The National Consumer Commission (NCC) has yet to successfully defend appeals from SA's largest operators to the National Consumer Tribunal (NCT), after it sought to force the cellular companies to amend their contracts.
Last April, the wide-ranging Consumer Protection Act (CPA) came into effect. It protects consumers from unscrupulous business practices and makes strict provision for cooling off periods, reasonable cancellation fees and the option to get out of fixed-term contracts by giving 20 days' notice.
Cellular companies were among the first that the NCC fixed in its sights after it came into being last April. However, only iBurst folded after receiving a compliance notice to change its terms and conditions, while MTN, Vodacom, Telkom and Cell C took the notices on appeal, arguing that they were compliant with the CPA.
“If mobile operators were good corporate citizens, they would have amended their contracts to make them CPA-compliant without the NCC intervening,” the commission says.
So far, it has only won one case at the National Consumer Tribunal - an argument over a technicality. The tribunal has found that the NCC did not follow the procedures dictated in the law in other cases in the ICT sector, leading to adverse judgements that it is now taking on appeal.
Yet, the NCC's mammoth task is also thwarted by a lack of funding, and consumers are caught in the midst of a battle between the Department of Trade and Industry (DTI) and the commission over money, as the department has put the enforcement body under administration.
As a result, commentators argue the NCC is letting down South Africans.
Despite the chain of losses, the body argues it is fulfilling its mandate and hits back at critics who suggest that it is a waste of money and has let consumers down. The NCC says arguing matters before the tribunal is only 5% of its work. It has also improved the lives of 6 000 consumers through complaints handling and conciliations in 18 months, it points out.
Losing streak
Both Vodacom and MTN have appealed the notices at the tribunal. Vodacom won its bid after the tribunal ruled that the commission unlawfully issued a compliance notice, to the wrong party, and for a reason not authorised in the law. It said the notice was not issued reasonably, nor was it procedurally fair.
In January, MTN and the NCC argued whether the notice issued to MTN should have been issued to MTN Service Provider, which is the entity that contracts with subscribers.
In March, the tribunal ruled that MTN, SA's second-largest cellular network, could not scupper the notice from the NCC by arguing that it was issued against the wrong legal entity. This paved the way for the merits of the matter - whether MTN's contract was CPA-compliant - to be heard.
The MTN matter, which hinges on many issues that are similar to the Vodacom case, came and went without the commission arguing its case. In the second week of July, the tribunal convened to hear arguments from MTN as to why a notice issued against it to change its contracts should be overturned. However, the NCC's legal representatives were not prepared to argue, and the matter was postponed to the next day.
Despite the NCC's assurances that it would work through the night to prepare, the matter was again not heard. The tribunal then gave the commission until 18 July to sort out its heads of argument, but that deadline has also come and gone.
As a result, explains Robby Coelho - a partner with Webber Wentzel - the tribunal will have to decide the matter based on the information at hand. This includes affidavits from both sides and MTN's oral arguments, but no oral argument from the NCC, Coelho - who represents MTN - explains. The NCC argues it has followed the rules, because heads of argument were filed with the tribunal.
The NCC argues it never received the notice as it “was not sent to an official NCC e-mail address and not hand-delivered as stipulated in the rules of the tribunal”.
The mail, it argues, was sent to an intern's private e-mail. However, iWeek has been advised to send questions via a Gmail address, as the commission was having issues with its internal system.
The NCC says the second postponement was requested as the legal advisor was ill, but a doctor's note to this effect was not provided as “an employee's medical condition is confidential”.
The tribunal also recently threw out 45 notices against the City of Johannesburg over the billing crisis, because the NCC did not follow proper procedures and did not investigate the matter first, before issuing notices.
In its ruling, the tribunal said it had “some difficulty establishing the exact nature of the procedure followed” by the NCC. As a result, the 45 compliance notices issued to the city in August last year were deemed to be “defective” and have been cancelled by the NCT.
Commissioner Mamodupi Mohlala-Mulaudzi says she will take these decisions on appeal. The commission says, in all the tribunal's findings, the exact procedures to be followed have not been identified or highlighted. “That is why we are taking the tribunal rulings on review.”
The NCC adds that it has full investigation reports and has complied with all the requirements of the audi alteram partem rule. It adds that tribunal members are not advocates or attorneys. “Let's see whether a court of law will agree with us.”
Infighting
In addition to the commission's woes, Mohlala-Mulaudzi seems to be waging a war against its parent body - the DTI - after her post was advertised before she was told her contract would not be renewed.
Recently, Mohlala-Mulaudzi lost a court bid to stay on after 3 September and the DTI will soon have to find a replacement commissioner. Trade and Industry is also none too happy with the way the commission is handling its finances.
DTI placed the NCC under administration about five months ago and has taken over all payments to creditors on a month-to-month basis, says Mohlala-Mulaudzi. The department did this based on the auditor-general's third-quarter high-level audit, which did not justify such intervention, she says.
Mohlala-Mulaudzi says the unit requested about R134 million in total for the year, but was granted R100 million less, and its budget only covers operational expenses such as rent, salaries, security and cleaning services.
Consumers are suffering in the middle of all this, notes Mohlala-Mulaudzi. She has lodged a complaint with the Public Protector over the DTI's abuse of power and its handling of the NCC's finances in an inappropriate manner, she adds.
“We have spoken to both the DTI and Parliament, begging for more money to meet the broad mandate and, to date, this has fallen on deaf ears. We are doing very well under very challenging circumstances,” says the NCC.
DTI spokesman Sidwell Medupe says the NCC does not have the proper financial systems in place to make sure it adheres to the requirements of the Public Finance Management Act (PFMA). He says it was agreed that the department would pay out the NCC on a monthly basis, based on its projected expenses.
Medupe says the auditor-general's report raised serious concerns around financial management at the NCC and the DTI had no choice but to intervene. He says the department is not interfering.
All institutions funded by government submit funding requests annually to the National Treasury for consideration, says Medupe. Once budgets are allocated, the parent department has to be sure in terms of the PFMA that effective, efficient and transparent financial management and internal control systems have been implemented before funds can be transferred to that institution, he adds.
The day before the NCC became operational, DG Lionel October wrote to the commissioner to inform her of this requirement and also advising on the different processes that must be in place before funds can be released, says Medupe.
In the same correspondence, October acknowledged that there would not be enough time to address these issues and advised that most financial processes should be outsourced for a while until the necessary financial capacity, systems and controls were addressed, says Medupe. He says this advice was not heeded and the DTI processed all financial transactions on behalf of the NCC until 30 September.
After the NCC appointed finance staff, including a CFO, and assured the department that it had the necessary financial systems and controls, it took this function back, says Medupe.
“After a few months, it became apparent that the NCC was encountering challenges with financial management.” Medupe says this indicated there were errors in the financials and a report from one month to the next did not balance with each other.
Medupe adds that the auditor-general raised serious concerns in the latest quarterly report. However, Mohlala-Mulaudzi says the quarterly report was “fine” and the auditor-general did not indicate that anything was wrong.
Mohlala-Mulaudzi says the problems began when she and the department started fighting about her contract and the DTI decided not to fund the NCC. “It's just another way of trying to force me out of my job.”
Medupe says, as the NCC is a very important institution, October has committed the department to provide any assistance and advice that is required in order to ensure that the financial management of the institution is rectified as a matter of urgency.
Tough for consumers
Because of the issues around the budget, South Africans will not be able to sign up to a national opt-out registry anytime this year. The CPA makes a provision for a national “do not contact” list, but currently there are only two third-party options - Trust Fabric or the Direct Marketing Association of SA (DMASA).
The NCC needs about R5 million to develop an opt-out registry, which will allow consumers to pre-emptively block unwanted communications from companies.
However, there is currently a dispute between Mohlala-Mulaudzi and the department over the money needed for the registry. Spam accounts for as much as 90% of all e-mails and, while SMS spam is less - due to the cost involved - unwanted messages are more intrusive.
Medupe says funding is available for the database, but Mohlala-Mulaudzi has not requested it. Mohlala-Mulaudzi denies this, saying the database was included in the NCC's requested budget, but was not granted.
Medupe says DTI advised the commissioner in writing, on 14 February, that R9 million was available for projects. He says the department told the NCC it needed to prioritise the projects according to this available funding.
Mohlala-Mulaudzi was also told the procurement process for priority projects could go ahead, but service providers should only be informed once the DTI was satisfied that all relevant procurement processes have been complied with, says Medupe.
Last July, the NCC said the DMASA, an umbrella body that looks after the interests of the entire sector, was the preferred entity to run the database. However, in September, the commission said it was considering running the registry in-house, after people objected to the DMASA providing the service because of potential conflicts of interest.
'Own worst enemy'
Arthur Goldstuck, MD of World Wide Worx, says the NCC has not been a failure, but has been a mess. While the commission has been successful in lighting a fire under various industries in terms of companies' understanding of the law, it has slipped up by creating a mechanism to delay contract changes by going up against cellphone operators as an enemy instead of facilitating constructive engagements.
Goldstuck says the NCC's heart is in the right place, but its mind is elsewhere. “They were their own worst enemy.”
The NCC must make sure it plays by the rulebook because telecoms operators each have a bigger squad of lawyers than the entire staff of the commission, says Goldstuck. He notes that the NCC is understaffed and underfunded to meet the demands of consumers in the sector.
However, the NCC is not totally to blame, as it should be better resourced, says Goldstuck.
Goldstuck points out that the three largest cellphone operators combined are the biggest consumer-facing industry in SA, which makes them a prime battle ground for the NCC. If it cannot get its act together and processes right when dealing with the sector, it is letting down the highest proportion of consumers in a sector that it can, he adds.
Elizabeth de Stadler, a senior associate with Esselaar Attorneys, says the problem with the NCC is that it does not properly investigate issues before issuing compliance notices.
De Stadler says the compliance notices issued against both MTN and Vodacom were based on outdated contracts and the commission acted in a nonsensical way by issuing the notice to Vodacom a month before its final revised contract was due to be made public.
The commission wants to strong-arm the sector rather than try to enforce the Act, says De Stadler, although companies have paid more attention to consumers' rights since the inception of the law. She says that while the Act is not a failure, the enforcement body is. “It's a colossal waste of money.”
The commission argues that it is not a failure and is one of the very few, very effective state institutions. “We have met 80% of our business plan targets, 15% of the targets we have exceeded, and the remaining 5% have not been met because of budgetary constraints. This is fact, not speculation.” The NCC argues its annual report indicates it is carrying out its mandate.
Medupe says the DTI is aware of the problems and has written to the commissioner to address the issues. DTI has received numerous complaints about the commission from the industry. Trade and industry minister Rob Davies has written to Mohlala-Mulaudzi in a bid to address the issues, he says.
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