1. Presentation to the Portfolio Committee on Trade and Industry on the NRCS’ Third Quarter Performance Report for the Financial Year Mr Edward Mamadise Acting Chief Executive Officer 14 February 2017

2. NRCS representation Mr. Edward Mamadise Ms. Elmarie Cornelius
Acting Chief Executive Officer
Ms. Elmarie Cornelius
Acting Chief Financial Officer
Ms. Meisie Katz
General Manager Foods and Associated Industries
Mr. Bongani Khanyile
General Manager Electro-technical
Mr. Edward Matemba
Manager: Strategy and Risk

3. Scope of Presentation Status on Portfolio Committee Commitments
Electro-technical LOAs
Progress on IT commitments
Strategic Overview of the NRCS
Strategic Goals, Mission, Vision
Legislative mandate
Regulated industries
Highlights
Performance against Targets
Non-Financial Performance
Financial Performance
Challenges

4. NRCS Strategy, Mission and Vision
NRCS Strategic Goals
Mission & Vision
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. Legislative Mandate
Mandate of the NRCS is derived from the following Acts.
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)

6. Industries regulated by NRCS
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

7. Key highlights NRCS conducted 10 694 inspections
5 988 fishery and associated products consignment/productions
4 706 inspections for automotive, electro-technical, chemicals, materials and legal metrology related products.
Non- Compliant Products
NRCS found non-compliant products estimated at R69 million.
Automotive – Value of Non-compliance R2m. Brake friction material containing asbestos
CMM – R0,832m. Disinfectants, paraffin stoves plastic bas & swimming aids
Electro-technical – Value of Non-compliance R0,987m. CFL’s, lamp holders, luminaires, cord extension sets, incandescent lamps and adaptors, dishwashers, geysers, cell phone chargers
Foods and Associated Products – Prawns and canned fish - non compliance – mostly pathogenic Vibrio spp and these products were imported. The estimated monetary value of these products is R 47,918,730.00
Legal Metrology - The total monetary value of products tested R million. The estimated value of the non-compliant products found is R17.4 million.

8. Progress on Commitments made to the Portfolio Committee

9. BACKLOG SHORT-TERM INTERVENTIONS - UPDATE
COMMITMENT
Progress to date
Separation of administrative from technical processes
Separation of Administrative and Technical processes completed - Implementation ongoing
Develop and piloted risk-based approach
Low Risk & Medium Risk: Manual implementation on going using checklists.
Human Resources
Recruitment and Selection process underway, incumbents to start beginning April Interviews conducted 9 and 10 February 2017
Applications process during intervention period (Dec to Jan 2017)
Applications Processed – 6 636
Applications above 120 days
LOA issued
Since Feb 2017, number of capturers has been increase 3 to 7 to deal with the backlog on LOA issuing stage.
Applications cancelled - 145
Applications awaiting capturing – 1 404
Applications unassigned – 73
Applications in progress - 635
Applications pending awaiting industry response – 2 377

10. Business requirements received from business and built into the system
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.
Delays experienced in User Testing which was planned for December 2016 due to user availability.
Testing started on the 23rd Jan 2016 after the holiday recess and expected to be finalised by the end of February 2017

11. NRCS Systems Improvements Progress – LONG TERM INTERVENTIONS
Both Modernization and ERP specification were finalized in November 2016 but could not be advertised during December 2016 due to holidays recess period.
The ICT steering committee met on the 17th of January and advised the CEO that the two specifications be combined. The CEO approved.
Both specification were referred back to the BSC in line with SCM requirements. A new committee was appointed to combine and finalize the RFI Bid (BSC sat on the 2nd of February 2017 and document finalized & circulated for inputs to the ARC and ICT Steering committee.)
The RFI will be finalized and advertised before the end of February 2017

12. Project Current Status
The e-EXCO resolved that the committee will now be headed by the CIO assisted by Mr Riyano after the resignation of the CFO.
The e-EXCO also resolved that the project teams be dissolved and the functional areas as identified be dealt with by the main committee.
The CEO emphasized that business must sign off on their business requirements for the project as part of the business reengineering process.
The NRCS will also appoint an external Project Manager to manage the project due to its size and impact.

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
08/16
09/16
10/16
11/16
12/16
01/17
12/17
01/18
06/17
88% Complete
10%
Complete
6 Months – 18 Months
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

14. Actual Performance Against set targets
(Non-Financial performance)

15. Strategic Goal 1: To develop, maintain and administer compulsory specifications and technical regulations
Performance Indicator
/ Measure
Annual Target
Quarter 3 Target
Quarter 3 Actual Performance
Variance
Reason for Variance
Number of new VC’s/Tech Regulations submitted to the dti for approval.
10 Compulsory Specifications/ Technical Regulations
4 Compulsory Specifications/ Technical Regulations
1 VC/TRs submitted to the dti for approval/1st gazetting
-75%
Inadequate capacity within the Regulatory Research and Development area
Administer Review Board: % of Review Board decisions finalised within 30 calendar days
100%
None

16. Compulsory Specifications submitted to the dti
VC 8076, Safety of Lighters ( First gazette)
VC 8054, Chemical Disinfectants ( Final gazette)
VC 8056, Pneumatic Tyres for passenger vehicles and their trailers ( Final gazette)
VC 8059 , Pneumatic Tyres for commercial vehicles and their trailers ( Final gazette)
VC 8013, Hydraulic brake and clutch fluids (Final gazette)

17. SG 2: To maximise compliance with all specifications and technical regulations: Automotive
Performance Indicator
/ Measure
Annual Target
Quarter 3 Target
Quarter 3 Actual
Variance
Reason for Variance
Corrective Action
Number of Inspections conducted by the NRCS – Automotive, Electro-technical, CMM and Legal Metrology
18 900
4 345
4 706
+8,3%
More retail inspections were conducted due to the need to respond to non-compliant products in the marketplace.
No Action Required
Percentage of Inspections conducted on locally produced, imported and exported canned fishery and meat product consignments  
100% of inspections conducted on all declared produced canned fishery and meat products
Inspected 100% of all declared consignments and productions  
Total Inspections conducted 5988
No Variance
N/A

18. SG 2: To maximise compliance with all specifications and technical regulations: Chemicals, materials and mechanicals
Performance Indicator
/ Measure
Annual Target
Quarter 3 Target
Quarter 3 Actual
Variance
Reason for Variance
Corrective Action
Number of inspections conducted on locally produced Frozen products and fishery and canned meat processing factories and vessels in accordance with the compulsory specification and procedures
2 135 inspections
511 inspections
529
3,5%
Land based facilities are inspected by the NRCS on request by the Industry. The number of requests received in this quarter were higher than expected.
No action necessary at this stage.
Percentage of approval applications processed within the set timeframes
90% of all approval applications processed within 120 calendar days
47% (1 742 out of 3 739) of all approval applications processed within 120 calendar days
-43%
1) Backlog within the Electro-technical domain
2) Inadequate Capacity
3) Applications submitted without all required documents or unacceptable Test Reports
4) Delays in implementing dormant VCs within CMM
Implemented overtime
Appointed new employees
Utilizing field inspectors to eradicate the backlog
Implemented the 30 days cancellation policy for applicants who fail to respond to NRCS findings

19. Breakdown of Approvals per Industry (Business Unit)
Opening Balance
Applications received during the quarter
Processed and Finalised within 120 days
Processed and Finalised over 120 days
Total Approvals Finalised
Applications carried over to Quarter 4
% Within 120 Days
Legal Metrology Gaming Applications
102
356
250
208
100%
Legal Metrology Type Approvals 73 49 58 1 59 63
98%
CMM Approvals
423 54 38 70
108
369
35%
Automotive Approvals*
1802
1037
888 31
919
1882
97%
Electro-technical Approvals**
5170
2919
508
1895
2403
5583
21%
Total
7570
4415
1742
1997
3739
8105
47%

20. SG 3: To inform and educate our stakeholders about the NRCS
Performance Indicator
/ Measure
Annual Target
Quarter 3 Target
Quarter 3 Actual Performance
Variance
Reason for Variance
Number of stakeholder consumer education events
or campaigns
12 NRCS consumer education events or campaigns
3 NRCS consumer education events or campaigns
4 Consumer Awareness Campaigns were conducted
+33%
The variance was due to the Poultry workshop that was organised by the Department of Agriculture, Forestry and Fisheries

21. Strategic Goal 4: To ensure an optimally capacitated institution
Performance Indicator
/ Measure
Annual Target
Quarter 3 Target
Quarter 3 Actual Performance
Variance
Reason for Variance
Corrective Action
Percentage (%) of vacancy rate 6%
9.62% vacancy rate as of 31December 2016 .
Resignations and retirements coupled with a moratorium on filling of vacancies as a measure to manage Human Resources costs
Filling at least 5 vacant posts during Quarter 4
Developed, approved and implemented ICT Master System Plan (MSP)
Develop and approve ICT Master System Plan
Draft concept for MSP finalised
Draft Master Systems Plan (MSP) developed and circulated for IT Steering Committee in January 2017
MSP was referred back to take into consideration the need to modernize the NRCS

22. Human Resources
Staff Complement – Total 300 comprising of 293 permanent staff and interns.
One appointment was made during the quarter
Five terminations
Three resignations
One dismissal
One by mutual separation
Vacancies
29 budgeted vacant positions
Vacancy Rate 9,62%
NRCS prioritising the appointment of the Deputy CEO and CFO
Staff training
NRCS awarded bursaries worth about R to employees commencing studies at various higher institutions of learning in 2017 calendar year

23. Financial Performance

24. Financial Overview: Income Statement

25. Financial Overview: Revenue

26. Financial Overview: Revenue

27. Financial Overview: Expenditure

28. Financial Overview: Expenditure

29. Financial Overview: Expenditure

30. Progress on Revenue qualification

31. Recap: Revenue Qualification
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

32. Recap: Revenue Qualification Plan
Internal control improvements
NRCS Modernisation
ERP system implementation
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

33. Revenue Qualification Plan: Progress
Progress to date
NRCS Modernisation
ERP system implementation
Business process re-design
Request for information has been revised to ensure full integration across systems within the NRCS
Implementation strategy was discussed and agreed with ICT Steering Committee and Audit and Risk Committee
SARS Collaboration
Information sharing and system integration
HSS codes project with SARS was finalised
Way forward: Roll out to all NRCS regulated commodities (Planning phase) to be combined with the modernisation project
Legal opinion re: NRCS Act
To determine if the NRCS Act needs to be amended
the dti has indicated that changing the NRCS Act and Regulations will be a lengthy process, therefore the NRCS will proceed with implementing business process re-design based on current legislation
LOA Conditionality
Quarterly volumes forecast
Introduce LOA validity period
In the process of investigating mechanisms to operationalise
Pending resolution of the LOA backlog

34. Challenges

35. Audit findings

36. Key challenges Operational challenges Border enforcement challenges:
Inadequate capacity and relatively unstable human resource environment
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
Funding and Expenditure: NRCS performing mandates that are not fully funded, reduction in funding in the current and prior year and relatively high employee costs.
Collection dependent on the industry co-operation
Declining economic activity impacting revenue collection

37. Abbreviations and Acronyms
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

38. Thank You