Three Year Annual Performance Plan. Five Year Strategic Plan 2018/ / / /23

Transcription

1 Three Year Annual Performance Plan 2018/ /21 Five Year Strategic Plan 2018/ /23

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3 Three Year Annual Performance Plan 2018/ /21

4 Abbreviations AA - Accounting Authority ARMC - Audit and Risk Management Committee ADR - Alternative Dispute Resolution CB - Credit Bureau CCI - Consumer Credit Index CCMR - Consumer Credit Market Report COTII - Council of Trade and Industry Institutions CP - Credit Provider dti - Department of Trade & Industry DPSA - Department of Public Service Administration EXCO - Executive Committee FSRA - Financial Sector Regulation Act ICT - Information Communication Technology MICTSETA - Media Information and Communication Technologies Sector Education and Training Authority NCA - National Credit Act NCAA - National Credit Amendment Act NCR - National Credit Regulator NCT - National Consumer Tribunal PDA - Payment Distribution Agents PFMA - Public Finance Management Act SADC - Southern African Development Community SDIP - Service Delivery Improvement Plan SMME - Small Medium and Micro Enterprises WRSETA - Wholesale and Retail Sector Education and Training Authority Definitions used to measure performance Effective - Successful in producing a desired or intended result Enhance - Improve the quality of performance Support - To give assistance Facilitate - To make an action or process easier 4 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

5 Table of Contents 1. NCR Organisational structure Foreword by the Minister Overview by the Accounting Authority PART A: Strategic Overview Vision Mission Values Strategic objectives Services Recent Court Rulings Situational Analysis State of the Credit Market a) Certainty in the regulatory framework b) Increasing complexity and sophistication c) Stakeholder management d) Challenges faced by the NCR a) Processes, system and structure renewal b) Human Capital c) Knowledge intensity Strategic Alignment to the dti Description of the Planning Process Financial Plan (i) Projections of revenue, expenditure, borrowings and capex (v) Dividend policies National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 5

6 PART B: Programme Performance Programme 1: Programme 2: Programme 3: Programme 5: PART C: 3.1 Fraud Prevention Plan: Key Strategic Risks Any subsidiary of statutory body reporting to the entity Service Delivery Improvement Plan National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

7 1. NCR Organisational Structure CEO and AA Outsourced Internal Audit ARMC CFO Company Secretary COO (Vacant) Deputy CEO Manager: Investigations & Enforcement Manager: Compliance CB Manager: Compliance CP Manager: Registrations Manager: Complaints Manager: Debt Counselling Manager: Education & Communication Manager: Statistics & Research Manager: HR Manager: Call Centre EXCO Management Team National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 7

8 2. Official sign-off Was developed by the management of the National Credit Regulator under the guidance of Mrs N Motshegare, who is the CEO and Accounting Authority. Was prepared in line with the current Strategic Plan of the National Credit Regulator. 8 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

9 3. Foreword by the Minister W after the National Credit Regulator s (NCR s) tenth year anniversary, we are reminded once more about our purpose to continue to strengthen consumer protection in the consumer credit industry while facilitating the sustainability and continued development of the credit industry. Global Economic Prospects report provided an outlook for potential growth in each of the six global regions. In Sub-Saharan Africa: Growth in the region is anticipated to pick up to 3.1 percent in 2018 from 2.4 percent in South Africa is forecast to pick up to 1.1 percent growth in 2018 from 0.8 percent in (Source: The World Bank: Press Release dated 9 January 2018: Global Economy to Edge up to 3.1 percent in 2018 but Future Potential Growth a Concern). The South African forecast is also supported by data released by Statistics South Africa. The economy of South Africa was reported to be on a recovery path. The economic activity in Q3 rose to 2.0% quarter-on-quarter- (Source: Focus Economics, December 8, 2017). This showed that the economy was gaining traction post the recession in Q2. Unemployment in South Africa still remains a challenge though. The unemployment rate was recorded at the highest rate in 13 years, according to Trading Economics. In terms of the TransUnion Consumer Credit Index (CCI), consumer credit health improved (albeit marginally), even though there was a slight decline in Q3 in 2017 at 53.9%, from Q2 in 2017 at 54.1% (an index level of 50 is considered the worsening credit health). Dr Rob Davies, MP Minister of Trade and Industry The results of the index were reported during a dire period of challenging economic conditions (Source: Southern Consumer Credit Health No room for complacency, ). A similar trend was reported in the Credit Bureau Monitor published by the NCR. The report is based on consumer credit data held by registered Credit Bureaus. Consumers considered to be impaired were active consumers as at end September 2017 (Q3). This was an increase from Q2 at 9.69million or 39.1%. National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 9

10 Year-on-year since September 2015, however, there was an improvement in the percent of impaired consumers : 42.3%; 2016: 40.6%; 2017: 39.36%. A consumer is classified as impaired if at least one account is three or more months in arrears, or has adverse listings, or has a judgement or administration order. The sluggish economic growth, high unemployment, consumer over-indebtedness and uncertainty in a volatile global economy all place consumers under intense pressure and risk. The National Credit Act No 34 of 2005 (the Act) as amended is a Government legislation enacted to amongst others, promote and advance the social and economic welfare of South Africans, promote a fair, transparent, responsible and accessible credit market and industry and to provide for consumer protection. The Act established the National Credit Regulator (the NCR) which commenced operations in In order to deliver on the above legislative mandate, the NCR developed five (5) Key Strategic Objectives for the period The NCR objectives are aligned to the Key Policy Areas of the Department of Trade and Industry, the National Development Plan, the Medium Term Strategic Framework and the Nine Point Plan and require the NCR to; Promote responsible credit granting, Protect consumers from abuse and unfair practices and address over-indebtedness; Enhance the quality and accuracy of consumer credit information; Improve NCR s operational effectiveness; and Facilitate efficient registration of persons and entities to include those involved in consumer credit operating underground to be formalised. Therefore, in addition to the above work, the NCR will continue to participate in discussions relating to the Debt Intervention Bill introduced by the Portfolio Committee on Trade and Industry. It is anticipated that the NCR will be one of the implementing agencies for debt intervention so that more over-indebted consumers are rehabilitated and given an opportunity once more to participate in the consumer credit industry and mainstream economy. In spite of the challenges that the NCR may continue to face in the future, I am confident that the NCR will possess the resolve and resilience to overcome these challenges and will, therefore, deliver on its mandate. I am pleased to release its 3-year Annual met with the continued support of the dti. Dr Rob Davies, MP Minister of Trade and Industry Government has considered it necessary to develop a statutory mechanism to assist low income over-indebted consumers who falter; through debt counselling and the personal insolvency regime. 10 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

11 4. Overview by the Accounting Authority The past year marked the tenth anniversary of the National Credit Regulator (NCR) which coincided with the events that started the global financial crisis and the world has changed significantly since then. This calls for the need for cooperation with other key stakeholders, including regulators, locally and internationally and acting more proactively and effectively, to identify and address market problems. Consumer expectations have changed and they have become more empowered. We now live in an era where technology and social media are at our fingertips. Regulatory technology has to be developed and leveraged to enhance the NCR s reach, impact, and effectiveness. Every consumer now has unprecedented access to information and it is, therefore, necessary for business and regulators to step up and respond accordingly. The NCR is committed to continuing to build a consumer credit market that works for consumers, the credit industry and for the South African economy. A desire for fair access to legitimate credit, an alternative to abusive credit practices, and high quality service must remain the hallmark of the credit industry. As a regulator, it is important to use our mandate to act more efficiently to identify and address market problems. We need to ensure that consumers receive fair, transparent and responsible access to credit while educating consumers to make sound financial decisions for themselves. The current economic climate in South Africa is slowly improving, which means that consumers will be in better shape to weather economic storms. There are promising signs that the consumer credit market is poised to perform well in The economy grew by 2.0% in the three months to September Nomsa Motshegare Accounting Authority This is in line with growth in Sub-Saharan Africa which is estimated to have rebounded to 2.4% in 2017 from 1.3% in The projections are that regional growth will rise to an average (article on Sub-Saharan Africa, by Gerard Kambou Global Economic Prospects, January 2018). High unemployment, however, remains a major social challenge and if this is not addressed, it will result in decreased household consumption. The priorities of the NCR are aligned with the Key Policy Areas of the Department of Trade and National Development Plan, the Nine Point Plan and the Medium Term Strategic Framework. National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 11

12 These focus areas reflect the NCR s vision of promoting a South African consumer credit market which is fair, transparent, accessible and contributing to South Africa s socio-economic development. The NCR operates under the ambit of the National Credit Act No 34 of 2005 (the Act) as amended. A high level situational analysis conducted identified trends in the developments that are likely to influence the consumer credit industry and impact the NCR over a period of time. The factors impacting on the regulatory environment include the following: According to the NCR Consumer Credit Market Report and Credit Bureau Monitor which cover credit market information up to September 2017, credit-active consumers for the quarter ended September 2017, an increase of 0.32% when compared to the million in the quarter ended September The number of consumers classified in good standing increased by 115,000 to million. The percentage number of consumers classified in good standing accounted for 60.64% of the total credit-active consumers. This was an increase of 1.26% year-on-year. One of the most significant trends observed in terms of credit granted for the quarter ended September 2017 is that the total outstanding consumer credit balances (or gross debtors book) was R1.73 trillion, representing a year-on-year growth of 3.44%. The above consumer credit insights will help us guide our strategy and planning going forward. They indicate that although consumer credit health is improving, consumers remain credit stretched. These trends are supported by the Consumer Credit Index (CCI) published by TransUnion. The index measures the aggregate consumer loan repayment record, tracks the use of revolving consumer credit facilities as an indicator of distressed borrowing, estimates household cash flow and quantifies the relative cost of servicing outstanding debt. These aspects are then combined into a single indicator of credit health (TransUnion Q Consumer Credit Index Report). The CCI dropped slightly to 53.9 in Q3 from 54.1 in Q2, but because it remained above 50.0 (where 50.0 is the breakeven point), this is an indication of some improvement in consumer credit health. In an article titled Bad Debts better than a year ago, but the picture for this year is mixed by Tammy Foyn, dated 17 August 2017, it is reported that bad debts for South Africans improved compared to the previous year and that indebtedness of households has been easing. Household debt to disposable income ratio as reduced to 75% for Q2, 2016 and further reduced to 74% for Q3 of biggest risks every South African household faces in 2017, January 2017) enforcing federal consumer financial laws and protecting consumers in the financial marketplace. Despite improved consumer credit health, consumers are still not out of the woods. Measures will have to be identified to continue to improve consumer credit health by preventing financial harm to consumers while promoting responsible and sustainable lending practices that benefit them. The Credit Industry Forum continues to provide a neutral platform to discuss cooperation between various industry associations to find solutions to industry challenges in the credit industry. The NCR will also continue to engage on a regular basis with other local and international regulators such as the South African Reserve Bank, Financial Services Board, the Competition Commission, and the Consumer Financial Protection Bureau in the United States. The main function of the Bureau is to enforce federal consumer financial laws and protect consumers in the financial marketplace. 12 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

13 NCR, therefore, collaborates with other regulators to share guiding principles and best practices. In terms of the National Credit Act, as amended, and the Financial Sector Regulation Act, 9 of 2017 (FSRA), which will implement the Twin Peaks model for financial regulation and supervision, the NCR will cooperate with regulators to be established under the FSRA. The NCR participates in quarterly regulatory cluster meetings of the Council of Trade and Industry Institutions (COTII) which facilitate sharing of information and pulling resources to work together as regulators. The regulators who form COTII all report to the dti. Collaboration regulation is about having a holistic view of the regulatory environment and an inclusive dialogue across sectors. It is important for sharing of information and experiences in terms of best practices in different regulatory aspects. The NCR working jointly with local Tribal Authorities in rural areas of most provinces, will conduct community outreach programmes ( Imbizos ) aimed mainly at pensioners to create awareness relating to their rights and responsibilities as consumers in the credit industry. The NCR will continue to focus on visits to rural areas as most consumers in the credit market who reside in these areas form part of the vulnerable communities that must continue to be protected from financial harm. NCR will empower consumers in general by assisting them to understand the costs and risks of financial decisions, build trusted relationships that are informative so that they can make better informed choices and live better financial lives. This ensures compliance with the Act and enforcement of the Act to hold violators accountable by utilising a range of compliance monitoring and enforcement tools. A full update on matters before the National Consumer Tribunal and the courts are in the section on Recent Court Rulings. The enforcement of the Act is one of the key functions of the NCR. This is primarily done through conducting investigations. These investigations are informed by complaints from consumers, trends identified in the media, referrals from other institutions and compliance monitoring. As a result of the prudent financial management and corporate governance practiced, the NCR has always obtained an unqualified audit opinion and aims to achieve a clean audit opinion going forward. To this end the NCR holds regular engagements with Assurance Providers (Internal and External Auditors) through combined assurance forums. It is also important for the NCR to effectively and efficiently deliver on its mandate. A service delivery improvement plan is being developed and will be implemented from financial challenges encountered in executing the planned strategic activities. To achieve the long-term goals, we will need to ensure that the strategic plan is robust. Management will need to be flexible and alert to new opportunities as they present themselves. The NCR has continuously been focusing on measures to cut operational costs and simultaneously identifying other revenue streams to deal with funding challenges. For example, some of the work that was outsourced has been internalised by providing extensive training to staff. Some of the NCR legal advisors have been empowered to refer and defend matters at the Tribunal. Measures that have been identified to supplement income include the following: to submit a proposal to the dti to increase registration fees; the PDA interest utilisation policy has been reviewed and a proposal has been submitted to the dti to utilise the PDA interest earned for additional purposes that will in the long run benefit consumers e.g. research and impact studies. National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 13

14 The NCR is committed to good governance practices. It complies with the prescripts of the Public Finance Management Act (PFMA) and Treasury Regulations. The responsibilities of the Accounting Authority vest in the Chief Executive Officer. An Audit and Risk Management Committee (ARMC) is constituted in terms of the PFMA and Treasury Regulations. The Internal Audit function, which reports to the ARMC, is outsourced. The organisation has been working smartly to achieve most of the objectives it set out to meet. By the end of September 2017 (second the planned quarterly milestones had either been achieved or exceeded for two quarters. This needs to be maintained going forward. following: Education and awareness campaigns on deceptive and unfair practices, and consumer rights; Monitoring and enforcement programmes in particular in relation to the new registrants. The National Credit Amendment Act and its Regulations make provision for all credit providers to be registered with the NCR and the threshold has been reduced to R1,00; Monitoring and enforcement programmes in relation to collection and sale of prescribed debts and credit providers to be encouraged to refrain from doing this; Monitoring the implementation of the Affordability Assessment Regulations; Review of the cost of credit and credit life insurance; and improved publication on the work undertaken by the NCR and its success stories. We have aligned the key performance areas with the strategic objectives and core themes of the dti. The vision and mission are articulated through strategic goals. Measurable performance indicators as well as an analysis of external and internal factors that could affect the ability to achieve our goals are indicated. Strategic risks, which we could be exposed to, as well as possible mitigating controls, are also identified. The strategic thrusts driving the plan include: - To promote responsible credit granting, to protect consumers from abuse and unfair practices in the consumer credit market and address over indebtedness; to enhance the quality and accuracy of consumer credit information; to improve NCR s operational effectiveness; and to facilitate efficient registration of persons and entities. A Debt Intervention Bill was introduced by the Portfolio Committee on Trade & Industry and published in November 2017 for public comment. The Bill seeks to bridge the gap between low income consumers who cannot afford to go under debt review, and those who do not have any income and assets. There is currently no legislative mechanism to assist this category of consumers in the current legislative framework. It is anticipated that the NCR will be one of the implementing agencies of this Bill once enacted. Implementation of the NCR will need to be capacitated to be able to deliver effectively on this Bill. Deadline for submission of written comments by the public Committee has commenced with public hearings regarding the Bill. I would like to thank the NCR Executive Team, Management and personnel for their efforts, energy and dedication in providing a valuable contribution in the development of the consumer credit market. This has assisted the NCR to make strides in achieving its strategic goal of protecting consumers in the country. The continued dedication and passion displayed by the NCR employees will go a long way in making a difference in the lives of many vulnerable communities in South Africa. 14 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

15 My gratitude is also extended to the dti in advancing socio-economic development in the country. The NCR will strive to improve its efficiency and effectiveness in the implementation of the Act and protection of consumers. I am grateful to the Honourable Members of the Portfolio Committee on Trade & Industry, the Honourable Members of the Select Committee on Trade and International Relations, the Honourable Minister of Trade and Industry, Dr October, the Group Chief Operating Officer, Ms Jodi Scholtz, and the Acting Deputy Director- General, Mr MacDonald Netshitenzhe for their guidance and continued support of the NCR. I would also like to extend my sincere appreciation to the Members of the Audit & Risk Management Committee, for their dedicated energies and time they devote to the NCR. Nomsa Motshegare Accounting Authority National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 15

16 Part A: Strategic Overview 2. Vision The vision of the NCR is: To promote a South African consumer credit market that is fair, transparent, accessible and dynamic. 3. Mission The mission of the NCR is: regulating for a fair and non-discriminatory market for access to consumer credit; and promoting responsible credit granting, use and effective redress. 4. Values The values of the NCR are: Service Excellence We strive for service excellence that exceeds the expectations of all stakeholders. Integrity We are committed to honesty and integrity without compromise. Empowerment We strive for empowerment in the consumer credit market and we are also committed to employee empowerment. Good Corporate Governance We strive to be a model of good corporate governance at all times. 5. Legislative Mandate The legislative mandate of the NCR is as follows: To promote a fair and non-discriminatory marketplace for access to consumer credit and for that purpose to provide for the general regulation of consumer credit improved standards for consumer information; To prohibit certain unfair credit and credit market practices; To promote responsible credit granting and use and for that purpose to prohibit reckless credit granting; To provide for debt re-organisation in cases of over-indebtedness; To regulate credit information; and To promote a consistent enforcement framework relating to consumer credit. 16 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

17 6. Strategic objectives The strategic objectives the NCR pursues are as follows: 1. To promote responsible credit granting. 2. To protect consumers from abuse and unfair practices in the consumer credit market and address over-indebtedness. 3. To enhance the quality and accuracy of credit bureau information. 4. To monitor and improve NCR s operational effectiveness. 5. To facilitate effective registration of persons and entities. 7. Services The NCR renders the following services, in accordance with the requirements of the NCA. Register credit providers, credit bureaux, PDAs, ADRs and debt counsellors, and monitor their compliance with the Act. Educate and create awareness of the protection that the NCA offers; Research the credit market and its trends, monitor access to credit and the cost of credit to identify factors that may undermine access to credit, competitiveness in the credit market and consumer protection; Advise government on policy and legislation; Receive and investigate complaints and ensure that consumer rights are protected and Enforce the NCA and take action against contravening entities. 8. Recent Court Rulings A brief summary of recent court cases and rulings are provided below: Matter Name Truworths and others vs NCR and dti MFSA vs NCR and dti MFSA vs NCR, dti and NCT Court & Case Reference No. Western Cape High Court Case No: North Gauteng High Court Case No: North Gauteng High Court Case No: Legal issues and status This is a High Court review of the affordability regulations by the clothing retailers. The matter judgement. This is a High Court review of Regulation 42- limitation on fees and interest by MFSA in which the matter was ruled in favour of MFSA and the NCR and dti have launched an appeal which was heard on 12 and 13 December 2017 and we await judgement. This is an application for a Declaratory Order regarding the interpretation of section 102 that was brought by the MFSA. MFSA would like the court to interpret the section as permitting for the inclusion of initiation fees into the deferred amount for all types of credit agreements, and not just the credit agreements mentioned in section 102. The parties are still exchanging pleadings and as soon as the pleadings have closed the matter will be set down for a hearing. National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 17

18 Matter Name Bridge Corporate (Pty) Bayport vs Minister of Justice and NCR Court & Case Reference No. North Gauteng High Court Case No: North Gauteng High Court Case No: Legal issues and status High Court for an order to declare sections 55 and 57 of the NCA, which grant the NCR powers to issue compliance notices, unconstitutional. The matter is Bayport brought an application to declare consent to foreign jurisdiction as legitimate, in spite of the express prohibition in Section 90(2)(k)(vi) (bb) of the NCA. We await a date of set down for the matter to be heard. SAFPS vs NCR and NCT North Gauteng High Court. Case No: This is an appeal by SAFPS against the decision of the NCT that found SAFPS guilty of prohibited conduct and for breaching the NCA regarding retention periods of adverse listings for credit bureaus. On 30 November 2017 the North Gauteng High Court upheld the appeal by SAFPS. The NCR is appealing the High Court decision in the Supreme Court of Appeal. NCR vs Finbond NCR and NCT NCR vs Shoprite Investments National Consumer North Gauteng High National Consumer The NCR referred Finbond to the NCT for charging consumers unreasonable cost of credit life insurance. The matter was heard on the 25th July 2017 and the NCT dismissed the NCR s case. The NCR is appealing the decision. conduct for the mis-selling of credit life insurance. The NCR referred Shoprite to the NCT for allegations of reckless lending and mis-selling of credit life insurance. The matter was heard on the 20 June 2017 and the NCT ruled in favour of the NCR and found Shoprite imposed. Shoprite has appealed the decision and the NCR is opposing the appeal. Getbucks (Proprietary) Another North Gauteng High Court Case No: Court to declare Regulation 44 ultra vires and void and to seek declaratory relief regarding the process to be followed when NCR investigates complaints in terms of section 136(2). The parties are still exchanging pleadings and once the pleadings have closed, the matter will be set down for a hearing. 18 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

19 Matter Name Moneyline Financial NCR Court & Case Reference No. Legal issues and status Moneyline has appealed the decision handed down by the NCT which ruled that the NCR acted lawfully and procedurally correct when investigating Moneyline. The merits of the matter relate to allegation of reckless lending towards the recipients of social security grants by Moneyline. The matter was set down for a hearing on 6 December 2017 and it was postponed on account of Moneyline not being ready to proceed. We now await a new date for the hearing. NCR vs Diners Club SA and Std Bank This is an application by the NCR for an order declaring that the Diners Club agreement concluded with consumers, which is administered by Standard Bank on behalf of Diners Club SA, is a credit agreement as NCR vs Standard Bank North Gauteng High Court Case No: The NCR has brought an application for a declaratory order regarding the application of the common law principle of set off on credit agreements. Once all the pleadings have been exchanged between the parties, the matter will be set down for a hearing. NCR North Gauteng High Court Case Case No: National Consumer The NCR referred Edcon Group to the NCT for the unlawful charging of club fees to consumers, and the NCT ruled in the favour of the NCR. Edcon has launched an appeal against the decision of the NCT. The matter charging of club fees to consumers, and the NCT ruled against the decision of the NCT. The matter is set down NCR vs Wesbank a division of First Rand National Consumer The NCR referred Wesbank a division of FirstRand Wesbank s debt collection practices, which revealed that Wesbank does not allow consumers to voluntarily surrender their motor vehicles, in contravention of Section 127. National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 19

20 Matter Name NCR vs Standard Bank NCR vs Nedbank BMW Financial Services Court & Case Reference No. National Consumer National Consumer National Consumer Legal issues and status The NCR referred Standard Bank to the NCT for reckless lending. The matter concerns the so called 699 Satinsky car scheme. The NCT dismissed the application by the NCR and the NCR is appealing the decision. The NCR referred Nedbank to the NCT for reckless lending. The matter concerns the so called 699 Satinsky car scheme. The hearing was set down for postponed to a soon to be decided date. A compliance notice was issued for the on the road fees. BMW has objected to the compliance notice by an application to the NCT. The NCR is opposing the whereafter the matter will be set down for hearing. Volkswagen Financial NCR National Consumer A compliance notice was issued for the on the road fees. VW has objected to the compliance notice by application to the NCT. The NCR is opposing the 9. Situational analysis brief synopsis of the state of the credit market is provided. An analysis of the internal and external factors impacting on the NCR is then provided. State of the Credit Market increased by R57.44 billion (3.44%) for the quarter ended September 2017, when compared to the quarter ended September The value of the debtors book at the end of September 2017 was R1.73 trillion For the quarter ended September 2017, the total rand value of new credit granted was R billion, with Mortgages comprising R37.54 billion (30.36%), Secured Credit R42.25 billion (34.17%), Unsecured Credit Applications for registration of credit providers are steadily increasing. A total of credit providers with branches, 23 Credit Bureaus, 3 Payment Distribution Agents, 4 Alternative Dispute Resolution whilst unregistered. 20 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

21 Performance Delivery Environment (external) work of the NCR: a) Certainty in the regulatory framework Uncertainty in the regulating enforcement can curb job creation. Regulatory certainty creates consistent application of the legislation resulting in desirable outcomes that have a positive impact on the credit The NCR has worked closely with the dti to close the gaps that existed in the legislation through the Insurance, Interest rates and fees; Requirements to register every person and entity that extends credit. Implementation of the regulations has commenced and will be closely monitored. Impact of these regulations will be conducted in the next 3 years. b) Increasing complexity and sophistication The evolution of the credit market has come with innovation by the industry. This continues to increase alternative consumer lending. The emergence of on-line, peer-to-peer lending and other new forms of lending in South Africa and other countries has brought new regulatory challenges. Close monitoring or scrutiny on compliance with the law will have to be done. The NCR is also closely monitoring the introduction of the new credit products and the advertising methods of credit providers in order to curb the luring of consumers into debt traps. This in turn requires improved product knowledge and understanding by the NCR to be able to monitor their compliance with legislation effectively. c) Stakeholder management The approach of the NCR towards stakeholder management is to facilitate open discussion and engagement with the industry and other stakeholders. Efforts are being made to achieve this objective while avoiding regulatory capture by the industry. The NCR has established the Credit Industry Forum which serves as a platform for the NCR and industry to engage and reach agreement on industry issues. The forum represents all industry players and consumers. It plays an important role in resolving operational problems on the implementation of the legislation. The forum continues to meet quarterly and several guidelines and circulars have been issued to the industry emanating from these meetings. The NCR is a member of the African Consumer Protection Dialogue which is facilitated by the Federal Trade Commission of the United States (The African Dialogue). This forum brings together regulators from all over the African continent to discuss consumer protection issues and share information. NCR will continue to participate in conferences arranged by the African Dialogue. The NCR also holds regular meetings with industry associations, registrants and magistrates. other regulators including the Reserve Bank of South Africa. The NCR has also established networks with other regulators in the SADC region, United States of America and the United Kingdom. More relationships will be established with other regulators across the globe. d) Challenges faced by the NCR The main challenge of the NCR is funding. The NCR requires additional funding to meet its operational requirements. mandate. National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 21

22 Organisational Delivery Environment (Internal) NCR: a) Processes, system and structure renewal A new human resource management system and a performance management system have been introduced. b) Human Capital The NCR is focusing on staff issues and ensures that staff morale remains high. In order to increase capacity c) Knowledge intensity In order to provide guidance to stakeholders and employees on the developments and trends in the credit market, the NCR relies on measures such as issuing public notices, capacity building workshops, media statements, radio and TV interviews, community outreach programmes (Imbizos) and others. The NCR also publishes statistics on a quarterly basis on the level and nature of consumer indebtedness. In-house training sessions are provided for staff. Strategic Alignment to the dti Employment through Inclusive Growth. In aligning its strategic priorities, the NCR took into account the external and internal environmental trends and issues as well as priorities of government which are the twelve (12) outcomes, NDP and the Nine Point Plan. for ensuring inclusive growth and employment creation. Thus, the activities of the NCR are most closely associated with contributing to Outcome 4. The alignment between the outcomes that the NCR seeks to achieve, the strategic objectives of the dti, its strategic outcome oriented goals, the NDP and the Nine Point Plan is set out below: The Nine Point Plan includes unlocking the potential of SMMEs, Cooperatives, townships and rural turnaround times to register new entrants (persons & entities). This will result in increased job creation. dti Objectives dti Outcomes NCR Objectives NCR Outcomes Grow the manufacturing sector to promote industrial development, job creation, investment and exports. Facilitate the transformation of the economy to promote industrial development, investment, competitiveness and employment creation. To promote responsible credit granting. To enhance the quality and accuracy of consumer credit bureau information. Reduced levels of over-indebtedness. Affordable levels of credit promoted. Improved quality and accuracy of consumer credit information. 22 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

23 dti Objectives dti Outcomes NCR Objectives NCR Outcomes Improved conditions of consumers, artists and opening up of markets for new patents players. Facilitate broad-based economic participation through targeted interventions to achieve more inclusive growth. To protect consumers from abuse and unfair practices in the consumer credit market and address over-indebtedness. registration of persons and entities. Decreased levels of reckless lending and unfair practices. registration of persons and entities. Strengthen capacity to deliver on the dti mandate. Create a fair regulatory environment that enables investment, trade and enterprise development in an equitable and social responsible manner. To monitor and improve NCR s operational effectiveness. delivery. Promote a professional, ethical, dynamic, competitive and customer-focused working environment that ensures effective delivery. 10. Description of the Planning Process the organisational strategic direction. The dti, Audit and Risk Management Committee and Internal Audit play a pivotal role in that they review and provide inputs to the process. Workshops are then held between executive members and the management team to develop the departmental operational objectives. Management in turn engages with their respective team members to develop operational objectives which are in line with the business plan of the organisation. Upon approval of the strategic and operational objectives, all employees including executive management conclude performance contracts annually. 11. Financial Plan and the need to regulate the credit industry and enforce the NCA, it is imperative for the NCR to optimise the available funding. In order to ensure optimisation of available funds, the NCR continues to implement cost containment measures. the three (3) year period. In addition, the NCR s assets and management strategy is provided, as well as the capital expenditure projections. National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 23

24 (i) Projections of revenue, expenditure, borrowings and capex OPERATIONAL EXPENDITURE YEAR YEAR YEAR Personnel costs Administration costs 19,391,747 19,736,271 27,964,764 29,505,440 Total operational expenditure 131,969, ,383, ,119,852 CAPITAL EXPENDITURE YEAR YEAR YEAR Fixed assets 3,626,014 3,734,795 ICT operational system 2,015,343 2,064,000 Total capital expenditure 5,641,357 5,791,783 5,910,838 TOTAL EXPENDITURE 137,611, ,175, ,030,690 INCOME YEAR YEAR YEAR Fees from registrants 43,461,575 Transfers from the dti 75,361,000 Interest 1,000,000 1,000,000 1,000,000 Other income 19,677,225 20,130,750 20,612,115 TOTAL INCOME 137,611, ,175, ,030,690 The NCR s projected capital expenditure programme for the next three years focuses on the continuous improvements on ICT infrastructure and implementation of the ICT disaster recovery plan. The capex programme is outlined below: YEAR YEAR YEAR , , ,327 Computer Equipment 659, ,345 Furniture 2,529,064 2,604,936 ICT operating system 2,015,343 2,064,000 Total 5,641,357 5,791,783 5,910, National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

25 (ii) Asset and Liability Management In terms of section 51(1)(c) of the PFMA, the Accounting Authority is responsible for the management, including the safeguarding, of assets and the management of revenue, expenditure and liabilities of the public entity. Within the NCR, the Asset Management Policy provides for the acquisition of assets when the need arises. Procurement processes are in line with legislative requirements as well as the NCR s supply chain management policy. In addition, assets are effectively maintained and when required, disposed of in line with the requirements of the PFMA. YEAR YEAR YEAR Cash receipts from applicants and registered entities Cash paid to suppliers ( ) Cash paid to employees Cash absorbed by operations before transfers received ( ) ( ) Transfer received Cash absorbed by operations Finance Income activities activities YEAR YEAR YEAR ( ) ( ) Development of ICT operational system actvities ( ) ( ) ( ) activities Net decrease/increase in cash and cash equivalents National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 25

26 (iv) Capital expenditure programmes The NCR s projected capital expenditure programme for the next three years focuses on the continuous improvements on ICT infrastructure and implementation of the ICT disaster recovery plan. The capex programme is outlined below: YEAR YEAR YEAR , , ,327 Computer Equipment 659, ,345 Furniture 2,529,064 2,604,936 ICT operating system 2,015,343 2,064,000 Total 5,641,357 5,791,783 5,910,838 (v) Dividend policies The NCR is a schedule 3A public entity receiving a transfer payment from the dti. Hence the NCR does not declare dividends. 26 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

27 Part B: Programme Performance 15 Programme 1: To promote responsible credit granting 15.1 Purpose of the programme The purpose of this programme is to reduce levels of consumer over-indebtedness by: (a) Understanding the impact of the regulations on consumers and credit providers; (b) Monitoring credit provider compliance with the regulations; (c) Enforcing compliance with the regulations; and (d) Improving the regulations Description of the programme Credit provider compliance monitoring and investigations will be conducted in order to assist credit providers to comply with affordability assessment regulations and the total cost of credit Performance indicators and performance targets per programme. Goal/ Outcome Output Performance Indicator/ measure Audited Actual Performance Estimate Performance Medium Term Targets 2014/ / / / / / /21 Reduced levels of over-indebtedness. Improve compliance with affordability assessment regulations. A report on the study of the impact of affordability assessment regulations on consumers Service provider procured. Conduct an impact study of the affordability assessment regulations on consumers and produce a report. Implementation of recommendations. Continue with implementation and produce a report. R1m R0.5m R0.5m National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 27

28 Goal/ Outcome Affordable levels of credit promoted. Output Increase compliance with regulations pertaining to the total cost of credit (including credit life). Performance Indicator/ measure -Number of compliance complaints evaluations conducted to enforce regulations. -Enforcement action taken on a percentage (%) of compliance complaints evaluations conducted, where necessary for the whole year. A report on the impact study of the effect of total cost of credit and credit life insurance regulations on consumers. Audited Actual Performance Estimate Performance Medium Term Targets 2014/ / / / / / /21 Study conducted to review the current levels of the cost of credit and make recommendations to the dti. *15 investigations conducted and appropriate enforcement action taken where necessary. 52 investigations conducted and enforcement action taken where necessary. 50 investigations conducted and enforcement action taken where necessary. of any or a combination of the following: compliance complaints evaluations. Conduct 300 of any or a combination of the following: compliance evaluations. Conduct 320 of any or a combination of the following: compliance evaluations. 70% Enforcement action taken on compliance complaints evaluations conducted, where necessary for the whole year. 75% Enforcement action taken on compliance complaints evaluations conducted, where necessary for the whole year. Enforcement action taken on compliance complaints evaluations conducted, where necessary for the whole year. R18.1m R20.5m R21.6m Conduct an impact study of the effect of total cost of credit and credit life insurance regulations on consumers. Implementation of recommendations. Continue with implementation of recommendations. R9.5m R10.4m R11m R11.2m R1m National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

29 *Ba 15.4 Quarterly Milestones for Programme 1 Goal/ Outcome Output Performance Indicator / measure Baseline 2018/19 Annual Target Reduced levels of over-indebtedness. Improve compliance with affordability assessment regulations. A report on the study of the impact of affordability assessment regulations on consumers. Service provider procured. Conduct an impact study of the affordability assessment regulations on consumers and produce a report. R1m Affordable levels of credit promoted. Increase compliance with regulations pertaining to the total cost of credit (including credit life). - Number of compliance evaluations conducted to enforce regulations. 50 investigations conducted and enforcement action taken where necessary. any or a combination of the following: compliance complaints evaluations to enforce regulations. - Enforcement action taken on a percentage (%) of compliance evaluations conducted, where necessary for the whole year. 70%. Enforcement action taken on compliance complaints evaluations conducted, where necessary for the whole year. R11.2m R19.1m *Based on the estimated annual performance targets for 2017/18 financial year Quarterly Milestones 1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter Commence with the impact assessment study. Continue with the study. Continue with the study and produce draft report. Finalise and produce a report with recommendations and submit to the dti. R1m % Enforcement action taken on compliance complaints evaluations conducted, where necessary for the whole year. R4.7m R5m R4.5m R4.9m National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 29

30 Goal/ Outcome Output Performance Indicator / measure Baseline 2018/19 Annual Target Quarterly Milestones 1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter A report on the impact study of the effect of total cost of credit and credit life insurance regulations on consumers. - Conduct an impact study of the effect of total cost of credit and credit life insurance regulations on consumers. Procure the services of a service provider to conduct the study. -Appoint the service provider. -Commence with the study. Continue with the study and produce progress report. Finalise and produce a report with recommendations and submit to the dti. R1m - - R0.3m R0.7m 15.5 Financial Plan (Expenditure estimates for programme 1) Programme 1 Economic 2014/15 R 000 Expenditure outcome 2015/16 R /17 R 000 Adjusted Appropriation 2017/18 R 000 Medium-Term Expenditure Estimate 2018/19 R /20 R /21 Current payment Compensation of employees Goods & services, etc. R4m R13m R8.6m R8.3m R9m R8.7m R9.1m R8.7m R9.6m R10.5m R10.1m R10.9m R10.6m R11.5m Payments of capital assets Machinery & equipment Total R17m R16.9m R17.7m R17.8m R20.1m R21m R22.1m 16 Programme 2: To protect consumers from abuse and unfair practices in the consumer credit market and address over-indebtedness Purpose of the programme The purpose of this programme is to decrease the practice of reckless lending by credit providers. This will be implemented by conducting investigations and taking enforcement action on non-compliant credit providers and improving education awareness regarding deceptive and unfair practices and consumer rights Description of the programme Complaints reports that are lodged by consumers and reports of non-compliance reported by Accounting Officers and auditors will be investigated through reactive mechanisms. Appropriate enforcement action will be taken where necessary. 30 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

31 16.3 Performance indicators and performance targets per programme. Outcome Output Performance Indicator/ measure Audited Actual Performance Estimate Performance Medium Term Targets 2014/ / / / / / /21 Decreased levels of reckless lending and unfair practices. -Conduct compliance complaints evaluations relating to reckless lending and or collection of prescribed debt. -Number of credit provider compliance complaints evaluations relating to reckless collection of prescribed debt conducted to enforce regulations. 15 compliance compliance where necessary. *40 credit providers investigated and appropriate enforcement action taken where necessary. 61 Investigations conducted and enforcement action taken where necessary. 70 credit provider investigations conducted and enforcement action taken where necessary on investigations conducted for the whole year. any or a combination of the following: Credit provider compliance complaints evaluations relating to reckless lending and or collection of prescribed debt. Conduct 300 of any or a combination of the following: Credit provider compliance evaluations relating to reckless lending and or collection of prescribed debt. Conduct 320 of any or a combination of the following: Credit provider compliance evaluations relating to reckless lending and or collection of prescribed debt. -Enforcement action taken where necessary for the whole year. -Enforcement action taken on a percentage (%) of compliance complaints evaluations relating to reckless lending and or collection of prescribed debt where necessary for the whole year. R35m R28.3m R28.5m R29m 70% enforcement action taken on compliance complaints evaluations relating to reckless lending of prescribed debt where necessary for the whole year. R30m 75% enforcement action taken on compliance evaluations relating to reckless lending of prescribed debt where necessary for the whole year. R30.5m enforcement action taken on compliance evaluations relating to reckless lending of prescribed debt where necessary for the whole year. R40m National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 31

32 Goal/ Outcome Output Performance Indicator/ measure Audited Actual Performance Estimate Performance Medium Term Targets 2014/ / / / / / /21 Improve consumer education and awareness regarding deceptive and unfair practices and consumer rights. Number of multimedia awareness campaigns Community outreach social media) conducted on deceptive and unfair practices and consumer rights of any of the following: -Radio interviews -TV interviews -News print -Community outreach programmes on deceptive and unfair credit practices. R1.1m 35 of any of the following: -Radio interviews -TV interviews -News print -Community outreach programmes on deceptive and unfair credit practices. R1.4m any or a combination of the following: -Radio interviews -TV interviews -News print -Community outreach programmes -social media on deceptive and unfair practices and consumer rights. R1.6m or a combination of the following: -Radio interviews -TV interviews -News print -Community outreach programmes -social media on deceptive and unfair practices and consumer rights. R1.7m Conduct 90 of any or a combination of the following: -Radio interviews -TV interviews -News print -Community outreach programmes -social media on deceptive and unfair practices and consumer rights. R1.8m *Based on the estimated annual performance targets for 2017/18 financial year. 32 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

33 16.4 Quarterly Milestones for Programme 2 Goal/ Outcome Output Performance Indicator / measure Decreased levels of reckless lending and unfair practices. -Conduct compliance complaints evaluations relating to reckless lending and or collection of prescribed debt. Number of credit provider compliance evaluations relating to reckless lending prescribed debt conducted to enforce regulations. -Enforcement action taken where necessary for the whole year. - Enforcement action taken on a percentage (%) compliance evaluations relating to reckless lending and or collection of prescribed debt where necessary for the whole year. Baseline 70 credit provider investigations conducted and enforcement action taken where necessary. R29m 2018/19 Annual Target any or a combination of the following: Credit provider compliance complaints evaluations relating to reckless lending and or collection of prescribed debt. 70% enforcement action taken on compliance complaints evaluations relating to reckless lending of prescribed debt where necessary for the whole year. R30m Quarterly Milestones 1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter % enforcement action taken on compliance complaints evaluations relating to reckless lending of prescribed debt where necessary for the whole year. R7.5m R8m R7m R7.5m National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 33

34 Goal/ Outcome Output Performance Indicator / measure Baseline 2018/19 Annual Target Quarterly Milestones 1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter Improve consumer education & awareness regarding deceptive and unfair practices and consumer rights. Number of multimedia awareness outreach media) conducted on deceptive and unfair practices and consumer rights. 35 of any of the following: -Radio interviews -TV interviews -News print -Community outreach programmes on deceptive and unfair credit practices. following: -Radio interviews -TV interviews -News print -Community outreach programmes -social media conducted on deceptive and unfair practices and consumer rights R1.4m R0.35m R0.45m R0.35m R0.45m *Based on the estimated annual performance targets for 2017/18 financial year 16.5 Financial Plan (Expenditure estimates for programme 2) Programme 2 Economic 2014/15 R 000 Expenditure outcome 2015/16 R /17 R 000 Adjusted Appropriation 2017/18 R 000 Medium-Term Expenditure Estimate 2018/19 R /20 R /21 Current payment Compensation of employees Goods & services, etc. R16m R13m R15.6m R12.7m R16.2m R13.4m R16.7m R13.7m R17.5m R14.1m R17.9m R14.3m R23m R18.8m Payments of capital assets Machinery & equipment Total R29m R28.3m R29.6m R30.4m R31.6m R32.2m R41.8m 34 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

35 17 Programme 3: To enhance the quality and accuracy of consumer credit information Purpose of the programme The purpose of this programme is to increase compliance by credit bureaus through compliance monitoring, complaints evaluation and investigations and by taking appropriate enforcement action where necessary Description of the programme Compliance monitoring will be conducted by the NCR. Based on the outcome of the compliance monitoring, complaints evaluation, enforcement action will be taken where necessary Performance indicators and performance targets per programme Goal/ Outcome Output Performance Indicator/ measure Audited Actual Performance Estimate Performance Medium Term Targets 2014/ / / / / / /21 Improved quality and accuracy of consumer credit information. Increase compliance by credit bureaus in respect of, quality, accuracy, the removal of paid up judgements and adverse consumer credit information (ACCI). Number of credit bureaus monitored. Enforcement action taken on a percentage (%) of monitored credit bureaus where necessary. *2 credit bureaus investigated and appropriate enforcement action taken where necessary. 2 credit bureaus investigated and appropriate enforcement action taken where necessary. 6 credit bureaus monitored and enforcement action taken where necessary. credit bureaus. Enforcement action taken where necessary. bureaus. Enforcement action taken on 100% non-compliant credit bureaus. Monitor 10 credit bureaus. Enforcement action taken on 100% non-compliant credit bureaus. Monitor 12 credit bureaus. Enforcement action taken on 100% non-compliant credit bureaus. R14.9m R14.15m R15m R15.4m R16m R16.5m R17m National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 35

36 Goal/ Outcome Output Performance Indicator/ measure Audited Actual Performance Estimate Performance Medium Term Targets 2014/ / / / / / /21 - Number of audited reports submitted by registered credit bureaus and enforcement action taken where necessary All registered credit bureaus to submit audited reports by 15 March 2019 and enforcement action taken where necessary. All registered credit bureaus to submit audited reports by 15 March 2020 and enforcement action taken where necessary. All registered credit bureaus to submit audited reports by 15 March 2021 and enforcement action taken where necessary. % of received credit bureau audited reports evaluated and enforcement action taken where necessary credit bureaus audited. Reports reviewed and appropriate corrective action taken where necessary. All registered credit bureaus audited reports reviewed and enforcement action taken where necessary. Review 100% of credit bureau audited reports from credit bureaus and enforcement action taken where necessary. Evaluate 100% of credit bureau audited reports received from credit bureaus and enforcement action taken where necessary. Evaluate 100% of credit bureau audited reports received from credit bureaus and enforcement action taken where necessary. Evaluate 100% of credit bureau audited reports received from credit bureaus and enforcement action taken where necessary. R6.2m R9.6m R4m R4.5m R4.6m R4.7m *Based on the estimated annual performance targets for 2017/18 financial year. 36 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

37 17.4 Quarterly Milestones for Programme 3 Goal/ Outcome Output Performance Indicator / measure Baseline 2018/19 Annual Target Improved quality and accuracy of consumer credit information. Increase compliance by credit bureaus in respect of quality, accuracy, the removal of paid up judgements and adverse consumer credit information (ACCI). Number of credit bureaus monitored. Enforcement action taken on a percentage (%) of monitored credit bureaus where necessary. monitored and enforcement action taken where necessary. R15.4m bureaus. 100% enforcement action taken on non-compliant credit bureaus. R16m Number of audited reports submitted by registered credit bureaus and enforcement action taken where necessary. - All registered credit bureaus to submit audited reports by 15 March 2019 and enforcement action taken where necessary. % of received credit bureau audited evaluated and enforcement action taken where necessary. Review 100% of audited reports from credit bureaus and enforcement action taken where necessary. Evaluate 100% of credit bureau audited reports received from credit bureaus and enforcement action taken where necessary. R4m R4.5m *Based on the estimated annual performance targets for 2017/18 financial year Quarterly Milestones 1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter Monitor 3 credit bureaus. Monitor 3 credit bureaus. Monitor 2 credit bureaus. Enforcement action taken on 100% non-compliant credit bureaus. R4m R4m R4m R4m All registered credit bureaus to submit audited reports by 15 March 2019 and enforcement action taken where necessary. Evaluate 100% of credit bureau audited reports received from credit bureaus and enforcement action taken where necessary. Continue to take enforcement action where necessary. - - R2.5m R2m National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 37

38 17.5 Financial Plan (Expenditure estimates for programme 3) Programme 3 Economic 2014/15 R 000 Expenditure outcome 2015/16 R /17 R 000 Adjusted Appropriation 2017/18 R 000 Medium-Term Expenditure Estimate 2018/19 R /20 R /21 R 000 Current payment Compensation of employees Goods & services, etc. R14.6m R9m R14.9m R9m R14.6m R9.55m R15.0m R4.4m R15.3m R5.2m R15.6m R5.5m R15.9m R5.8m Payments of capital assets Machinery & equipment Total R23.6m R23.9m R24.15m R19.4m R20.5m R21.1m R21.7m 38 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

39 18 Programme 4: To improve NCR s operational effectiveness 18.1 Purpose of the programme The purpose of this programme is to improve the NCR s operational efficiency and service delivery Description of the programme This will be done through continuous improvement of the ICT systems Performance indicators and performance targets per programme. Goal/ Outcome Output Performance Indicator/ measure Audited Actual Performance Estimate Performance Medium Term Targets 2014/ / / / / / /21 service delivery. Improve operational through automated processes. % of uptime availability of the legacy ICT (Registrations and Complaints) systems. Implementation of recommendations of the ICT assessment. R44.1m *95% uptime of the ICT system. *96% uptime of the ICT system. R39.6m 97% uptime of the ICT system. R33.1m the ICT system. R35m the ICT system. R35.9m the ICT system. R37.5m Service Delivery Improvement Plan. Approved SDIP. - - SDIP approved. Call centre SDIP implemented for 6 months. Approval of by AA. Commence with implementation of the SDIP. Continue with implementation of the SDIP. R3.2m R3.34m R3.5m R3.5m R3.5m National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 39

40 18.4 Quarterly Milestones for Programme 4 Goal/ Outcome Output Performance Indicator / measure Baseline 2018/19 Annual Target Quarterly Milestones 1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter delivery. Improve operational through automated processes. % of uptime availability of the legacy ICT (Registrations and Complaints) systems. 97% uptime of the ICT system. R33.1m the ICT system. R35m the ICT system. R8.7m the ICT system. R8.7m the ICT system. R8.7m the ICT system. R8.9m Service delivery improvement plan. Approved SDIP. Call Centre SDIP implemented for 6 months. Approval of by AA. Draft SDIP for submit to EXCO for review and inputs. Incorporate inputs from EXCO and submit to AA for Incorporate inputs from AA. Approval of by AA. R3.34m R3.5m R0.87m R0.87m R0.87m R0.89m *Based on the estimated annual performance targets for 2017/18 financial year appointing a task team. ** Drafting of the SDIP entails the, identification of an improvement area, appointing a task team, conducting workshops & meetings with different stakeholders. Legends: Uptime = The measure of the time a server has been working and available. 40 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

41 18.5 Financial Plan (Expenditure estimates for programme 4) Programme 4 Economic 2014/15 R 000 Expenditure outcome 2015/16 R /17 R 000 Adjusted Appropriation 2017/18 R 000 Medium-Term Expenditure Estimate 2018/19 R /20 R /21 Current payment Compensation of employees Goods & services, etc. R29m R12m R20.7m R13.8m R20.8m R13.9m R17.09m R13.55m R17.9m R15m R18.2m R15.5m R18.8m R16.3m Payments of capital assets Machinery & equipment R5.9m R5.1m R6.1m R5.8m R5.6m R5.7m R5.9m Total R46.9m R39.6m R40.88m R36.44m R38.5m R39.4m R41m 19. Programme 5: To facilitate efficient registration of persons and entities Purpose of the programme The purpose of this programme is to increase the participation of SMMEs which would facilitate the creation of job opportunities Description of the programme Registering new entrants in the consumer credit market, i.e. Credit providers, Credit Bureaus, Payment Distribution Agents, Alternative Dispute Resolution Agents and Debt Counsellors. National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 41

42 19.3 Performance indicators and performance targets per programme. Goal/ Outcome Output Performance Indicator/ measure Audited Actual Performance Estimate Performance Medium Term Targets 2014/ / / / / / /21 Increased registration of persons and entities. Improve registration process of persons and entities. % of new applications registered in the consumer credit market within 10 business days of receipt of signed proposed conditions and payment of registration fees applications registered within 10 business days of receipt of signed proposed conditions and payment of registration fees. R11.05m Register 90% of applications within 10 business days of receipt of signed proposed conditions and payment of registration fees. R12.5m Register 95% of applications within 10 business days of receipt of signed proposed conditions and payment of registration fees. R13.5m Register 95% of applications within 10 business days of receipt of signed proposed conditions and payment of registration fees. R14.5m *Based on the estimated annual performance targets for 2017/18 financial year Quarterly Milestones for Programme 5 Goal/ Outcome Output Performance Indicator / measure Baseline 2018/19 Annual Target Quarterly Milestones 1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter Increased registration of persons and entities. Improve registration process of persons and entities. % of new applications registered in the consumer credit market within 10 business days of receipt of signed proposed conditions and payment of registration fees. applications registered within 10 business days of receipt of signed proposed conditions and payment of registration fees. Register 90% of applications within 10 business days of receipt of signed proposed conditions and payment of registration fees. R12.5m Register 90% of applications within 10 business days of receipt of signed proposed conditions and payment of registration fees. R2.5m Register 90% of applications within 10 business days of receipt of signed proposed conditions and payment of registration fees. R3.5m Register 90% of applications within 10 business days of receipt of signed proposed conditions and payment of registration fees. R3m Register 90% of applications within 10 business days of receipt of signed proposed conditions and payment of registration fees. R3.5m *Based on the estimated annual performance targets for 2017/18 financial year 42 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

43 18.5 Financial Plan (Expenditure estimates for programme 4) Programme 3 Economic 2014/15 R 000 Expenditure outcome 2015/16 R /17 R 000 Adjusted Appropriation 2017/18 R 000 Medium-Term Expenditure Estimate 2018/19 R /20 R /21 R 000 Current payment Compensation of employees R7.7m R8.5m R8.6m R8.8m Goods & services, etc R3.35m R4m R4.9m R5.7m Total R11.05m R12.5m R13.5m R14.5m National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 43

44 PART C: Links to other plans 1. Asset management plan The NCR continues to effectively manage and safeguard its assets. The NCR has implemented an Obsolete and redundant assets are disposed of in line with the NCR Assets Management Policy and Treasury Regulations. The Facilities department is responsible for repairs and maintenance of the NCR assets. The NCR continues to ensure that its assets are adequately insured. 2. Information technology plan The NCR makes extensive use of ICT systems to deliver on its mandate. It is also in the process of elivery. The NCR has aligned its ICT Governance Framework to the Department of Public Service infrastructure and the implementation of the ICT Disaster Recovery Plan. 3. Risk management and Fraud prevention plan 3.1 Fraud Prevention Plan: The NCR fraud prevention plan has been developed within the context of the Risk Management framework with the aim to reduce fraud to an absolute minimum and effect policies and procedures to maintain the risk of fraud within tolerable levels, and preferably zero, at all times. The Public Finance Management Act, Act No.1 of 1999 (PFMA), as amended, has as its prime objective, to secure transparency, accountability and management of revenue, assets, and liabilities within a spirit of good corporate governance, of the institutions to which the NCA applies. The main objectives of the plan include: To create an anti-fraud culture in which countering fraud is the joint responsibility of all stakeholders. To ensure that the totality of anti-fraud measures represents the strongest deterrent possible to those perpetrating or considering perpetrating fraud. To develop the most effective measures to prevent fraud by developing systems with administrative and technical features, which make the NCR less vulnerable to fraud. To establish the most effective processes to detect fraud by ensuring that departments have the ability to detect existing and new types of fraud effectively and timeously and implementing effective liaison procedures to ensure that prompt action is taken to minimise losses to the NCR. To take appropriate legal action and apply realistic sanctions where an investigation reveals fraud by ensuring that there is integration of risk management, ownership of the control environment, investigative and legal skills. To use all possible means to seek redress in respect of money and assets lost to fraud, by ensuring that the recovery of defrauded money and assets forms an essential part of our overall strategy, in order to ensure that committing fraud does not pay. 44 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

45 The main principles of the plan are: The NCR s creating a fraud intolerant culture; Fraud Prevention; Fraud Detection; Fraud Investigation; Appropriate action (e.g. prosecution, disciplinary action, etc.) and Appropriate recovery or the application of sanction. The Code of Conduct contains the fundamental ethical principles, which staff members and those who render services to the NCR on a contract basis, must adhere to. The principles are categorised as: Professionalism and integrity; Obligations to stakeholders; and Conduct in relation to others. Basic internal controls to prevent and detect fraud and the training of employees in internal controls and their day-to-day duties are critical to the success of this plan. The systems, policies and procedures of the NCR prescribe various controls, which, if effectively implemented, would limit the risk of fraud. These controls are categorised as: Prevention controls: Authorisation Custody of assets Detection controls Physical Supervision Management information Segregation of duties Physical and information security: Physical security Information security The fraud detection and investigation process involves the following: Internal audit Ongoing risk assessment and management Fraud detection Reporting and monitoring Fraud policy Implementation and maintenance of the fraud prevention plan includes: Creating awareness Communication Ongoing maintenance and review National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 45

46 The Accounting Authority is responsible for ensuring that a formal risk assessment is undertaken at least annually for the purpose of making its public statement on risk management. The NCR recognises that the consistent and efficient application of disciplinary measures is an integral component of effective fraud prevention. The NCR will continue to pursue the following steps to expedite the consistent, efficient and speedy application of disciplinary measures: Creating awareness amongst employees of forbidden conduct in terms of the disciplinary code and regular monitoring and review of application of discipline with the objective of improving weaknesses identified. Where managers discipline, the NCR will consider firm action. The management of the NCR will improve awareness and knowledge of the relevant systems, policies and procedures. In the pursuit hereof, the NCR will create awareness of existing and new policies and procedures to ensure that all employees are made aware of, and adequately trained in, the implementation of the policies and procedures relevant to their duties and responsibilities. The line management must be held accountable for complying with, and implementing, the NCR s systems, policies and procedures and for preventing fraud. This will continually be addressed by reviewing job description and performance appraisal processes and aligning this to the entity s strategy. Where managers are consider firm action. The Fraud Prevention Policy, central to the Plan, addresses the stance of the NCR, including the response mechanisms in place to report, investigate and resolve incidents of fraud impacting the NCR. A critical component of the policy addresses the practical execution phases and guidelines for decision-making at different stages of the investigation. The role of the NCR s Deputy Chief Executive Officer (DCEO) includes ongoing maintenance and review of the Plan, amongst other tasks. Ongoing maintenance includes: Steering and taking responsibility for the Plan; Reviewing and making appropriate amendments to the Code and Fraud Policy; Considering fraud threats to the NCR and making recommendations to other appropriate committees or management; Evaluating fraud reports; Considering criminal activity threatening the NCR and making fraud prevention recommendations with regard to areas for examination; Monitoring action taken to implement recommendations relating to incidents of fraud; Amending the awareness programme as necessary, and implementing the changes; and Ensuring that ongoing communication and implementation strategies are developed and implemented. The Plan will be reviewed on an annual basis, with quarterly implementation and progress reviews. 46 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

47 All reports or allegations received by the DCEO are to be investigated on their merits, with a copy to the Internal Auditor. In the event that there is merit in the allegations, these must be recorded and reported to the CEO and investigated, if the CEO is involved, the allegation must be referred to the Minister of Trade and Industry for a decision. If the person involved is an EXCO member, the allegations must be reported to the Chairperson of the NCR Audit Committee who must decide on the course of action to be taken. The above processes ensure that uninvolved parties are not negatively affected by malicious reports and that the intent to cause such damage is dealt with and disciplinary action taken where necessary. 3.2 Key Strategic Risks The NCR manages the key strategic risks it faces on a regular basis. The continuous review includes the update of both the strategic and operational risks on a periodic basis. The following table provides a summary of the NCR s key strategic risks, as well as the control improvement plan to mitigate the risks. Risk Name Risk Control Residual Risk Action Financial - Monthly variance reports to compare actual vs budget; - Budget mid-term reviews and re-allocation of funds; - Approval of budget by AA after recommondation from EXCO and Audit and Risk Management Committee; - Invoicing off all registrants a month before fees are due; - Submissions of additional funding requests to the dti; - Prepared and submitted budget - Quarterly update to the Portfolio Committee; - New registration thresholds for credit providers are place; - New registration fee increases are in place; - PDA interest utilisation policy; - Registration of new entrants is ongoing; decals issued annually upon renewal and not once off; Critical - Continue to engage with the dti for additional funding; - Implementation of imposition of penalties for late renewals; - Finalisation of the proposed Bill to offset enforcement costs against - Proposal on penalty fees for registration. Progress on action plans: - On going engagements with the dti regarding additional funding continue; proposed Bill to offset enforcement - ICT Systems for the Implementation of penalties are being developed. National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 47

48 Risk Name Risk Control Residual Risk Action Financial - Monthly variance reports to compare actual vs budget; - Budget mid-term reviews and re-allocation of funds; - Approval of budget by EXCO & Audit and Risk Management Committee; - Invoicing off all registrants a month before fees are due; - Submissions of additional funding requests to the dti; - Prepared and submitted budget - Quarterly update to the Portfolio Committee; - New registration thresholds for credit providers are place; - New registration fee increases are in place; - PDA interest utilisation policy; - Registration of new entrants is ongoing; decals issued annually upon renewal and not once off; Critical - Continue to engage with the dti for additional funding; - Implementation of imposition of penalties for late renewals; - Finalisation of the proposed Bill to offset enforcement costs against - Proposal on penalty fees for registration. Progress on action plans: - On going engagements with the dti regarding additional funding continue; proposed Bill to offset enforcement - ICT Systems for the Implementation of penalties are being developed. Service delivery - Payment of invoices within 30 days; - Entered into MOU with Credit Ombud; - Regular consumer education campaigns; - Regular engagements with provincial consumer protection - Capacity building workshops; - Ongoing improvement on the IT infrastructure; - Ongoing compliance monitoring and enforcement action; - Ongoing training sessions for NCR employees; - External evaluation of the call centre; - Regular engagements with registrants associations; - Regular engagements with the Reserve Bank (SARB); that are lodged; - Regular engagements with the media; - Quarterly sessions with the Portfolio and Select Committees; - Procedure manual for invoice payments in place; - Regular engagements with the dti and other government departments. Major Control improvement action plans - Improvement on ICT infrastructure. 48 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

49 Risk Name Risk Control Residual Risk Action - Alerts and reminders in the Complaints ICT systems Service Delivery Improvement Plan in place; - Centralised ICT services to one service provider; - Effective contract management; - More desk top compliance conducted; - Commencement of enforcement instituted by various departments; - Establishment of Service Provider panels; - Imbizos in all provinces; - Service Delivery Improvement Plan implemented; for registration; renewals. - Automated service rating of the call centre agents; - Implementation of disaster recovery plan; - Enter into MOUs with Provincial - Implement case management system for investigations; - Enter into MOUs with Department of Education, Stats SA, SAPS and SAHRC. Progress on action plans: - Ongoing improvement on ICT infrastructure; - Implementation of disaster recovery plan is underway; - Automatic service rating of the call centre agents will form part of the call centre system upgrade. Information Technology - Assessment of the new IT infrastructure and implementation to date; - Off-site storage of backups; - Internal auditors ensure assurance role; Implementation plan documented; - Network infrastructure improved. - Additional servers acquired e.g. SAP, Operational system; - Network monitoring tool has been acquired; - ICT Disaster Recovery Plan and Policy in place; - ICT Steering and Operational committees in place; - Alignment of ICT governance framework; - Business Continuity plan reviewed. - ICT expert as a member of ARMC appointed. Major Control improvement action plans: - Implement the Business Continuity plan for all critical business applications; - To implement the ICT disaster recovery plan; - Recruitment of additional skills; - Implementation of ICT Governance Framework; Service Provider. Progress on action plans: - Implementation of disaster recovery plan is underway; - Implementation of ICT Governance Framework is in progress. Human Resources - HR policies in place; - Wellness programmes in place; - Social Committee established; established; - Work place forum established; - Some vacant positions have been - Implemented the PMS in the whole organisation; - Other HR policies reviewed and approved; - Coaching; - Access to Senior Management; - Provisions of tools of trade. Control improvement action plans: - Engagements with the dti for additional funding to continue in order to employ more staff; - Finding other sources of income; more learners; - Training interventions; - Remuneration benchmarking. National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 49

50 Risk Name Risk Control Residual Risk Action Progress on action plans: - Engagements with the dti for additional funding continue; - Ongoing training interventions. Business Continuity - Risk assessment on security performed; extinguishers; - Information security policy in place; - Insurance cover in place; Disaster Recovery Team established; - CCTV surveillance, Electric fence, perimeter lighting, access control and alarm system are in place; - Security scanner in place; - Request for extension for current premises approved; - Fire drills are conducted; signage in place (OHSA); - Approved Disaster Recovery Plan; - Encryption for new laptops; - First Aid Kits available; - NCR has a generator in place to power the whole of NCR; - Medical Aid is compulsory for all employees; - Ongoing data encryption for new laptops; Control improvement action plans: - Information and physical Security Policies to be reviewed ; - Training for health and safety Team; - Engagement with dti to address the funding challenges; - To implement the DRP; - Implement the Control improvement action plans for all critical business applications; - Software upgrades for all staff; equipment; - DRS MOU to be signed with the dti; - Implement Server Monitoring and Alert system which will notify if the detection, server power failure, temperature(overheating) etc. Progress on action plans: - Ongoing training for health and Recovery Team; - Implementation of the DRP & Business Continuity plan in progress; security equipment; - Information and physical Security Policies to be reviewed; - Training for health and safety Team; - Engagement with dti to address the funding challenges; - To implement the DRP; - Implement the Security Policy reviewed by State security agency. NCR Security Committee to effect the recommendations of the review. 50 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

51 4. Any subsidiary of statutory body reporting to the entity Not applicable: The NCR does not have subsidiaries. 5. Service Delivery Improvement Plan NCR was unable to deliver on the call centre targets. As a result, approval was sought from the dti to defer Materiality Significance Framework Section in terms of PFMA 51(1)(g) Requirement An Accounting Authority for a public entity must promptly inform the National Treasury on any new entity, which that public entity intends to establish, or in the establishment of which it takes the initiative, and allow the National Treasury a reasonable time to submit its decision prior to formal establishment. 54(2) Before a public entity concludes any of the following transactions, the Accounting Authority for the public entity must promptly and in writing inform the relevant treasury of the transaction and submit relevant particulars of the transaction to its executive authority for approval of the transaction: a) Establishment or participation in the establishment of a company; partnership, trust, unincorporated joint venture or similar arrangement; c) Acquisition or disposal of a company; d) Acquisition or disposal of a e) Commencement or cessation activity; and nature or extent of its interest trust, unincorporated joint venture or similar arrangement. Quantitative R1,612,701 (2% of total assets at R1,612,701 (2% of total assets at Qualitative Any transaction of this nature that causes any interest (equity or loans) to be taken by the public entity in the company to be established requires approval from the executive authority irrespective of its Any transaction of this nature that causes any interest (equity or loans) to be taken by the public entity in the company to be established requires approval from the executive authority irrespective of its Where ownership is control is affected mandate. A business activity that falls outside of a public entity s core business should be National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 51

52 Section in terms of PFMA Requirement 55(2) The annual report and subsection 55(2) must include particulars of : a) any material losses through criminal conduct and any irregular expenditure and fruitless and wasteful expenditure that occurred during the b) any losses recovered or written off Quantitative R1,612,701 (2% of total assets at Qualitative Annexure: Indicator Profile Items (SO1) Guide 1. Indicator title 3. Purpose/importance A report on the study of the impact of affordability assessment regulations on consumers. A study conducted on the affordability assessment regulations. Understanding the impact of the regulations on consumers and credit providers; and Improving the regulations 4. Source/collection of data Affordability assessment regulations 5. Method of calculation 6. Data limitations A report on the study of the impact of affordability ssessment regulations on consumers with recommendations Expertise Unclear TOR 7. Type of indicator Output 8. Calculation type NA 9. New indicator New 10. Reporting cycle Annually 11. Desired performance Improved compliance with the Act 12. Indicator responsibility Manager: Credit Provider Compliance 52 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

53 Items (SO1) Guide 1. Indicator title Number of investigations/compliance monitoring/ audits/raids/complaints evaluations conducted to enforce regulations. Enforcement of the Act through investigations, compliance monitoring and complaints evaluations. 3. Purpose/importance To decrease the levels of non-compliance with provisions of the Act. 4. Source/collection of data Referrals from other government entities Proactive sourcing of information Complaints received Anonymous tip-offs Media reports 5. Method of calculation Tribunal (NCT) Copies of compliance notices issued (signed compliance notices) Investigations reports Complaints evaluations Tip-off anonymous report 6. Data limitations Tribunal and Tribunal rules 7. Type of indicator Output 8. Calculation type Numbers 9. New indicator Continues with changes from the previous year 10. Reporting cycle Quarterly and annually 11. Desired performance Improved compliance with the Act and consumer redress 12. Indicator responsibility Managers: Investigations and Enforcement, Complaints and CP Compliance National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 53

54 Items (SO1) Guide 1. Indicator title Enforcement action taken on a percentage (%) of investigations/compliance monitoring/audits/raids/ complaints evaluations conducted, where necessary for the whole year. Taking enforcement action against alleged non-compliance with the Act. 3. Purpose/importance To decrease the levels of non-compliance with provisions of the Act. 4. Source/collection of data Investigation reports Compliance monitoring reports Complaints evaluation reports 5. Method of calculation Total number of investigations/compliance monitoring/audits/raids/complaints evaluations conducted for the whole year (where contraventions of the Act were found) Total number of investigations/compliance monitoring/ audits/raids/evaluation conducted for the whole year = Total percentage (%) of enforcement action taken 6. Data limitations Budget, resources and capacity 7. Type of indicator Output 8. Calculation type Percentages and numbers 9. New indicator Continues with changes from previous year 10. Reporting cycle Quarterly and annually 11. Desired performance 12. Indicator responsibility Improved compliance with the Act and consumer redress Managers: Investigations and Enforcement, Complaints and CP Compliance 54 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

55 Items (SO1) Guide 1. Indicator title A report on the impact study of the effect of total cost of credit and credit life insurance regulations on consumers. A study conducted on the effect of total cost of credit and credit life insurance regulations. 3. Purpose/importance Understanding the impact of the regulations on consumers and credit providers; and Improving the regulations 4. Source/collection of data Affordability assessment regulations 5. Method of calculation A report on the impact study of the effect of total cost of credit and credit life insurance regulations on consumers with recommendations. 6. Data limitations Expertise Unclear TOR 7. Type of indicator Output 8. Calculation type NA 9. New indicator New 10. Reporting cycle Annually 11. Desired performance Improved compliance with the Act 12. Indicator responsibility Manager: Statistics & Research National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 55

56 Items (SO2) Guide 1. Indicator title Number of credit provider investigations/ compliance monitoring/audits/raids/complaints evaluations relating to reckless lending and/or collection of prescribed debt conducted to enforce regulations. To decrease the levels of non-compliance with provisions of the Act. 3. Purpose/importance To combat reckless credit granting and over-indebtedness. 4. Source/collection of data 5. Method of calculation 6. Data limitations Referrals from other government entities Proactive sourcing of information Complaints received Anonymous tip-offs Media reports Consumer Tribunal (NCT) Copies of compliance notices issued (signed compliance notices) Investigations reports Complaints evaluations Tip-off anonymous report Tribunal and Tribunal rules 7. Type of indicator Output 8. Calculation type Percentages and numbers 9. New indicator Continues without change from previous year 10. Reporting cycle Quarterly and Annually 11. Desired performance 12. Indicator responsibility Improved compliance with the Act and consumer redress Managers: Investigations and Enforcement, Complaints and CP Compliance 56 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

57 Items (SO2) Guide 1. Indicator title Enforcement action taken on a percentage (%) of investigations/compliance monitoring/audits/raids/ complaints evaluations relating to reckless lending and or collection of prescribed debt where necessary for the whole year. Enforcement of regulations through investigations 3. Purpose/importance 4. Source/collection of data Taking enforcement action against alleged non-compliance with the Act. To decrease the levels of non-compliance with provisions of the Act. Investigation reports Compliance monitoring reports Media reports Complaints evaluation reports 5. Method of calculation Total number of investigations/compliance monitoring/audits/raids/complains evaluations conducted for the whole year (where contraventions of the Act were found) Total number of investigations/compliance monitoring/ audits/raids/evaluation conducted for the whole year = Total percentage (%) of enforcement action taken 6. Data limitations Tribunal and Tribunal rules 7. Type of indicator Output 8. Calculation type Percentages and numbers 9. New indicator Continues with changes from previous year 10. Reporting cycle Quarterly and annually 11. Desired performance 12. Indicator responsibility Improved compliance with the Act and consumer redress Managers: Investigations and Enforcement, Complaints and CP Compliance National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 57

58 Items (SO2) Guide 1. Indicator title Number of multimedia awareness campaigns (radio/ TV interviews/news print/community outreach programmes/social media) conducted on deceptive and unfair practices and consumer rights. Improving education awareness on the deceptive and unfair credit practices and consumer rights. 3. Purpose/importance To educate and create public awareness for consumers on deceptive and unfair credit practices and consumer rights through multimedia awareness campaigns. 4. Source/collection of data Complaints received; Investigations conducted; Statistics; Media; Stakeholder engagements. 5. Method of calculation Media briefs; News Clippings; Interviews clips; Campaign reports; 6. Data limitations Training, capacity and funding 7. Type of indicator Output 8. Calculation type Percentages and numbers 9. New indicator Continues with changes from previous year 10. Reporting cycle Quarterly and annually 11. Desired performance To increase the level of public awareness on deceptive and unfair credit practices 12. Indicator responsibility Manager: Education & Communications 58 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

59 Items (SO3) Guide 1. Indicator title Number of credit bureaus monitored and disputes evaluated. To monitor compliance by credit bureaus. 3. Purpose/importance Increase compliance by credit bureaus in respect of their obligations in terms of the NCA. 4. Source/collection of data Form 43 annual reports Credit bureau audited reports Compliance monitoring plan Media reports Complaints evaluation reports 5. Method of calculation Compliance requirements letter sent to credit bureaus requesting information; Proof of compliance from credit bureaus; 6. Data limitations Industry readiness System developments either by credit bureaus or industry. 7. Type of indicator Output 8. Calculation type Percentages and numbers 9. New indicator Continues with changes from previous year. 10. Reporting cycle Quarterly and Annually 11. Desired performance Improved compliance with the Act 12. Indicator responsibility Manager: Credit Bureau Compliance National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 59

60 Items (SO3) Guide 1. Indicator title Enforcement action taken on a percentage (%) of monitored credit bureaus where necessary. Taking enforcement action on non-compliant credit bureaus. 3. Purpose/importance Increase compliance by credit bureaus in respect of their obligations in terms of the NCA. 4. Source/collection of data Form 43 annual reports; Proactive sourcing of information; Complaints received; Anonymous tip-offs; Media reports. 5. Method of calculation Total number of monitored non-compliant credit bureaus Total number of monitored credit bureaus = Total percentage (%) of non-compliant credit bureaus 6. Data limitations Industry readiness System developments either by credit bureaus or industry. 7. Type of indicator Output 8. Calculation type Percentages and numbers 9. New indicator Continues with changes from previous year. 10. Reporting cycle Quarterly and Annually 11. Desired performance Improved compliance with the Act 12. Indicator responsibility Manager: Credit Bureau Compliance 60 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

61 Items (SO3) Guide 1. Indicator title Number of audited reports submitted by registered credit bureaus and enforcement action taken where necessary. To monitor compliance by credit bureaus. 3. Purpose/importance Increase compliance by credit bureaus in respect of their obligations in terms of the NCA. 4. Source/collection of data Form 43 annual reports Credit bureau audited reports Compliance monitoring plan 5. Method of calculation Compliance requirements letter sent to credit bureaus requesting information; Audit confirmation reports from credit bureaus. 6. Data limitations Industry readiness System developments either by credit bureaus or industry. 7. Type of indicator Output 8. Calculation type Percentages and numbers 9. New indicator Continues without change from previous year. 10. Reporting cycle Quarterly and Annually 11. Desired performance Improved compliance with the Act 12. Indicator responsibility Manager: Credit Bureau Compliance 61 National Credit Regulator - 3 Year Annual National Performance Credit Regulator Plan 2018/19-3 Year -2020/21 Annual Performance Plan 2018/ /21 61

62 Items (SO3) Guide 1. Indicator title % of received credit bureau audited reports for action taken where necessary. The indicator seeks to highlight non compliances 3. Purpose/importance To decrease the levels of non-compliance with provisions of the Act. 4. Source/collection of data Credit bureau audited reports Form 43 annual reports 5. Method of calculation Received credit bureaus audited reports; Received completed Form 43 returns from credit bureaus; Referral memos to investigations department; Compliance notices issued; Annual compliance review reports; Approved internal memos. 6. Data limitations 7. Type of indicator Output 8. Calculation type Percentages and numbers 9. New indicator Continues without change from previous year. 10. Reporting cycle Quarterly and Annually 11. Desired performance Improved compliance with the Act 12. Indicator responsibility Manager: Credit Bureau Compliance 62 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

63 Items (SO4) Guide 1. Indicator title % of uptime availability of the legacy ICT (Registrations and Complaints) systems. The indicator seeks to highlight the system availability 3. Purpose/importance To assess the down time and uptime availability of the system 4. Source/collection of data Report from the systems. 5. Method of calculation ICT network monitoring report (Registrations and Complaints ICT system) 6. Data limitations Non commitment of service provider, stakeholders Out-dated ICT hardware. Capacity 7. Type of indicator Output 8. Calculation type Percentage 9. New indicator Continues without change from previous year. 10. Reporting cycle Quarterly reports 11. Desired performance 12. Indicator responsibility National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 63

64 Items (SO4) Guide 1. Indicator title Approved service delivery improvement plan of the NCR 3. Purpose/importance To improve service delivery 4. Source/collection of data Report from the systems Performance information reports 5. Method of calculation Signed SDIP document 6. Data limitations Capacity Expertise & budget Resources (ICT systems) Cooperation from the SDIP task team 7. Type of indicator Output 8. Calculation type NA 9. New indicator New 10. Reporting cycle Quarterly reports 11. Desired performance 12. Indicator responsibility Manager: Complaints department 64 National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21

65 Items (SO5) Guide 1. Indicator title % of new applications registered in the consumer credit market within 10 business days of receipt of signed proposed conditions and payment of registration fees. registration process of persons and entities. 3. Purpose/importance 4. Source/collection of data Registration fees collected; Signed proposed conditions of registration received. 5. Method of calculation Total number of applications registered within 10 business days Total number of applications registered = Total percentage (%) of new applications registered 6. Data limitations Training, capacity and ICT systems 7. Type of indicator Output 8. Calculation type Percentages and numbers 9. New indicator Continues without change from the previous year. 10. Reporting cycle Quarterly and annually 11. Desired performance Increased number of registered persons and entities leading to job creation and establishment of SMMEs. 12. Indicator responsibility Manager: Registrations National Credit Regulator - 3 Year Annual Performance Plan 2018/ /21 65

66

67 Five Year Strategic Plan 2018/ /23

68 Abbreviations AA - Accounting Authority ARMC - Audit and Risk Management Committee ADR - Alternative Dispute Resolution CB - Credit Bureau CCI - Consumer Credit Index CCMR - Consumer Credit Market Report COTII - Council of Trade and Industry Institutions CP - Credit Provider dti - Department of Trade & Industry DPSA - Department of Public Service Administration EXCO - Executive Committee FSRA - Financial Sector Regulation Act ICT - Information Communication Technology MICTSETA - Media Information and Communication Technologies Sector Education and Training Authority NCA - National Credit Act NCAA - National Credit Amendment Act NCR - National Credit Regulator NCT - National Consumer Tribunal PDA - Payment Distribution Agents PFMA - Public Finance Management Act SADC - Southern African Development Community SDIP - Service Delivery Improvement Plan SMME - Small Medium and Micro Enterprises WRSETA - Wholesale and Retail Sector Education and Training Authority Definitions used to measure performance Effective - Successful in producing a desired or intended result Enhance - Improve the quality of performance Support - To give assistance Facilitate - To make an action or process easier 68 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

69 Table of Contents Foreword by the Minister Overview by the Accounting Authority PART A: Strategic Overview Vision Mission Values PART B: National Credit Regulator - 5 Year Strategic Plan 2018/ /23 69

70 10.4 Capital expenditure programmes Dividend policies Asset management plan (narrative) Information technology plan (narrative) Risk management and Fraud prevention plan Fraud Prevention Plan: Key Strategic risk National Credit Regulator - 5 Year Strategic Plan 2018/ /23

71 3. Foreword by the Minister W after the National Credit Regulator s (NCR s) tenth year anniversary, we are reminded once more about our purpose to continue to strengthen consumer protection in the consumer credit industry while facilitating the sustainability and continued development of the credit industry. Global Economic Prospects report provided an outlook for potential growth in each of the six global regions. In Sub-Saharan Africa: Growth in the region is anticipated to pick up to 3.1 percent in 2018 from 2.4 percent in South Africa is forecast to pick up to 1.1 percent growth in 2018 from 0.8 percent in (Source: The World Bank: Press Release dated 9 January 2018: Global Economy to Edge up to 3.1 percent in 2018 but Future Potential Growth a Concern). The South African forecast is also supported by data released by Statistics South Africa. The economy of South Africa was reported to be on a recovery path. The economic activity in Q3 rose to 2.0% quarter-on-quarter- (Source: Focus Economics, December 8, 2017). This showed that the economy was gaining traction post the recession in Q2. Unemployment in South Africa still remains a challenge though. The unemployment rate was recorded at the highest rate in 13 years, according to Trading Economics. In terms of the TransUnion Consumer Credit Index (CCI), consumer credit health improved (albeit marginally), even though there was a slight decline in Q3 in 2017 at 53.9%, from Q2 in 2017 at 54.1% (an index level of 50 is considered the worsening credit health). Dr Rob Davies, MP Minister of Trade and Industry The results of the index were reported during a dire period of challenging economic conditions (Source: Southern Consumer Credit Health No room for complacency, ). A similar trend was reported in the Credit Bureau Monitor published by the NCR. The report is based on consumer credit data held by registered Credit Bureaus. Consumers considered to be impaired were active consumers as at end September 2017 (Q3). This was an increase from Q2 at 9.69million or 39.1%. National Credit Regulator - 5 Year Strategic Plan 2018/ /23 71

72 Year-on-year since September 2015, however, there was an improvement in the percent of impaired consumers : 42.3%; 2016: 40.6%; 2017: 39.36%. A consumer is classified as impaired if at least one account is three or more months in arrears, or has adverse listings, or has a judgement or administration order. The sluggish economic growth, high unemployment, consumer over-indebtedness and uncertainty in a volatile global economy all place consumers under intense pressure and risk. The National Credit Act No 34 of 2005 (the Act) as amended is a Government legislation enacted to amongst others, promote and advance the social and economic welfare of South Africans, promote a fair, transparent, responsible and accessible credit market and industry and to provide for consumer protection. The Act established the National Credit Regulator (the NCR) which commenced operations in In order to deliver on the above legislative mandate, the NCR developed five (5) Key Strategic Objectives for the period The NCR objectives are aligned to the Key Policy Areas of the Department of Trade and Industry, the National Development Plan, the Medium Term Strategic Framework and the Nine Point Plan and require the NCR to; Promote responsible credit granting, Protect consumers from abuse and unfair practices and address over-indebtedness; Enhance the quality and accuracy of consumer credit information; improve NCR s operational effectiveness; and Facilitate efficient registration of persons and entities to include those involved in consumer credit operating underground to be formalised. Therefore, in addition to the above work, the NCR will continue to participate in discussions relating to the Debt Intervention Bill introduced by the Portfolio Committee on Trade and Industry. It is anticipated that the NCR will be one of the implementing agencies for debt intervention so that more over-indebted consumers are rehabilitated and given an opportunity once more to participate in the consumer credit industry and mainstream economy. In spite of the challenges that the NCR may continue to face in the future, I am confident that the NCR will possess the resolve and resilience to overcome these challenges and will, therefore, deliver on its mandate. I am pleased to release its 3-year Annual met with the continued support of the dti. Dr Rob Davies, MP Minister of Trade and Industry Government has considered it necessary to develop a statutory mechanism to assist low income over-indebted consumers who falter; through debt counselling and the personal insolvency regime. 72 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

73 4. Overview by the Accounting Authority The past year marked the tenth anniversary of the National Credit Regulator (NCR) which coincided with the events that started the global financial crisis and the world has changed significantly since then. This calls for the need for cooperation with other key stakeholders, including regulators, locally and internationally and acting more proactively and effectively, to identify and address market problems. Consumer expectations have changed and they have become more empowered. We now live in an era where technology and social media are at our fingertips. Regulatory technology has to be developed and leveraged to enhance the NCR s reach, impact, and effectiveness. Every consumer now has unprecedented access to information and it is, therefore, necessary for business and regulators to step up and respond accordingly. The NCR is committed to continuing to build a consumer credit market that works for consumers, the credit industry and for the South African economy. A desire for fair access to legitimate credit, an alternative to abusive credit practices, and high quality service must remain the hallmark of the credit industry. As a regulator, it is important to use our mandate to act more efficiently to identify and address market problems. We need to ensure that consumers receive fair, transparent and responsible access to credit while educating consumers to make sound financial decisions for themselves. The current economic climate in South Africa is slowly improving, which means that consumers will be in better shape to weather economic storms. There are promising signs that the consumer credit market is poised to perform well in The economy grew by 2.0% in the three months to September Nomsa Motshegare Accounting Authority This is in line with growth in Sub-Saharan Africa which is estimated to have rebounded to 2.4% in 2017 from 1.3% in The projections are that regional growth will rise to an average (article on Sub-Saharan Africa, by Gerard Kambou Global Economic Prospects, January 2018). High unemployment, however, remains a major social challenge and if this is not addressed, it will result in decreased household consumption. The priorities of the NCR are aligned with the Key Policy Areas of the Department of Trade and National Development Plan, the Nine Point Plan and the Medium Term Strategic Framework. National Credit Regulator - 5 Year Strategic Plan 2018/ /23 73

74 These focus areas reflect the NCR s vision of promoting a South African consumer credit market which is fair, transparent, accessible and contributing to South Africa s socio-economic development. The NCR operates under the ambit of the National Credit Act No 34 of 2005 (the Act) as amended. A high level situational analysis conducted identified trends in the developments that are likely to influence the consumer credit industry and impact the NCR over a period of time. The factors impacting on the regulatory environment include the following: According to the NCR Consumer Credit Market Report and Credit Bureau Monitor which cover credit market information up to September 2017, credit-active consumers for the quarter ended September 2017, an increase of 0.32% when compared to the million in the quarter ended September The number of consumers classified in good standing increased by 115,000 to million. The percentage number of consumers classified in good standing accounted for 60.64% of the total credit-active consumers. This was an increase of 1.26% year-on-year. One of the most significant trends observed in terms of credit granted for the quarter ended September 2017 is that the total outstanding consumer credit balances (or gross debtors book) was R1.73 trillion, representing a year-on-year growth of 3.44%. The above consumer credit insights will help us guide our strategy and planning going forward. They indicate that although consumer credit health is improving, consumers remain credit stretched. These trends are supported by the Consumer Credit Index (CCI) published by TransUnion. The index measures the aggregate consumer loan repayment record, tracks the use of revolving consumer credit facilities as an indicator of distressed borrowing, estimates household cash flow and quantifies the relative cost of servicing outstanding debt. These aspects are then combined into a single indicator of credit health (TransUnion Q Consumer Credit Index Report). The CCI dropped slightly to 53.9 in Q3 from 54.1 in Q2, but because it remained above 50.0 (where 50.0 is the breakeven point), this is an indication of some improvement in consumer credit health. In an article titled Bad Debts better than a year ago, but the picture for this year is mixed by Tammy Foyn, dated 17 August 2017, it is reported that bad debts for South Africans improved compared to the previous year and that indebtedness of households has been easing. Household debt to disposable income ratio as reduced to 75% for Q2, 2016 and further reduced to 74% for Q3 of biggest risks every South African household faces in 2017, January 2017) enforcing federal consumer financial laws and protecting consumers in the financial marketplace. Despite improved consumer credit health, consumers are still not out of the woods. Measures will have to be identified to continue to improve consumer credit health by preventing financial harm to consumers while promoting responsible and sustainable lending practices that benefit them. The Credit Industry Forum continues to provide a neutral platform to discuss cooperation between various industry associations to find solutions to industry challenges in the credit industry. The NCR will also continue to engage on a regular basis with other local and international regulators such as the South African Reserve Bank, Financial Services Board, the Competition Commission, and the Consumer Financial Protection Bureau in the United States. The main function of the Bureau is to enforce federal consumer financial laws and protect consumers in the financial marketplace. 74 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

75 NCR, therefore, collaborates with other regulators to share guiding principles and best practices. In terms of the National Credit Act, as amended, and the Financial Sector Regulation Act, 9 of 2017 (FSRA), which will implement the Twin Peaks model for financial regulation and supervision, the NCR will cooperate with regulators to be established under the FSRA. The NCR participates in quarterly regulatory cluster meetings of the Council of Trade and Industry Institutions (COTII) which facilitate sharing of information and pulling resources to work together as regulators. The regulators who form COTII all report to the dti. Collaboration regulation is about having a holistic view of the regulatory environment and an inclusive dialogue across sectors. It is important for sharing of information, experiences in terms of best practices in different regulatory aspects. The NCR working jointly with local Tribal Authorities in rural areas of most provinces, will conduct community outreach programmes ( Imbizos ) aimed mainly at pensioners to create awareness relating to their rights and responsibilities as consumers in the credit industry. The NCR will continue to focus on visits to rural areas as most consumers in the credit market who reside in these areas form part of the vulnerable communities that must continue to be protected from financial harm. NCR will empower consumers in general by assisting them to understand the costs and risks of financial decisions, build trusted relationships that are informative so that they can make better informed choices and live better financial lives. This ensures compliance with the Act and enforcement of the Act to hold violators accountable by utilising a range of compliance monitoring and enforcement tools. A full update on matters before the National Consumer Tribunal and the courts are in the section on Recent Court Rulings. The enforcement of the Act is one of the key functions of the NCR. This is primarily done through conducting investigations. These investigations are informed by complaints from consumers, trends identified in the media, referrals from other institutions and compliance monitoring. As a result of the prudent financial management and corporate governance practiced, the NCR has always obtained an unqualified audit opinion and aims to achieve a clean audit opinion going forward. To this end the NCR holds regular engagements with Assurance Providers (Internal and External Auditors) through combined assurance forums. It is also important for the NCR to effectively and efficiently deliver on its mandate. A service delivery improvement plan is being developed and will be implemented from financial challenges encountered in executing the planned strategic activities. To achieve the long-term goals, we will need to ensure that the strategic plan is robust. Management will need to be flexible and alert to new opportunities as they present themselves. The NCR has continuously been focusing on measures to cut operational costs and simultaneously identifying other revenue streams to deal with funding challenges. For example, some of the work that was outsourced has been internalised by providing extensive training to staff. Some of the NCR legal advisors have been empowered to refer and defend matters at the Tribunal. Measures that have been identified to supplement income include the following: to submit a proposal to the dti to increase registration fees; the PDA interest utilisation policy has been reviewed and a proposal has been submitted to the dti to utilise the PDA interest earned for additional purposes that will in the long run benefit consumers e.g. research and impact studies. National Credit Regulator - 5 Year Strategic Plan 2018/ /23 75

76 The NCR is committed to good governance practices. It complies with the prescripts of the Public Finance Management Act (PFMA) and Treasury Regulations. The responsibilities of the Accounting Authority vest in the Chief Executive Officer. An Audit and Risk Management Committee (ARMC) is constituted in terms of the PFMA and Treasury Regulations. The Internal Audit function, which reports to the ARMC, is outsourced. The organisation has been working smartly to achieve most of the objectives it set out to meet. By the end of September 2017 (second the planned quarterly milestones had either been achieved or exceeded for the two quarters. This needs to be maintained going forward. following: Education and awareness campaigns on deceptive and unfair practices, and consumer rights; Monitoring and enforcement programmes in particular in relation to the new registrants. The National Credit Amendment Act and its Regulations make provision for all credit providers to be registered with the NCR and the threshold has been reduced to R1,00; Monitoring and enforcement programmes in relation to collection and sale of prescribed debts and credit providers to be encouraged to refrain from doing this; Monitoring the implementation of the Affordability Assessment Regulations; Review of the cost of credit and credit life insurance; and improved publication on the work undertaken by the NCR and its success stories. We have aligned the key performance areas with the strategic objectives and core themes of the dti. The vision and mission are articulated through strategic goals. Measurable performance indicators as well as an analysis of external and internal factors that could affect the ability to achieve our goals are indicated. Strategic risks, which we could be exposed to, as well as possible mitigating controls, are also identified. The strategic thrusts driving the plan include: - To promote responsible credit granting, to protect consumers from abuse and unfair practices in the consumer credit market and address over indebtedness; to enhance the quality and accuracy of consumer credit information; to improve NCR s operational effectiveness; and to facilitate efficient registration of persons and entities. A Debt Intervention Bill was introduced by the Portfolio Committee on Trade & Industry and published in November 2017 for public comment. The Bill seeks to bridge the gap between low income consumers who cannot afford to go under debt review, and those who do not have any income and assets. There is currently no legislative mechanism to assist this category of consumers in the current legislative framework. It is anticipated that the NCR will be one of the implementing agencies of this Bill once enacted. Implementation of the NCR will need to be capacitated to be able to deliver effectively on this Bill. Deadline for submission of written comments by the public Committee has commenced with public hearings regarding the Bill. I would like to thank the NCR Executive Team, Management and personnel for their efforts, energy and dedication in providing a valuable contribution in the development of the consumer credit market. This has assisted the NCR to make strides in achieving its strategic goal of protecting consumers in the country. The continued dedication and passion displayed by the NCR employees will go a long way in making a difference in the lives of many vulnerable communities in South Africa. 76 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

77 My gratitude is also extended to the dti in advancing socio-economic development in the country. The NCR will strive to improve its efficiency and effectiveness in the implementation of the Act and protection of consumers. I am grateful to the Honourable Members of the Portfolio Committee on Trade & Industry, the Honourable Members of the Select Committee on Trade and International Relations, the Honourable Minister of Trade and Industry, Dr October, the Group Chief Operating Officer, Ms Jodi Scholtz, and the Acting Deputy Director- General, Mr MacDonald Netshitenzhe for their guidance and continued support of the NCR. I would also like to extend my sincere appreciation to the Members of the Audit & Risk Management Committee, for their dedicated energies and time they devote to the NCR. Nomsa Motshegare Accounting Authority National Credit Regulator - 5 Year Strategic Plan 2018/ /23 77

78 2. Official sign-off Was developed by the management of the National Credit Regulator under the guidance of Mrs N Motshegare, who is the CEO and Accounting Authority. Was prepared in line with the current Strategic Plan of the National Credit Regulator. 78 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

79 Part A: Strategic Overview This section describes the vision, mission, values, strategic goals and objectives of the National Credit Regulator (NCR). Furthermore, it provides an overview of the products and services, recent court rulings and 1. Vision The vision of the NCR is: To promote a South African consumer credit market that is fair, transparent, accessible and dynamic. 2. Mission The mission of the NCR is: regulating for a fair and non-discriminatory market for access to consumer credit; and promoting responsible credit granting, use and effective redress. 3. Values The values of the NCR are: Service Excellence We strive for service excellence that exceeds the expectations of all stakeholders. Integrity We are committed to honesty and integrity without compromise. Empowerment We strive for empowerment in the consumer credit market and we are also committed to employee empowerment. Good Corporate Governance We strive to be a model of good corporate governance at all times. 4. Legislative Mandate The legislative mandate of the NCR is as follows: To promote a fair and non-discriminatory marketplace for access to consumer credit and for that purpose to provide for the general regulation of consumer credit improved standards for consumer information; To prohibit certain unfair credit and credit market practices; To promote responsible credit granting and use and for that purpose to prohibit reckless credit granting; To provide for debt re-organisation in cases of over-indebtedness; To regulate credit information; and To promote a consistent enforcement framework relating to consumer credit. National Credit Regulator - 5 Year Strategic Plan 2018/ /23 79

80 5. Services The NCR renders the following services, in accordance with the requirements of the NCA. Register credit providers, credit bureaux, PDAs, ADRs and debt counsellors, and monitor their compliance with the Act. Educate and create awareness of the protection that the NCA offers; Research the credit market and its trends, monitor access to credit and the cost of credit to identify factors that may undermine access to credit, competitiveness in the credit market and consumer protection; Advise government on policy and legislation; Receive and investigate complaints and ensure that consumer rights are protected; and Enforce the NCA and take action against contravening entities. 6. Recent Court Rulings The NCR appraises the rulings and decision of the High Courts and the National Consumer Tribunal on a regular basis. The likely impact of these decisions on the NCR s functions and mandates is taken into account when we craft our strategic plans. A brief summary of recent court decisions and rulings is provided below: Matter Name Truworths and others vs NCR and dti MFSA vs NCR and dti MFSA vs NCR, dti and NCT Court & Case Reference No. Western Cape High Court Case No: North Gauteng High Court Case No: North Gauteng High Court Case No: Legal issues and status This is a High Court review of the affordability regulations by the clothing retailers. The matter judgement. This is a High Court review of Regulation 42- limitation on fees and interest by MFSA in which the matter was ruled in favour of MFSA and the NCR and dti have launched an appeal which was heard on 12 and 13 December 2017 and we await judgement. This is an application for a Declaratory Order regarding the interpretation of section 102 that was brought by the MFSA. MFSA would like the court to interpret the section as permitting for the inclusion of initiation fees into the deferred amount for all types of credit agreements, and not just the credit agreements mentioned in section 102. The parties are still exchanging pleadings and as soon as the pleadings have closed the matter will be set down for a hearing. 80 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

81 Matter Name Bridge Corporate (Pty) Bayport vs Minister of Justice and NCR Court & Case Reference No. North Gauteng High Court Case No: North Gauteng High Court Case No: Legal issues and status High Court for an order to declare sections 55 and 57 of the NCA, which grant the NCR powers to issue compliance notices, unconstitutional. The matter is Bayport brought an application to declare consent to foreign jurisdiction as legitimate, in spite of the express prohibition in Section 90(2)(k)(vi) (bb) of the NCA. We await a date of set down for the matter to be heard. SAFPS vs NCR and NCT North Gauteng High Court. Case No: This is an appeal by SAFPS against the decision of the NCT that found SAFPS guilty of prohibited conduct and for breaching the NCA regarding retention periods of adverse listings for credit bureaus. On 30 November 2017 the North Gauteng High Court upheld the appeal by SAFPS. The NCR is appealing the High Court decision in the Supreme Court of Appeal. NCR vs Finbond NCR and NCT NCR vs Shoprite Investments National Consumer North Gauteng High National Consumer The NCR referred Finbond to the NCT for charging consumers unreasonable cost of credit life insurance. The matter was heard on the 25th July 2017 and the NCT dismissed the NCR s case. The NCR is appealing the decision. conduct for the mis-selling of credit life insurance. The NCR referred Shoprite to the NCT for allegations of reckless lending and mis-selling of credit life insurance. The matter was heard on the 20 June 2017 and the NCT ruled in favour of the NCR and found Shoprite imposed. Shoprite has appealed the decision and the NCR is opposing the appeal. Getbucks (Proprietary) Another North Gauteng High Court Case No: Court to declare Regulation 44 ultra vires and void and to seek declaratory relief regarding the process to be followed when NCR investigates complaints in terms of section 136(2). The parties are still exchanging pleadings and once the pleadings have closed, the matter will be set down for a hearing. National Credit Regulator - 5 Year Strategic Plan 2018/ /23 81

82 Matter Name Moneyline Financial NCR NCR vs Diners Club SA and Std Bank NCR vs Standard Bank NCR NCR vs Wesbank a division of First Rand NCR vs Standard Bank NCR vs Nedbank Court & Case Reference No. North Gauteng High Court Case No: North Gauteng High Court Case Case No: National Consumer National Consumer National Consumer National Consumer Legal issues and status Moneyline has appealed the decision handed down by the NCT which ruled that the NCR acted lawfully and procedurally correct when investigating Moneyline. The merits of the matter relate to allegation of reckless lending towards the recipients of social security grants by Moneyline. The matter was set down for a hearing on 6 December 2017 and it was postponed on account of Moneyline not being ready to proceed. We now await a new date for the hearing. This is an application by the NCR for an order declaring that the Diners Club agreement concluded with consumers, which is administered by Standard Bank on behalf of Diners Club SA, is a credit agreement as The NCR has brought an application for a declaratory order regarding the application of the common law principle of set off on credit agreements. Once all the pleadings have been exchanged between the parties, the matter will be set down for a hearing. The NCR referred Edcon Group to the NCT for the unlawful charging of club fees to consumers, and the NCT ruled in the favour of the NCR. Edcon has launched an appeal against the decision of the NCT. The matter charging of club fees to consumers, and the NCT ruled against the decision of the NCT. The matter is set down The NCR referred Wesbank a division of FirstRand Wesbank s debt collection practices, which revealed that Wesbank does not allow consumers to voluntarily surrender their motor vehicles, in contravention of Section 127. The NCR referred Standard Bank to the NCT for reckless lending. The matter concerns the so called 699 Satinsky car scheme. The NCT dismissed the application by the NCR and the NCR is appealing the decision. The NCR referred Nedbank to the NCT for reckless lending. The matter concerns the so called 699 Satinsky car scheme. The hearing was set down for postponed to a soon to be decided date. 82 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

83 Matter Name BMW Financial Services Volkswagen Financial NCR Court & Case Reference No. National Consumer National Consumer Legal issues and status A compliance notice was issued for the on the road fees. BMW has objected to the compliance notice by an application to the NCT. The NCR is opposing the whereafter the matter will be set down for hearing. A compliance notice was issued for the on the road fees. VW has objected to the compliance notice by application to the NCT. The NCR is opposing the 7. Situational analysis brief synopsis of the state of the credit market is provided. An analysis of the internal and external factors impacting on the NCR is then provided. 7.1 State of the Credit Market increased by R57.44 billion (3.44%) for the quarter ended September 2017, when compared to the quarter ended September The value of the debtors book at the end of September 2017 was R1.73 trillion For the quarter ended September 2017, the total rand value of new credit granted was R billion, with Mortgages comprising R37.54 billion (30.36%), Secured Credit R42.25 billion (34.17%), Unsecured Credit Applications for registration of credit providers are steadily increasing. A total of credit providers with branches, 23 Credit Bureaus, 3 Payment Distribution Agents, 4 Alternative Dispute Resolution whilst unregistered. 7.2 Performance Delivery Environment (external) the work of the NCR: a) Certainty in the regulatory framework Uncertainty in the regulating enforcement can curb job creation. Regulatory certainty creates consistent application of the legislation resulting in desirable outcomes that have a positive impact has worked closely with the dti to close the gaps that existed in the legislation through the National Insurance, Interest rates and fees; Requirements to register every person and entity that extends credit. Implementation of the regulations has commenced and will be closely monitored. Impact of these regulations will be conducted in the next 3 years. National Credit Regulator - 5 Year Strategic Plan 2018/ /23 83

84 b) Increasing complexity and sophistication The evolution of the credit market has come with innovation by the industry. This continues to increase alternative consumer lending. The emergence of on-line, peer-to-peer lending and other new forms of lending in South Africa and other countries has brought new regulatory challenges for credit regulators. Close monitoring or scrutiny on compliance with the law will have to be done. The NCR is also closely monitoring the introduction of the new credit products and the advertising methods of credit providers in order to curb the luring of consumers into debt traps. This in turn requires improved product knowledge and understanding by the NCR to be able to monitor their compliance with legislation effectively. c) Stakeholder management The approach of the NCR towards stakeholder management is to facilitate open discussion and engagement with the industry and other stakeholders. Efforts are being made to achieve this objective while avoiding regulatory capture by the industry. The NCR has established the Credit Industry Forum which serves as a platform for the NCR and industry to engage and reach agreement on industry issues. The forum represents all industry players and consumers. It plays an important role in resolving operational problems on the implementation of the legislation. The forum continues to meet quarterly, several guidelines circulars have been issued to the industry emanating from these meetings. The NCR is a member of the African Consumer Protection Dialogue which is facilitated by the Federal Trade Commission of the United States (The African Dialogue). This forum brings together regulators from all over the African continent to discuss consumer protection issues and share information. NCR will continue to participate in conferences arranged by the African Dialogue. The NCR also holds regular meetings with industry associations, registrants and magistrates. Ongoing meetings are also the Reserve Bank of South Africa. The NCR has also established networks with other regulators in the SADC region, United States of America and the United Kingdom. More relationships will be established with other regulators across the globe. d) Challenges faced by the NCR The main challenge of the NCR is funding. The NCR requires additional funding to meet its operational requirements. legislative mandate. 7.3 Organisational Delivery Environment (internal) the NCR: a) Processes, system and structure renewal A new human resource management system and a performance management system have been introduced. b) Human Capital The NCR is focusing on staff issues and ensures that staff morale remains high. In order to increase 84 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

85 c) Knowledge intensity In order to provide guidance to stakeholders and employees on the developments and trends in the credit market. This is achieved through measures such as issuing public notices, capacity building workshops, media statements, radio and TV interviews; community outreach programmes (Imbizos) and others. The NCR also publishes statistics on a quarterly basis on the level and nature of consumer indebtedness. In-house training sessions are provided for staff. 7.4 Description of the Planning Process the organisational strategic direction. The dti, Audit and Risk Management Committee and Internal audit play a pivotal role in that they make review and inputs to the process. Workshops are then held between executive members and the management team to develop the departmental operational objectives. Management in turn engages with their respective team members to develop operational objectives which are in line with the business plan of the organisation. Upon approval of the strategic and operational objectives, all employees including executive management conclude performance contracts quarterly. 8. Strategic Alignment to the dti Employment through Inclusive Growth. In aligning its strategic priorities, the NCR took into account the external and internal environmental trends and issues as well as priorities of government which are the twelve (12) outcomes, NDP and the Nine Point Plan. The alignment between the outcomes that the NCR seeks to achieve, the strategic objectives of the dti, its strategic outcome oriented goals, the NDP and the Nine Point Plan is set out below: The Nine Point Plan includes unlocking the potential of SMMEs, Cooperatives, townships and rural turnaround times to register new entrants (persons & entities). This will result in increased job creation. The dti strategic objectives and NCR outcomes dti Objectives dti Outcomes NCR Objectives NCR Outcomes Grow the manufacturing sector to promote industrial development, job creation, investment and exports. Facilitate the transformation of the economy to promote industrial development, investment, competitiveness and employment creation. To promote responsible credit granting. To enhance the quality and accuracy of consumer credit bureau information. Reduced levels of over-indebtedness. Affordable levels of credit promoted. Improved quality and accuracy of consumer credit information. National Credit Regulator - 5 Year Strategic Plan 2018/ /23 85

86 dti Objectives dti Outcomes NCR Objectives NCR Outcomes Improved conditions of consumers, artists and opening up of markets for new patents players. Facilitate broadbased economic participation through targeted interventions to achieve more inclusive growth: To protect consumers from abuse and unfair practices in the consumer credit market and address overindebtedness. registration of persons and entities. Decreased levels of reckless lending and unfair practices. registration of persons and entities. Strengthen capacity to deliver on the dti mandate. Create a fair regulatory environment that enables investment, trade and enterprise development in an equitable and social responsible manner. To monitor and improve NCR s operational effectiveness. delivery. Promote a professional, ethical, dynamic, competitive and customer-focused working environment that ensures effective delivery. 86 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

87 Part B: Strategic Objectives 9. The strategic objectives the NCR pursues are as follows: Programme 1 To promote responsible credit granting. Programme statement The purpose of this programme is to reduce levels of consumer over-indebtedness by: (a) Understanding the impact of the regulations on consumers and credit providers; (b) Monitoring credit provider compliance with the regulations; (c) Enforcing compliance with the regulations; and (d) Improving the regulations. Description of the programme Credit provider compliance monitoring and investigations will be conducted in order to assist credit providers to comply with affordability assessment regulations and the total cost of credit. Baseline * Credit provider compliance monitored in 9 provinces. Enforcement action taken on non-compliant credit provider where necessary. * Fifty 50 investigations conducted and enforcement action taken where necessary. * Service provider to conduct an impact study of the affordability assessment regulations on consumers procured. Programme 2 To protect consumers from abuse and unfair practices in the consumer credit market and address over-indebtedness. Programme statement The purpose of this programme is to decrease the practice of reckless lending by credit providers. This will be implemented by conducting investigations and taking enforcement action on non-compliant credit providers and improving education awareness regarding deceptive and unfair practices and consumer rights. Description of the programme Complaints reports that are lodged by consumers and reports of non-compliance reported by investigated through reactive mechanisms. Appropriate enforcement action will be taken where necessary. Baseline * Seventy (70) credit provider investigations conducted and enforcement action taken where necessary. 35 of any of the following: -Radio interviews -TV interviews -News print -Community outreach programmes on deceptive and unfair credit practices conducted. National Credit Regulator - 5 Year Strategic Plan 2018/ /23 87

88 Programme 3 To enhance the quality and accuracy of consumer credit information. Programme statement The purpose of this programme is to increase compliance by credit bureaus through compliance monitoring, complaints evaluation and investigations by taking appropriate enforcement action where necessary. Description of the programme Compliance monitoring will be conducted by the NCR. Based on the outcome of the compliance monitoring, complaints evaluation and investigations, enforcement action will be taken where necessary. Baseline Enforcement action taken where necessary. 100% of audited reports from credit bureaus reviewed and enforcement action taken where necessary. Programme 4 To improve NCR s operational effectiveness. Programme statement Description of the programme The purpose of this programme is to improve the This will be done through continuous improvement of the ICT systems. Baseline *97% uptime of the ICT system. Call Centre SDIP implemented for 6 months. Programme 5 entities. Programme statement The purpose of this programme is to increase the participation of SMMEs which would facilitate the creation of job opportunities. Description of the programme Registering new entrants in the consumer credit market, i.e. Credit providers, Credit Bureaus, Payment Distribution Agents, Alternative Dispute Resolution and Debt Counsellors. 10. Financial Plan and the need to regulate the credit industry and enforce the NCA, it is imperative for the NCR to optimise the available funding. In order to ensure optimisation of available funds, the NCR will continue implementing its cost containment measures, as well as ensuring 100% compliance with the National Treasury Instructions on cost containment. capital expenditure projections. 88 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

89 10.1 Projections of Revenue, Expenditure, Borrowings and Capex period. OPERATIONAL EXPENDITURE YEAR YEAR YEAR YEAR YEAR Personnel costs Administration costs Total operational expenditure CAPITAL EXPENDITURE YEAR YEAR YEAR YEAR YEAR ICT operational system Total capital expenditure TOTAL EXPENDITURE: INCOME YEAR YEAR YEAR YEAR YEAR Fees from registrants Transfers from the dti Interest Other income TOTAL INCOME Asset and liability management In terms of section 51(1)(c) of the PFMA, the Accounting Authority is responsible for the management, including the safeguarding, of the assets and the management of the revenue, expenditure and liabilities of the public entity. Within the NCR, the Asset Management Policy provides for the acquisition of assets when the need arises. Procurement processes are in line with legislative requirements as well as the NCR s supply chain management policy. In addition, assets are effectively maintained and when required, disposed of in line with the requirements of the PFMA Cash flow projections National Credit Regulator - 5 Year Strategic Plan 2018/ /23 89

90 activities YEAR YEAR YEAR YEAR YEAR Cash receipts from applicants and registered entities 62,595,621 64,073,690 65,410,464 66,627,049 Cash paid to suppliers (47,356,511) Cash paid to employees (97,950,356) Cash absorbed by operations before transfers received (70,719,643) (79,046,162) Transfers received 75,361,000 Cash absorbed by operations 4,641,357 5,125,715 Finance Income 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 activities 5,641,357 5,791,783 5,910,838 6,125,715 6,244,583 activities YEAR YEAR YEAR YEAR YEAR (3,626,014) (3,734,795) (3,962,243) New ICT System Development of ICT operational system activities (2,015,343) (2,064,000) (2,163,472) (2,163,472) (5,641,357) (6,125,715) activities cash equivalents National Credit Regulator - 5 Year Strategic Plan 2018/ /23

91 10.4 Capital expenditure programmes The NCR s projected capital expenditure programme for the next three years focuses on the ICT systems upgrade and implementation of the ICT disaster recovery plan. The capex programme is outlined below: YEAR YEAR YEAR YEAR YEAR , , , ,634 Computer Equipment 659, , , ,935 Furniture 219,474 2,529,064 2,604,936 2,763,577 ICT operating system 2,015,343 2,064,000 2,163,472 2,163,472 Total 5,641,357 5,791,783 5,910,838 6,125,715 6,244, Dividend policies The NCR is a schedule 3A public entity receiving a transfer payment from the dti. Hence the NCR does not declare dividends. National Credit Regulator - 5 Year Strategic Plan 2018/ /23 91

92 PART C: Links to other plans 11. Asset management plan The NCR continues to effectively manage and safeguard its assets. The NCR has implemented electronic redundant assets are disposed of in line with the NCR Assets Management Policy and Treasury Regulations. Facilities department is responsible for repairs and maintenance of the NCR assets. The NCR continues to ensure that its assets are adequately insured. 12. Information technology plan The NCR makes extensive use of ICT systems to deliver on its mandate. It is also in the process of delivery. The NCR has aligned its ICT Governance Framework to the Department of Public Service and implementation of the ICT Disaster Recovery Plan. 13. Risk management and Fraud prevention plan 13.1 Fraud Prevention Plan: The NCR fraud prevention plan has been developed within the context of the Risk Management framework with the aim to reduce fraud to an absolute minimum and effect policies and procedures to maintain the risk of fraud within tolerable levels, and preferably zero, at all times. The Public Finance Management Act, Act No.1 of 1999 (PFMA), as amended, has as its prime objective, to secure transparency, accountability and management of revenue, assets, and liabilities within a spirit of good corporate governance, of the institutions to which the NCA applies. The main objectives of the plan include: To create an anti-fraud culture in which countering fraud is the joint responsibility of all stakeholders. To ensure that the totality of anti-fraud measures represents the strongest deterrent possible to those perpetrating or considering perpetrating fraud. To develop the most effective measures to prevent fraud by developing systems with administrative and technical features, which make the NCR less vulnerable to fraud. To establish the most effective processes to detect fraud by ensuring that departments have the ability to detect existing and new types of fraud effectively and timeously and implementing effective liaison procedures to ensure that prompt action is taken to minimise losses to the NCR. To take appropriate legal action and apply realistic sanctions where an investigation reveals fraud by ensuring that there is integration of risk management, ownership of the control environment, investigative and legal skills. To use all possible means to seek redress in respect of money and assets lost to fraud, by ensuring that the recovery of defrauded money and assets forms an essential part of our overall strategy, in order to ensure that committing fraud does not pay. 92 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

93 The main principles of the plan are: The NCR s creating a fraud intolerant culture; Fraud Prevention; Fraud Detection; Fraud Investigation; Appropriate action (e.g. prosecution, disciplinary action, etc.) and Appropriate recovery or the application of sanction. The Code of Conduct contains the fundamental ethical principles, which staff members and those who render services to the NCR on a contract basis, must adhere to. The principles are categorised as: Professionalism and integrity; Obligations to stakeholders; and Conduct in relation to others. Basic internal controls to prevent and detect fraud and the training of employees in internal controls and their day-to-day duties are critical to the success of this plan. The systems, policies and procedures of the NCR prescribe various controls, which, if effectively implemented, would limit the risk of fraud. These controls are categorised as: Prevention controls: Authorisation Custody of assets Detection controls Physical Supervision Management information Segregation of duties Physical and information security: Physical security Information security The fraud detection and investigation process involves the following: Internal audit Ongoing risk assessment and management Fraud detection Reporting and monitoring Fraud policy Implementation and maintenance of the fraud prevention plan includes: Creating awareness Communication Ongoing maintenance and review National Credit Regulator - 5 Year Strategic Plan 2018/ /23 93

94 The Accounting Authority is responsible for ensuring that a formal risk assessment is undertaken at least annually for the purpose of making its public statement on risk management. The NCR recognises that the consistent and efficient application of disciplinary measures is an integral component of effective fraud prevention. The NCR will continue to pursue the following steps to expedite the consistent, efficient and speedy application of disciplinary measures: Creating awareness amongst employees of forbidden conduct in terms of the disciplinary code and regular monitoring and review of application of discipline with the objective of improving weaknesses identified. Where managers discipline, the NCR will consider firm action. The management of the NCR will improve awareness and knowledge of the relevant systems, policies and procedures. In the pursuit hereof, the NCR will create awareness of existing and new policies and procedures to ensure that all employees are made aware of, and adequately trained in, the implementation of the policies and procedures relevant to their duties and responsibilities. The line management must be held accountable for complying with, and implementing, the NCR s systems, policies and procedures and for preventing fraud. This will continually be addressed by reviewing job description and performance appraisal processes and aligning this to the entity s strategy. Where managers are consider firm action. The Fraud Prevention Policy, central to the Plan, addresses the stance of the NCR, including the response mechanisms in place to report, investigate and resolve incidents of fraud impacting the NCR. A critical component of the policy addresses the practical execution phases and guidelines for decision-making at different stages of the investigation. The role of the NCR s Deputy Chief Executive Officer (DCEO) includes the ongoing maintenance and review of the Plan, amongst other tasks. Ongoing maintenance includes: Steering and taking responsibility for the Plan; Reviewing and making appropriate amendments to the Code and Fraud Policy; Considering fraud threats to the NCR and making recommendations to other appropriate committees or management; Evaluating fraud reports; Considering criminal activity threatening the NCR and making fraud prevention recommendations with regard to areas for examination; Monitoring action taken to implement recommendations relating to incidents of fraud; Amending the awareness programme as necessary, and implementing the changes; and Ensuring that ongoing communication and implementation strategies are developed and implemented. The Plan will be reviewed on an annual basis, with quarterly implementation and progress reviews. 94 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

95 All reports or allegations received by the DCEO are to be investigated on their merits, with a copy to the Internal Auditor. In the event that there is merit in the allegations, these must be recorded and reported to the CEO and investigated, if the CEO is involved, the allegation must be referred to the Minister of Trade and Industry for a decision. If the person involved is an EXCO member, the allegations must be reported to the Chairperson of the NCR Audit Committee who must decide on the course of action to be taken. The above processes ensure that uninvolved parties are not negatively affected by malicious reports and that the intent to cause such damage is dealt with and disciplinary action taken where necessary Key Strategic Risks The NCR manages the key strategic risks it faces on a regular basis. The continuous review includes the update of both the strategic and operational risks on a periodic basis. The following table provides a summary of the NCR s key strategic risks, as well as the control improvement plan to mitigate the risks. National Credit Regulator - 5 Year Strategic Plan 2018/ /23 95

96 Risk Name Risk Control Residual Risk Action Financial - Monthly variance reports to compare actual vs budget; - Budget mid-term reviews and re-allocation of funds; - Approval of budget by EXCO & Audit and Risk Management Committee; - Invoicing of all registrants a month before fees are due; - Submissions of additional funding requests to the dti; - Prepared and submitted budget - Quarterly update to the Portfolio Committee; - New registration thresholds for credit providers are in place; - New registration fee increases are in place; - PDA interest utilisation policy; - Registration of new entrants is ongoing; decals issued annually upon renewal and not once off; Critical Control improvement action plans: - Continue to engage with the dti for additional funding; - Implementation of imposition of penalties for late renewals; - Finalisation of the proposed Bill to offset enforcement costs against - Proposal on penalty fees for registration. Progress on action plans: - On going engagements with the dti regarding additional funding continue; Bill to offset enforcement costs - ICT Systems for the Implementation of penalties are being developed. Service delivery - Payment of invoices within 30 days; - Entered into MOU with Credit Ombud; - Regular consumer education campaigns; - Regular engagements with provincial consumer protection - Capacity building workshops; - Ongoing improvement on the IT infrastructure; - Ongoing compliance monitoring and enforcement action; - Ongoing training sessions for NCR employees; - External evaluation of the call centre; - Regular engagements with registrants associations; - Regular engagements with the Reserve Bank (SARB); Major Control improvement action plans: - Improvement on ICT infrastructure; - Automated service rating of the call centre agents; - Implementation of disaster recovery plan; - Enter into MOUs with Provincial - Implement case management system for investigations; - Enter into MOUs with Dept of Education, Stats SA, SAPS and SAHRC. 96 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

97 Risk Name Risk Control Residual Risk Action are lodged; - Regular engagements with the media; - Quarterly sessions with the Portfolio and Select Committees; - Procedure manual for invoice payments in place; - Regular engagements with the dti and other government departments; - Alerts and reminders in the Complaints ICT systems Service delivery improvement plan in place; - Centralised ICT services to one service provider; effective contract management; - More desk top compliance conducted; - Commencement of enforcement instituted by various departments; - Establishment of Service Provider panels; - Imbizos in all Provinces; - Service delivery improvement plan implemented; registration; renewals. Progress on action plans: - Ongoing improvement on ICT infrastructure; - Implementation of disaster recovery plan is underway; - Automatic service rating of the call centre agents will form part of the call centre system upgrade. Information Technology - Assessment of the new IT infrastructure and implementation to date; - Off-site storage of backups; - Internal auditors ensure assurance role; Implementation plan documented; - Network infrastructure improved. - Additional servers acquired e.g. SAP, Operational system; - Network monitoring tool has been acquired; - ICT Disaster Recovery Plan and Policy in place; - ICT Steering and Operational committees in place; - Alignment of ICT governance framework; - Business Continuity plan reviewed. - ICT expert as a member of ARMC appointed. Major Control improvement action plans: - Implement the Business Continuity plan for all critical business applications; - To implement the ICT disaster recovery plan; - Recruitment of additional skills; - Implementation of ICT Governance Framework; Service Provider. Progress on action plans: - Implementation of disaster recovery plan is underway; - Implementation of ICT Governance Framework is in progress. National Credit Regulator - 5 Year Strategic Plan 2018/ /23 97

98 Risk Name Risk Control Residual Risk Action Human Resources - HR policies in place; - wellness programmes in place; - Social Committee established; - Work place forum established; - Some vacant positions have been - Implemented the PMS in the whole organisation; - Other HR policies reviewed and approved; - Coaching; - Access to Senior Management; - Provisions of tools of trade. Control improvement action plans: - Engagements with the dti for additional funding to continue in order to employ more staff; - Finding other sources of income more learners; - Training interventions; - Remuneration benchmarking. Progress on action plans: - Engagements with the dti for additional funding continue; - Ongoing training interventions Business Continuity - Risk assessment on security performed; extinguishers; - Information security policy in place; - Insurance cover in place; Disaster Recovery Team established; - CCTV surveillance, Electric fence, perimeter lighting, access control and alarm system are in place; - Security scanner in place; - Request for extension for current premises approved; - Fire drills are conducted; signage in place (OHSA); - Approved Disaster Recovery Plan; - encryption for new laptops; - First Aid Kits available; - NCR has a generator in place topower the whole of NCR; - Medical Aid is compulsory for all employees; - Ongoing data encryption for new laptops; - Software upgrades for all staff; equipment; - DRS - MOU to be signed with the dti; - Implement Server Monitoring and Alert system which will notify if the detection, server power failure, temperature(overheating) etc. Progress on action plans: - Ongoing training for health and Recovery Team; - Implementation of the DRP & Business Continuity plan in progress; security equipment; - Information and physical Security Policy reviewed by State security agency. NCR Security Committee to effect the recommendations of the review. 98 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

99 Items (SO1) Guide 1. Indicator title A report on the study of the impact of affordability assessment regulations on consumers. A study conducted on the affordability assessment regulations. 3. Purpose/importance Understanding the impact of the regulations on consumers and credit providers; and Improving the regulations 4. Source/collection of data Affordability assessment regulations 5. Method of calculation A report on the study of the impact of affordability assessment regulations on consumers with recommendations 6. Data limitations Expertise Unclear TOR 7. Type of indicator Output 8. Calculation type NA 9. New indicator New 10. Reporting cycle Annually 11. Desired performance Improved compliance with the Act 12. Indicator responsibility Manager: Credit Provider Compliance National Credit Regulator - 5 Year Strategic Plan 2018/ /23 99

100 Items (SO1) Guide 1. Indicator title Number of investigations/compliance monitoring/ audits/raids/complaints evaluation conducted to enforce regulations. Enforcement of the Act through investigations, compliance monitoring and complaints evaluations. 3. Purpose/importance 4. Source/collection of data 5. Method of calculation To decrease the levels of non-compliance with provisions of the Act. Referrals from other government entities Proactive sourcing of information Complaints received Anonymous tip-offs Media reports Consumer Tribunal (NCT) Copies of compliance notices issued (signed compliance notices) Investigations reports Complaints evaluations Tip-off anonymous report 6. Data limitations Tribunal and Tribunal rules 7. Type of indicator Output 8. Calculation type Numbers 9. New indicator Continues with changes from the previous year 10. Reporting cycle Quarterly and annually 11. Desired performance Improved compliance with the Act and consumer redress 12. Indicator responsibility Managers: Investigations and Enforcement, Complaints and CP Compliance 100 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

101 Items (SO1) Guide 1. Indicator title Enforcement action taken on a percentage (%) of investigations/compliance monitoring/audits/raids/ complaints evaluations conducted, where necessary for the whole year. Taking enforcement action against alleged non-compliance with the Act. 3. Purpose/importance To decrease the levels of non-compliance with provisions of the Act. 4. Source/collection of data 5. Method of calculation Investigation reports Compliance monitoring reports Media reports Complaints evaluation reports Total number of investigations/compliance monitoring/audits/raids/complains evaluations conducted for the whole year (where contraventions of the Act were found) Total number of investigations/compliance monitoring/ audits/raids/evaluation conducted for the whole year = Total percentage (%) of enforcement action taken 6. Data limitations Budget, resources and capacity 7. Type of indicator Output 8. Calculation type Percentages and numbers 9. New indicator Continues with changes from previous year 10. Reporting cycle Quarterly and annually 11. Desired performance Improved compliance with the Act and consumer redress 12. Indicator responsibility Managers: Investigations and Enforcement, Complaints and CP Compliance National Credit Regulator - 5 Year Strategic Plan 2018/ /23 101

102 Items (SO1) Guide 1. Indicator title A report on the impact study of the effect of total cost of credit and credit life insurance regulations on consumers. A study conducted on the effect of total cost of credit and credit life insurance regulations. 3. Purpose/importance Understanding the impact of the regulations on consumers and credit providers; and Improving the regulations 4. Source/collection of data Affordability assessment regulations 5. Method of calculation A report on the impact study of the effect of total cost of credit and credit life insurance regulations on consumers with recommendations. 6. Data limitations Expertise Unclear TOR 7. Type of indicator Output 8. Calculation type NA 9. New indicator New 10. Reporting cycle Annually 11. Desired performance Improved compliance with the Act 12. Indicator responsibility Manager: Statistics & Research 102 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

103 Items (SO2) Guide 1. Indicator title Number of credit provider investigations/ compliance monitoring/audits/raids/complaints evaluations relating to reckless lending and/or collection of prescribed debt conducted to enforce regulations. To decrease the levels of non-compliance with provisions of the Act. 3. Purpose/importance To combat reckless credit granting and over-indebtedness. 4. Source/collection of data 5. Method of calculation 6. Data limitations Referrals from other government entities Proactive sourcing of information Complaints received Anonymous tip-offs Media reports Consumer Tribunal (NCT) Copies of compliance notices issued (signed compliance notices) Investigations reports Complaints evaluations Tip-off anonymous report Tribunal and Tribunal rules 7. Type of indicator Output 8. Calculation type Percentages and numbers 9. New indicator Continues without change from previous year 10. Reporting cycle Quarterly and Annually 11. Desired performance 12. Indicator responsibility Improved compliance with the Act and consumer redress Managers: Investigations and Enforcement, Complaints and CP Compliance National Credit Regulator - 5 Year Strategic Plan 2018/ /23 103

104 Items (SO2) Guide 1. Indicator title Enforcement action taken on a percentage (%) of investigations/compliance monitoring/audits/raids/ complaints evaluations relating to reckless lending and or collection of prescribed debt where necessary for the whole year. Enforcement of regulations through investigations 3. Purpose/importance 4. Source/collection of data 5. Method of calculation Taking enforcement action against alleged noncompliance with the Act. To decrease the levels of non-compliance with provisions of the Act. Investigation reports Compliance monitoring reports Media reports Complaints evaluation reports Total number of investigations/compliance monitoring/audits/raids/complains evaluations conducted for the whole year (where contraventions of the Act were found) Total number of investigations/compliance monitoring/ audits/raids/evaluation conducted for the whole year Total percentage (%) of enforcement action taken 6. Data limitations Tribunal and Tribunal rules 7. Type of indicator Output 8. Calculation type Percentages and numbers 9. New indicator Continues with changes from previous year 10. Reporting cycle Quarterly and annually 11. Desired performance 12. Indicator responsibility Improved compliance with the Act and consumer redress Managers: Investigations and Enforcement, Complaints and CP Compliance 104 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

105 Items (SO2) Guide 1. Indicator title Number of multimedia awareness campaigns (radio/tv interviews/news print/community outreach programmes/social media) conducted on deceptive and unfair practices and consumer rights. Improving education awareness on the deceptive and unfair credit practices and consumer rights. 3. Purpose/importance 4. Source/collection of data 5. Method of calculation To educate and create public awareness for consumers on deceptive and unfair credit practices and consumer rights through multimedia awareness campaigns. Complaints received; Investigations conducted; Statistics; Media; Stakeholder engagements. Media briefs; News Clippings; Interviews clips; Campaign reports; 6. Data limitations Training, capacity and funding 7. Type of indicator Output 8. Calculation type Percentages and numbers 9. New indicator Continues with changes from previous year 10. Reporting cycle Quarterly and annually 11. Desired performance To increase the level of public awareness on deceptive and unfair credit practices. 12. Indicator responsibility Manager: Education & Communications National Credit Regulator - 5 Year Strategic Plan 2018/ /23 105

106 Items (SO3) Guide 1. Indicator title Number of credit bureaus monitored and disputes evaluated. To monitor compliance by credit bureaus. 3. Purpose/importance Increase compliance by credit bureaus in respect of their obligations in terms of the NCA. 4. Source/collection of data Form 43 annual reports Credit bureau audited reports Compliance monitoring plan Media reports Complaints evaluation reports 5. Method of calculation 6. Data limitations Compliance requirements letter sent to credit bureaus requesting information; Proof of compliance from credit bureaus; Industry readiness System developments either by credit bureaus or industry. 7. Type of indicator Output 8. Calculation type Percentages and numbers 9. New indicator Continues with changes from previous year. 10. Reporting cycle Quarterly and Annually 11. Desired performance Improved compliance with the Act 12. Indicator responsibility Manager: Credit Bureau Compliance 106 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

107 Items (SO3) Guide 1. Indicator title Enforcement action taken on a percentage (%) of monitored credit bureaus where necessary. Taking enforcement action on non-compliant credit bureaus. 3. Purpose/importance Increase compliance by credit bureaus in respect of their obligations in terms of the NCA. 4. Source/collection of data Form 43 annual reports; Proactive sourcing of information; Complaints received; Anonymous tip-offs; Media reports. 5. Method of calculation Total number of monitored non-compliant credit bureaus Total number of monitored credit bureaus = Total percentage (%) of non-compliant credit bureaus 6. Data limitations Industry readiness System developments either by credit bureaus or industry. 7. Type of indicator Output 8. Calculation type Percentages and numbers 9. New indicator Continues with changes from previous year. 10. Reporting cycle Quarterly and Annually 11. Desired performance Improved compliance with the Act 12. Indicator responsibility Manager: Credit Bureau Compliance National Credit Regulator - 5 Year Strategic Plan 2018/ /23 107

108 Items (SO3) Guide 1. Indicator title Number of audited reports submitted by registered credit bureaus and enforcement action taken where necessary. To monitor compliance by credit bureaus. 3. Purpose/importance Increase compliance by credit bureaus in respect of their obligations in terms of the NCA. 4. Source/collection of data Form 43 annual reports Credit bureau audited reports Compliance monitoring plan 5. Method of calculation 6. Data limitations Compliance requirements letter sent to credit bureaus requesting information; Industry readiness System developments either by credit bureaus or industry. 7. Type of indicator Output 8. Calculation type Percentages and numbers 9. New indicator Continues with changes from previous year. 10. Reporting cycle Quarterly and Annually 11. Desired performance Improved compliance with the Act 12. Indicator responsibility Manager: Credit Bureau Compliance 108 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

109 Items (SO3) Guide 1. Indicator title % of received credit bureau audited reports for action taken where necessary. The indicator seeks to highlight non compliances 3. Purpose/importance To decrease the levels of non-compliance with provisions of the Act. 4. Source/collection of data Credit bureau audited reports Form 43 annual reports 5. Method of calculation Received credit bureaus audited reports Received completed Form 43 returns from credit bureaus Referral memos to investigations department Compliance notices issued; Annual compliance review reports; Approved internal memos. 6. Data limitations 7. Type of indicator Output 8. Calculation type Percentages and numbers 9. New indicator Continues without change from previous year. 10. Reporting cycle Quarterly and Annually 11. Desired performance Improved compliance with the Act 12. Indicator responsibility Manager: Credit Bureau Compliance National Credit Regulator - 5 Year Strategic Plan 2018/ /23 109

110 Items (SO4) Guide 1. Indicator title % of uptime availability of the legacy ICT (Registrations and Complaints) systems. The indicator seeks to highlight the system availability 3. Purpose/importance To assess the down time and uptime availability of the system 4. Source/collection of data Report from the systems. 5. Method of calculation ICT network monitoring report (Registrations and Complaints ICT system) 6. Data limitations Non commitment of service provider, stakeholders Out-dated ICT hardware. Capacity 7. Type of indicator Output 8. Calculation type Percentage 9. New indicator Continues without change from previous year. 10. Reporting cycle Quarterly reports 11. Desired performance 12. Indicator responsibility 110 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

111 Items (SO4) Guide 1. Indicator title Approved service delivery improvement plan of the NCR 3. Purpose/importance To improve service delivery 4. Source/collection of data Report from the systems Performance information reports 5. Method of calculation Signed SDIP document 6. Data limitations Capacity Expertise & budget Resources (ICT systems) Cooperation from the SDIP task team 7. Type of indicator Output 8. Calculation type NA 9. New indicator New 10. Reporting cycle Quarterly reports 11. Desired performance 12. Indicator responsibility Manager: Complaints department National Credit Regulator - 5 Year Strategic Plan 2018/ /23 111

112 Items (SO5) Guide 1. Indicator title % of new applications registered in the consumer credit market within 10 business days of receipt of signed proposed conditions and payment of registration fees. registration process of persons and entities. 3. Purpose/importance 4. Source/collection of data Registration fees collected; Signed proposed conditions of registration received. 5. Method of calculation Total number of applications registered within 10 business days Total number of applications registered = Total percentage (%) of new applications registered 6. Data limitations Training, capacity and ICT systems 7. Type of indicator Output 8. Calculation type Percentages and numbers 9. New indicator Continues without change from the previous year. 10. Reporting cycle Quarterly and annually 11. Desired performance Increased number of registered persons and entities leading to job creation and establishment of SMMEs. 12. Indicator responsibility Manager: Registrations 112 National Credit Regulator - 5 Year Strategic Plan 2018/ /23

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