NATIONAL CREDIT REGULATOR   Briefing by National Credit Regulator on its Annual Report 2016/17 Presentation to Portfolio Committee on Trade and Industry Presented by: Ms Nomsa Motshegare, NCR CEO Date: 3 October 2017

OVERVIEW OF PRESENTATION NCR Strategic Objectives 2016/17 New Regulations Regular Engagements with Key Stakeholders Key Highlights – 2016/17 Performance Information Tables Financial Information – Annual Report 2016/17 Audit Outcomes 2016-2017 First quarter performance Report 2017/18 Financial Performance- Q1 - 2017/18

THE NCR STRATEGIC OBJECTIVES FOR 2016/17 To promote responsible credit granting: Improve compliance with affordability assessment regulations. Increase compliance with regulations pertaining to total cost of credit. To protect consumers from abuse and unfair practices in the consumer credit market and address over-indebtedness: Conduct reckless lending investigations & take enforcement action where necessary. Improve awareness on deceptive and unfair credit practices. To enhance the quality and accuracy of credit bureau information: Increase compliance by credit bureaus in respect of consumer credit information. To improve NCR’s operational effectiveness: Improve operational efficiency through automated processes. Service delivery improvement plan. To ensure effective implementation of the National Credit Amendment Act (NCAA): Improve awareness and compliance. Conduct special investigations & take enforcement action taken where necessary

NEW REGULATIONS Limitations on fees and interest rate; Determination of thresholds for credit provider registration; Determination of application, registration and renewal fees;

REGULAR ENGAGEMENTS WITH KEY STAKEHOLDERS Community Outreach Programmes (Imbizos) with Traditional Authorities: Ga-dikgale (Limpopo), Duncan Village (E/Cape), Gopane and Mabiskraal (N/West), Matsulu and Lillydale (Mpumalanga). “Know your credit status” consumer awareness campaigns: NCR partnered with Credit Bureau Association & Credit Bureaus. The Credit Industry Forum (CIF) met on a quarterly basis. The NCR held regular meetings: industry associations, registrants, magistrates, local regulators, local and foreign investors. NCR participated in the joint African Dialogue conference together with NCT, NCC, CIPC and NRCS: Collaboration on consumer protection issues & information sharing.

KEY HIGHLIGHTS - 2016/17 Enforcement: Referred 39 matters to the NCT: Banks, Retailers, small credit providers & debt counselors; Referrals to the NCT e.g. Lewis Stores, Allied Capital and Wesbank Main alleged contraventions: Unlawful extended warranties and club fees; the so-called “Pawn your car and still drive it” scheme; and unlawful debt enforcement. Raids: Numerous raids were conducted on microlenders who retain consumers’ bank cards and identity documents in Gauteng (Hammanskraal, Vanderbjlpark, Vereeniging & Soweto); Free State (Theunissen); Northern Cape (Kimberly, Barkley West and surrounding areas) and Limpopo (Makhado) provinces.

KEY HIGHLIGHTS 2016/17 - cont. Judgement handed down against Lewis Stores The NCR, referred Lewis Stores Ltd (Lewis Stores) and Monarch Insurance Company Ltd (Monarch) to the NCT. Issues uncovered related to the: sale of loss of employment insurance as part of credit insurance to pensioners and self-employed consumers; R67m refunds to consumers; and sale of occupational disability insurance to pensioners and people with disabilities. Lewis is challenging this on a technical point. The NCT judgement, agreed with the NCR’s submissions and has: interdicted Lewis Stores from engaging in this conduct in future; Ordered that an independent audit be conducted on all credit agreements entered into by Lewis Stores since 2007; and That all affected consumers, identified in the audit, be reimbursed the premiums paid for this insurance. Lewis Stores has since appealed the judgement of the NCT to the High Court.

KEY HIGHLIGHTS 2016/17 - cont. PDA distribution & Refunds to consumers: Payment Distribution Agents distributed a total of R8.5 billion to credit providers; Refunds  to consumers as a result of successful enforcement, complaints resolution and compliance monitoring are >R101 million Education and Communication: More than 490 workshops, exhibitions, activations and roadshows. Community outreach programmes in rural areas (imbizos). ‘’Know your credit status’’ campaigns. NCR obtained an equivalent of R254 million in media coverage; The NCR was featured in 456 radio/TV interviews and newsprint. Free weekly slots on community radio stations: Sefako Makgatho, University FM, Energy FM, Mogale FM, Qwaqwa FM, Radio Zeerust, Lekoa Community Radio, Hlanganani FM, Greater Tzaneen FM, Unisa FM and Naledi Community Radio.

ANNUAL REPORT 2016/17 Annual Report 2016/17 Performance Tables

SO1: to promote responsible credit granting  Output  Performance measure or indicator  Actual achievement 2015/2016 Planned target 2016/2017  Actual achievement Improve compliance with affordability assessment regulations. Number of provinces in which credit providers’ compliance was monitored in respect of affordability assessment regulations and enforcement action taken where necessary. 9 provinces visited to monitor credit provider compliance. Sixty-nine (69) credit providers were referred for investigation. Credit provider compliance monitored in 9 provinces. Enforcement action taken on non- compliant credit providers where necessary. Compliance: Achieved Monitoring conducted in 9 provinces. GP, N/W and E/C provinces were monitored more than once. Enforcement:Achieved Letters of instructions were sent to various credit providers covering the 9 provinces.

SO1: to promote responsible credit granting - cont.  Output  Performance measure or indicator  Actual achievement 2015/2016  Planned target 2016/2017  Actual achievement Increase compliance with provisions pertaining to the total cost of credit. Number of investigations conducted to enforce regulations and enforcement action taken where necessary. 32 investigations concluded. 15 matters referred to the NCT, 1 compliance notice issued and 4 matters were closed as no contraventions found. The rest of the matters are WIP and will be dealt with in the next financial year. 40 investigations conducted and enforcement action taken where necessary. Investigations: Exceeded 52 investigations concluded. Enforcement: Not achieved 6 matters referred to the NCT and courts, 1 matter was closed as no contraventions were found. The rest of the matters are WIP and will be dealt with in the next financial year. Reason for Variance: Focus was given on finalizing matters from the previous financial year Corrective Action A new enforcement approach to fast track enforcement action has been adopted.

SO2: to protect consumers from abuse and unfair practices in the consumer credit market and address over-indebtedness  Output Performance measure or indicator  Actual achievement 2015/2016  Planned target 2016/2017  Actual achievement Conduct reckless lending investigations and enforcement action taken where necessary. Number of credit providers investigated and appropriate enforcement action taken where necessary. 56 Investigations on Reckless lending completed. 8 matters were referred to the NCT, 4 matters were closed as no contraventions were found. The rest of the matters are still WIP and will be dealt with in the next financial year. 60 investigations conducted and enforcement action taken where necessary. Investigations: Exceeded 61 Investigations on Reckless lending completed. Enforcement: Not achieved 10 matters were referred to the NCT, 4 matters were closed as no contraventions were found. The rest of the matters are still WIP and will be dealt with in the next financial year. Reason for Variance: Focus was given on finalizing matters from the previous financial year. Corrective Action A new enforcement approach to fast track enforcement action has been adopted.

SO2: to protect consumers from abuse and unfair practices in the consumer credit market and address over-indebtedness -cont.  Output Performance measure or indicator Actual achievement 2015/2016  Planned target 2016/2017  Actual achievement Improve awareness on deceptive and unfair credit practices. Number of multimedia awareness campaigns (radio/TV interviews/news print) conducted on deceptive and unfair credit practices. None (new target for 2016/2017). 30 of any of the following: -Radio -TV interviews -News print on deceptive and unfair credit practices. Exceeded 42 multimedia campaigns conducted. Reason for Variance: Weekly interviews were offered by different radio stations.

SO3 : to enhance the quality and accuracy of credit bureau information.  Output  Performance measure or indicator  Actual achievement 2015/2016  Planned target 2016/2017  Actual achievement Increase compliance by credit bureaus in respect of consumer credit information. . Number of credit bureaus monitored and enforcement action taken where necessary. Investigations into two credit bureaus completed. (Compuscan and Robertson). Enforcement action by way of instructional letters was sent to both entities. 6 credit bureaus monitored and enforcement action taken where necessary. Monitoring: Exceeded 15 credit bureaus monitored and or investigated. Reason for Variance: Due to policy change from on-site visits to desk top monitoring. The department managed to monitor more credit bureaus. Enforcement: Achieved Out of 15 credit bureaus monitored/ investigated, 4 were operating as unregistered entities and subsequently registered. 11 credit bureaus were found to be compliant.

SO3 : to enhance the quality and accuracy of credit bureau information – cont.  Output Performance measure or indicator  Actual achievement 2015/2016  Planned target 2016/2017  Actual achievement Increase compliance by credit bureaus in respect of consumer credit information. Number of credit bureau audited reports reviewed and enforcement action taken where necessary. 14 credit bureau audited reports reviewed. 6 entities were referred for investigation in the 1st quarter. All registered credit bureaus audited reports reviewed and enforcement action taken where necessary. Achieved Auditor’s reports from credit bureaus were reviewed. Enforcement/ Corrective: Letters on instruction were issued to all credit bureaus for risk mitigation plans to be put in place and bureaus complied. There was no need for enforcement action to be taken.

SO4 : to improve NCR’s operational effectiveness.  Output  Performance measure or indicator  Actual achievement 2015/2016  Planned target 2016/2017  Actual achievement Improve operational efficiency through automated processes % of uptime availability of the ICT (Registrations and Complaints) systems. On average - 99.5 % of uptime availability of the ICT system. 96% uptime of the ICT system. Exceeded. 100 % of uptime availability of the ICT system. Reason for Variance: The target was exceeded because of the network monitoring tool that enables ICT department to predict network failures in order to avoid downtime. Service delivery improvement plan (SDIP). SDIP approved. None (new target for 2016/2017). SDIP 2016-2019 approved. Achieved SDIP approved by the Accounting Authority.

SO5 : to ensure effective implementation of the National Credit Act as amended (NCA).  Output  Performance measure or indicator  Actual achievement 2015/2016  Planned target 2016/2017  Actual achievement Improve awareness and compliance. Number of workshops conducted with relevant stakeholders on NCA. 43 workshops 45 workshops with relevant stakeholders Exceeded. 46 workshops were conducted with relevant stakeholders Reason for Variance: Received more invites & initiated more w/shops. Number of multimedia awareness campaigns (radio/TV interviews/news print) conducted on NCA. 58 multimedia awareness campaigns. 50 of any of the following: Radio TV interviews News print Exceeded 58 multimedia awareness campaigns conducted. Weekly interviews were offered by different radio stations. Number of outreach programmes and exhibitions (mall activations/ Outside Broadcast (OB)/ Road shows/ Imbizos) conducted on NCA. 12 exhibitions conducted in peri-urban and rural areas. 11 of any of the following: Mall activations/ exhibitions/ OB/ Road shows/ Imbizos in peri urban and rural areas. 15 outreach programmes were conducted. Received more invites & initiated more programmes.

SO5 : to ensure effective implementation of the National Credit Act as amended (NCA). Output  Performance measure or indicator  Actual achievement 2015/2016  Planned target 2016/2017 Actual achievement Conduct special investigations and enforcement action taken where necessary. Number of special investigations conducted and enforcement action taken where necessary. Three (3) raids were conducted in the W/C & Limpopo provinces. Enforcement action was taken on 2 raids in which criminal cases were opened with the police. The following special investigations conducted: Raids in four (4) provinces; Achieved Raids were conducted in 4 provinces (N/C, GP, Limpopo & F/S). Enforcement: Raids Criminal cases opened with police in all 4 provinces. 8 compliance notices issued to unregistered new entrants & 16 matters closed as no contraventions found. 4 prescribed debt investigations; 4 investigations conducted Enforcement: prescribed debt: Partially achieved 2 matters closed as no contraventions found. The other 2 still WIP and will be dealt with in the next financial year. Reason for Variance: Focus given on finalizing matters from previous financial year. Corrective Action A new enforcement approach to fast track enforcement action has been adopted.

SO5 : to ensure effective implementation of the National Credit Act as amended (NCA) – cont.  Output  Performance measure or indicator  Actual achievement 2015/2016  Planned target 2016/2017  Actual achievement Conduct special investigations and enforcement action taken where necessary. Number of special investigations conducted and enforcement action taken where necessary. Three (3) raids were conducted in the W/C & Limpopo provinces. Enforcement action was taken on 2 raids in which criminal cases were opened with the police. Four (4) Garnishee order investigations Exceeded 11 investigations conducted. Reason for variance: More referrals were received from the Complaints. In addition, more desktop compliance monitoring was done. Enforcement: Garnishee: Partially achieved 2 matters were referred to the NCT. The rest of the matters are still WIP and will be dealt with the next financial year. Reason for Variance: Focus was given on finalizing matters from the previous financial year. Corrective Action A new enforcement approach to fast track enforcement action has been adopted.

SO5 : to ensure effective implementation of the National Credit Act as amended (NCA) – cont.  Output Performance measure or indicator  Actual achievement 2015/2016  Planned target 2016/2017  Actual achievement Conduct special investigations and enforcement action taken where necessary. Number of special investigations conducted and enforcement action taken where necessary. Three (3) raids were conducted in the W/C & Limpopo provinces. Enforcement action was taken on 2 raids in which criminal cases were opened with the police. Unregistered new entrants (credit providers ADRs and PDAs) in 4 provinces and take enforcement action where necessary. Achieved *Investigations conducted in 2 cities/towns in the first half of the financial year. The balance conducted in the 2nd half of the financial year, in KZN and GP provinces. * Target changed during mid-year review from cities/ towns to provinces. Enforcement: Unregistered: Partially achieved 8 compliance notices issued to unregistered new entrants in KZN, GP & N/C provinces. 1 matter relating to GP province was closed as no contraventions found. Reason for Variance: Focus was given on finalizing matters from the previous financial year. Corrective Action A new enforcement approach to fast track enforcement action has been adopted.

ANNUAL REPORT 2016/17 - FINANCIAL INFORMATION   2016/17 2015/16 2014/15 (Actual) (Budget) (Actual) R Total Income 127 183 606 120 406 069 107 398 274 103 298 980 Expenditure (120 833 723) (118 898 987) (114 196 671) (121 739 257) Surplus/(Deficit) for the year incl non-cash items 6 349 883 1 507 082 (6 798 397) (14 122 499) Capital Expenditure 6 328 596 2 815 338 4 317 778 Total Assets - 80 635 055 66 053 390 58 994 538 Total liabilities (75 377 650) (62 303 067) (48 445 818) Net asset value 5 257 405 3 750 323 10 548 720

AUDIT OUTCOMES 2016-2017 Summary of previous audit outcomes Unqualified audit opinion with findings Cause: Technical - material adjustment on the PDA Interest Utilisation - Accounting treatment: GRAP 1 vs GRAP 23

AUDIT OUTCOMES 2016-2017 2016-2017 Audit Findings: Plan of Action

FIRST QUARTER PERFORMANCE REPORT QUARTER (1) REPORT 2017/18

QUARTER (1) REPORT 2017/18 Output 2017/18 Annual Target 1st Quarter milestones Actual Achievement   SO 1: To promote responsible credit granting Improve compliance with affordability assessment regulations Credit provider (CP) compliance monitored in 9 provinces. Enforcement action taken on non-compliant credit providers where necessary. 1 province. Exceeded: CPs monitored in GP, KZN & W/C provinces. Letters of instructions sent to 96% CPs Reason for variance: Due to policy change from on-site visits to desktop monitoring. The department managed to monitor more CPs. Increase compliance with provisions pertaining to total cost of credit. 50 investigations conducted and enforcement action taken where necessary. 10 investigations. 14 investigations Additional desktop compliance monitoring informed the necessary investigations to be conducted.

QUARTER (1) REPORT 2017/18 - cont. Output 2017/18 Annual Target 1st Quarter milestones Actual Achievement SO 2: To protect consumers from abuse and unfair practice in the consumer credit market and address over-indebtedness. Conduct reckless lending investigations and enforcement action taken where necessary. 70 credit provider investigations conducted and enforcement action taken where necessary. 15 investigations.   Achieved: 15 investigations conducted. Improve awareness on deceptive and unfair credit practices. 35 of any of the following: Radio/TV interviews & news print on deceptive and unfair credit practices. 7 of any of the following: Radio/ TV interviews & news print. Exceeded: 8 radio interviews conducted. Reason for variance: Negotiated with community radio stations to cover deceptive & unfair credit practices. There was more interest on the topic than anticipated.

QUARTER (1) REPORT 2017/18 - cont. Output 2017/18 Annual Target 1st Quarter milestones Actual Achievement SO 3: To enhance the quality and accuracy of credit bureau information. Increase compliance by credit bureaus in respect of quality and accuracy of consumer credit information.   8 credit bureaus (CBs) monitored. Enforcement action taken where necessary. Monitor 2 credit bureaus. Exceeded: 5 CBs monitored. All bureaus were found to be compliant. Reason for variance: Due to policy change from on-site visits to desktop monitoring. The department managed to monitor more CBs. Review 100% of audited reports from credit bureaus and enforcement action taken where necessary. Achieved: 100% audited reports from CBs reviewed. An instructional letter was sent to one CB.

QUARTER (1) REPORT 2017/18 - cont. Output 2017/18 Annual Target 1st Quarter milestones Actual Achievement   SO 4: To improve NCR’s operational effectiveness. Improve operational efficiency through automated processes. 97% uptime of the ICT system. Exceeded: 99.99% of uptime availability of the IT system. Reason for variance: The target was exceeded because of the network monitoring tool that enables ICT to predict network failures in order to avoid downtime. Improve service delivery regarding written enquiries. All written enquires received and processed within average of 10 business days by 31 March 2018. All written enquiries received and processed within an average of 11 business days. Achieved:

QUARTER (1) REPORT 2017/18 - cont. Output 2017/18 Annual Target 1st Quarter milestones Actual Achievement SO 5: To ensure effective implementation of the National Credit Amendment Act . Improve awareness and compliance. 50 workshops with relevant stakeholders. 12 workshops. Achieved: 12 workshops conducted. 55 of any of the following: Radio/TV interviews/News print. 13 Radio /TV interviews/ News print. 13 radio interviews conducted. 15 of any of the following: mall activations/exhibitions/ OB/ Road shows/Imbizos on peri urban and rural areas. 4 of any of the ff.: mall activations/ exhibitions/OB/ Road shows/ Imbizos on peri urban and rural areas. Exceeded: 5 exhibitions were conducted. Reason for variance: Received more invites from stakeholders.

QUARTER (1) REPORT 2017/18 - cont. Output 2017/18 Annual Target 1st Quarter milestones Actual Achievement SO 5:To ensure effective implementation of the National Credit Amendment Act. Improve compliance by conducting special investigations/audits and taking enforcement action where necessary. Conduct special investigations/ audits in four (4) provinces in any of the following:   Prescribed debt/ Garnishee orders/ Unregistered new entrants (credit providers, Alternative Dispute Resolution Agents (ADRAs) and PDAs) and enforcement action where necessary. 1 province Exceeded: Investigations into unregistered (ADRAs) were conducted in 3 provinces.(GP, WC, & NW provinces). Reason for variance: Increase in consumer awareness resulted in increase of consumer complaints against unregistered ADRAs.

QUARTER (1) REPORT 2017/18 - cont. Output 2017/18 Annual Target 1st Quarter milestones Actual Achievement SO 6:To facilitate efficient registration of persons and entities. Improve efficiency in the registration process of persons and entities. 85 % of applications registered within 10 business days of receipt of signed proposed conditions and payment of registration fees. Exceeded: (CPs): 99% CPs registered. 96% DCs registered. Reason for variance: Improved turnaround times as a result of building efficiencies in processing applications.

1ST QUARTER - 2017/18 FINANCIAL PERFORMANCE   ACTUAL BUDGET VARIANCE ANNUAL BUDGET Q1 (Apr - Jun 2017) 2017- 2018 R % Fees from registrants 2 296 340 4 139 178 (1 842 838) -44.5% 55 051 554 DTI Transfers 43 834 000 0% 65 727 000 Other Income 1 059 857 1 574 600 (514 743) -32.6% 3 000 000 TOTAL INCOME 47 190 197 49 547 778 (2 357 581) -4.8% 130 717 713 Personnel costs 18 509 562 19 406 362 896 800 4.6% 83 247 690 Programme costs 2 822 643 4 566 544 1 743 901 38.2% 18 783 096 Administrative costs 5 738 420 5 518 617 (219 803) -3.9% 21 914 248 OPERATING EXPENDITURE incl non-cash 27 070 625 29 491 523 2 420 898 8.2% 123 945 034  NET SURPLUS/(DEFICIT) 20 119 572 20 056 255 (63 317) -0.3% CAPITAL EXPENDITURE 1 242 912 6 772 679 5 529 767 81.6%

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