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Following the accusation that the SA Bureau of Standards (SABS) has lost the country at least R4 billion a year in exports in the manufacturing and engineering sectors alone, Trade and Industry Minister Rob Davies has given the SABS board a notice of intention to suspend them and to place the entity under administration.

SA trade mission to Kenya and Tanzania plannedDavies will be examining other allegations levelled at the SABS, including favouritism of a Gupta company, severe underperformance and general dysfunction. Davies’s notice was based on the SABS’s failure to act timeously on an irregular certificate of approval issued for noncompliant “sub-standard” coal from a Gupta-owned Brakfontein mine in August 2015.

The subsidiary that issued the certificate, SABS Commercial, was allegedly established illegally as it did not get the required authorisation from the finance minister, as required by the Public Finance Management Act. According to SABS chairman Jeff Molobela, however, SABS Commercial had received the required approval from then finance minister Trevor Manuel in 2006 and that it had been legally constituted.

According to Davies, the SABS lost 1 051 customers between 2015/16 to end-April 2018, resulting in a financial loss of R50 million. The peak in customer cancellations was in the 2016-17 financial year and was due to customers cancelling their permits and certificates with the SABS.

Michael Ade, chief economist at the Steel and Engineering Industries Federation of Southern Africa Seifsa), says the SABS’s failures have increased the cost of doing business and impeded industrial and export efforts. Fellow Seifsa economist Marique Kruger adds that the lack of testing and certification by the SABS within the required time frames is a concern, as certification is often needed for products to be sold locally and internationally.

“Trade deals delayed or cancelled due to a lack of testing hit smaller businesses the hardest and caused a loss of billions in exports a year in the manufacturing and engineering sectors. The impact on the domestic production value chain is also huge,” she says.

SABS CEO Boni Mehlomakulu has responded by saying that the issues affecting industry are inherent in the policy which emerged from the 2004 National Economic Development and Labour Council (Nedlac) report, titled Modernising the South African Technical Infrastructure. Nedlac agreed that the SABS should split into a commercial testing and certification entity, and its statutory standards setting body should be funded by government.

According to Mehlomakulu, certain companies required a test once a year, and the SABS was expected to maintain the facilities and retain the expertise to conduct those tests, yet it was still required to be profitable. She adds that the department is not supporting its own policy, and blamed it for the R50 million loss, saying that the department pulled R55 million from its budget at short notice, so the loss was budgeted for and the SABS’ commercial arm was having to fund its statutory entity.

Image Credit: Flickr/GovernmentZA

https://www.flickr.com/photos/governmentza/25857975565

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