity being sought in respect of the legal opinion that was obtained
LOA Conditionality • Quarterly volumes forecast • Introduce LOA validity period
• In the process of investigating mechanisms to operationalise
Challenges
37
Key challenges
Operational challenges Number of Electro-technical LOA Applications as of end October 2016
Total applications registered (includes backlog) : 5231 Total application on backlog (more than 120 days) : 1615
The application and regulation of products covered under Compulsory Specifications that are outdated.
High transportation and storage costs for confiscated goods. Long turnaround times and capacity constraints at the test houses
compromises the effectiveness of the Regulator
Border enforcement challenges: Inadequate information supplied on the bill of entry and shipping manifests High number of abandoned goods at Ports of Entry which results in high
transportation and storage costs after confiscation.
Revenue challenges Collection dependent on the industry co-operation Declining economic activity impacting revenue collection Reduction in government funding allocation in current and prior year
38
Abbreviations and Acronyms
39
AG – Auditor General CMM – Chemicals, Materials and Mechanical DAFF – Department of Agriculture, Forestry and fisheries FY – Financial year LOA – Letter of Authority NBR – National Building Regulations NCC – National Consumer Commission SABS – South African Bureau of Standards SAPS – South African Police Services SARS – South African Revenue Services TR – Technical Regulation VC – Compulsory Specification YTD – Year to Date
40
Thank You
