Sub-Committee: Public Protector Report on Toyota Quantum Panel Vans: engagement with NAAMSA, BASA & RTMC

Meeting report

Opening Remarks by the Chairperson

The Chairperson opened the virtual meeting, first welcoming Members of the Subcommittee. He asked if the meeting could start two minutes earlier since everyone was present in the meeting.

He said that the Subcommittee would look at illegal conversion of panel vans into minibus taxis among others. He welcomed Mr Mikel Mabasa, CEO of the National Association of Automobile Manufacturers of South Africa (NAAMSA), and the team from NAAMSA. He asked the CEO to introduce the team and deliver the presentation. He said since the time was limited, it was better to spend more time on engagement rather than on the preliminaries. NAAMSA was invited because it is an interested party in the matter that was dealt with by the Public Protector. This is an inquisitorial Subcommittee to gather facts since the Public Protector may have had limitations of time. The Portfolio Committee on Transport needed to do more, since the practice that was investigated by the Public Protector is continuing. The Committee wants to get to the bottom of the matter. NAAMSA is among the group of stakeholders that have been invited. The Subcommittee will later make recommendations to the main Portfolio Committee.

Briefing by the National Association of Automobile Manufacturers of South Africa (NAAMSA)

Mr Mikel Mabasa, CEO, National Association of Automobile Manufacturers of South Africa (NAAMSA), thanked the Chairperson for the invitation to discuss this issue, as it is very important to the industry. He said since it was International Women’s Day, he decided to come to the Committee with a women-delegation. He introduced Ms Sharon Modiba, Executive Manager: Economic Policy and Data Management Solutions, and Ms Shinny Gobiyeza, Executive Manager: Corporate Relations (both from NAAMSA).

NAAMSA said that it represents independent companies and thrives to comply with South African laws and other international regulations. The association has 48 full members, including vehicle manufacturing brands, local manufacturers, importers, and commercial dealerships. The South African automotive industry contributes 6.4% of Gross Domestic Product (GDP), not including the entire value chain such as banks and other independent service providers who also contribute indirectly through vehicle finance. About 64% of production in the industry is exported around the world to more than 151 destinations.

NAAMSA is aware of the illegal conversion following various meetings facilitated by Department of Transport (DoT) from 2009. The DoT specifically raised the matter with Toyota as the market leader in the taxi industry. Unfortunately, other brands were not engaged to get their views on the illegal conversions. NAAMSA represents thirteen manufacturers, not just Toyota; these include JMC, Ford, Hyundai, KIA, Mahindra, and Volkswagen (VW). These should have been engaged too. Toyota does not approve the illegal conversion, and NAAMSA does periodic inspections of their manufacturing process. More than 5 000 panel vans were sold in the last twelve months. Legal conversion is part of the manufacturing process, provided that the National Regulator for Compulsory Specifications (NRCS) approves it through homologation requirements. There is rigorous testing before converting a goods-vehicle into a passenger-carrying vehicle for safety purposes. If the regulator has not homologated the vehicle, it cannot be converted.

NAAMSA members also interact with Government departments such as the Department of Health to convert panel vans into ambulances. All manufacturers participating in RT57 are registered and compliant. NAAMSA has participated in the stakeholder technical task team committee led by DoT since 2009, to understand the size of the challenge and what interventions can be made. No stakeholder engagements were held in the last four years. All legal conversions done through NRCS reflect on the National Traffic Information System (NaTIS).

NAAMSA does not have access to personal data of people who buy vehicles. NAAMSA members do not sell the illegally converted vehicles, as they conform to the code of conduct. NAAMSA is concerned about the illegal conversions because road safety statistics show that most people who die in road accidents are those in public transport. Consumers are lured to buy vehicles without researching the history of the vehicle, but the system shows the registration details whether the vehicle meets the homologation standards or not.

Discussion

Ms N Nolutshungu (EFF) thanked NAAMSA for the presentation. She said that there is a chain of government departments that are supposed to see the process of homologated, having the vehicles registered with NaTIS. Members learnt that dealerships and banks also have access to that system to see whether a vehicle has been homologated, whether it is a second hand, and other such information. The Committee is trying to get to the bottom of the matter to see where things went wrong. NAAMSA was part of the technical team tasked by the Public Protector to look into the issue. What role did NAAMSA play in the investigation? What were the findings? Did NAAMSA submit a report? Can that report be shared with the Committee?

She noted that NAAMSA mentioned that 5 000 panel vans were sold last year, and that there is a possibility that those have been converted to passenger vehicles. Can NAAMSA share that information with the Committee about what type of vehicles they were, whom they were sold to, and whether they have been converted or not?

Mr C Hunsinger (DA) said NAAMSA is probably the most credible of all the “fairy tales” that the Committee has been exposed to in all the submissions from the different stakeholders. The CEO is under a misperception, as he believes that the panel van conversions take place in small backyard outlets. There is evidence, and submissions have been made of unsuspecting buyers getting a fully converted panel van from top-class showrooms with polished floors. Can the CEO give his impression of the role and function of NAAMSA on protection of patents and property rights, given that this is the guardian of the relationship between South Africa and foreign countries who have trusted the country with local manufacturing and distribution of vehicles? This should be particularly around engineering specifications and the Manufacturer’s Importers and Builders (MIB) specifications. Can he talk specifically on the responsibility to uphold the Berne Convention and agreements expressed in the Paris and Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement?

He noted that the CEO submitted to the Committee that in 2009, the DoT engaged a technical task team specifically to discuss the conversions of panel vans to taxis. Did this have anything to do with the 2010 Soccer World Cup? Was this specifically an initiation to mitigate the transportation of people around the 2010 World Cup? Otherwise, there is certainly evidence that it was known long before 2009. Since the Department became aware of this phenomenon of conversion of panel vans into taxis, what did they do in approaching the Public Protector knowing that there was an investigation, so that they could also submit and try to expand the scope of investigation? Did the Department bring evidence to the Public Protector so that it is not just one manufacturer that seems to be targeted, but also the 13 other types of vehicles, as it was presented? None of the slides were numbered, but there was a slide that mentioned of ambulances, with a reference RT 57. Can this specification be explained further for Members to understanding better? He thanked the CEO for representing the organisation well, and for the submission to the Committee.

Mr L McDonald (ANC) thanked NAAMSA for a good presentation. It was heart-warming to receive a presentation that was not trying to shy away from the problems. As a major exporter of vehicles in South Africa, there is duty to protect the companies, especially those that are creating jobs and exports for the country – the top seven mentioned in the presentation. It is important to ensure that all vehicles that are exported and those used in the country reflect that the people of South Africa in their capabilities. Allowing the illegally converted vehicles and legal ones has eroded the whole beauty of the exporting and technologically advanced country. People are dying daily in the illegally converted vehicles as well as the legally convert ones, because the testing on the legally converted vehicles is far from substantial. For example, the Department presented that on average, about 5 000 panel vans are sold annually, which is about 50 000 vehicles in the last 10 years. This means that there is a serious issue, as there are no figures for how many vehicles are converted of all the brands.

He said that NAAMSA should speak to their members. He said that in his opinion, there should be no conversion of vehicles. NAAMSA members are part of both the legally and illegally conversion of the vehicles because they sell the parts required to do the conversions. Toyota, VW and Ford all sell the kits. Those are the things that need to be stopped because they are what allow people to do the backyard conversions. He reminded the Committee of the testing report from South Africa Police Service (SAPS) promised in the previous meeting.

The Chairperson thanked Mr McDonald for the reminder and said that 10 to 15 minutes would be squeezed in at the end of the meeting to map a way forward.

Mr K Sithole (IFP) thanked NAAMSA for the presentation. He asked what the CEO meant when he said NAAMSA members do not sell illegally converted vehicles. There are some members of NAAMSA who are selling the illegally panel vans. Can he explain why he said so?

He noted that in the presentation, the Department said that it does not have the statistics of the number of meetings attended by NAAMSA. What kind of leadership is this? How can the CEO say he does not have the statistics for the meetings attended? The records are supposed to be there. By saying the records are not there, it means the CEO is saying he does not care. While the Committee respects the CEO, the attitude of saying he does not have the records is not good.

He recognised that the Department said Toyota is leading the market for the panel vans. Toyota is part of NAAMSA members. From 2009 when the Department received the report, what step did they take for Toyota? If they did not take any steps, why was this so? Once information is received, there must be follow-up and investigation. If the CEO was part of the task team investigating the panel vans, what understanding does he have, and what role did he play in sharing the information with the Public Protector? The Committee must know what was done with the information.

In the presentation, the Department said there was no stakeholder engagement in the last four years, and they do not have the records. While respecting NAAMSA leadership, they need to give information to the Committee. The Department is supposed to implement the compulsory homologation-testing requirement, but they failed not done so. Why did they not implement this?

Responses

Ms Shinny Gobiyeza, Executive Manager: Corporate Relations, NAAMSA, thanked Members for the questions. She responded to the question on stakeholder engagement, the process of conversation that were supposed to happen and the recommendations of the Public Protector in guiding NAAMSA on how the facilitation of those conversations. She said that Chapter Eight of the Public Protector’s report recommended certain steps to be followed by different departments, specifically to this conversation. Section 8.1 covered the responsibilities and roles of the Minister of Transport. Section 8.1.4 stated that: “the facilitation of stakeholder engagement was recommended that it should be driven through the Minister of Transport‘s office.” There were also other stakeholders that would be part of that engagement, including National Regulator for Compulsory Specifications (NRCS), SAPS, South African National Taxi Council (SANTACO), National Taxi Alliance (NTA) and Transportation Security Administration (TSA). The recommendation was very clear that the process of facilitation was to determine details of vehicles that would be eligible for scraping based on the latest statistics. She reminded Members of this reason of the facilitation of stakeholder engagement that was covered under the recommendations for the Minister of Transport at the time. Further to the recommendations were alignment requests for DoT to work closely with the Department of Trade, Industry and Competition in aligning some of the decisions that would be taken through advisor of the consultative conversation. The recommendation also covers how to reconcile the data. In finding out the remedial actions going forward, the Public Protector also advised, in the recommendation, what data should be collected in trying to remedy some of the findings within the Public Protectors report.

Ms Sharon Modiba, Executive Manager: Economic Policy and Data Management Solution, NAAMSA, responded to comments from Members that conversions of panel vans should not be happening. She said panel vans are suitable for conversion, provided that they meet the required homologation standards, such as rollover seats, belt requirement and inside headroom. These are listed on the VC 8023 for the M2 and M3 set by the NRCS. Currently, the industry is working on improving the standard under the project ‘Save Our Cars 2025’, which is being worked on. As such, there are various improvements in the requirements that the industry is working on.

Members had also asked about the RT57. She explained that this is an approved list for all Government departments. This has information on the purchasing of vehicles and everything to do with vehicles, thus all manufacturers ought to be registered on it. The document gives verified information for one to be able to track down which vehicle is doing what, who purchased it, and in which department.

On the conversion done by customers, she said that NAAMSA members would not know such information, since manufacturers only input data into the e-NaTIS system, but they are not able to get customer information based on the Protection of Personal Information Act (POPIA). It is not possible to know information about the person purchasing the van, where they live and other information that would tell whether the person would convert it into a passenger vehicle. 

Mr Mabasa said the Department confined its attitude, actions, and behaviour in line with the remedial actions recommended by the Public Protector. After the investigation by the Public Protector, NAAMSA looked at the report and followed up on all the remedial actions that were attributable to NAAMSA. Vigorous action was taken. But NAAMSA did not want to overstep its mandate since the mandate is very clear. There were other specific remedial actions that were attributable to DoT, which they needed to act upon. As such, NAAMSA did not want to overstep its mandate.

Some of the issues raised by Members are within the findings made in the Public Protector’s report, which was very specific and explicit on which stakeholders are to manage the particular remedial actions. Mr Mabasa noted that Mr Hunsinger raised an issue that there are illegally converted vehicles that are sold from showrooms. The CEO is taking this very seriously. Can Mr Hunsinger share that information with NAAMSA? Mr Mabasa assured the Committee that this is an issue that NAAMSA will take up firmly. When the Department said NAAMSA members are not involved in illegal conversions, the list of NAAMSA members was shared with the Committee. NAAMSA members are owners of vehicle brands in South Africa. But if there is a dealership franchise somewhere owned by an independent service provider under the Toyota brand, that dealership is not a member of NAAMSA. NAAMSA represents manufacturers of brands and as earlier indicated, it does its own inspections by visiting manufacturing plants of every member to ascertain that the manufacturing processes are in line with South African laws. He assured the Committee that if evidence were presented before NAAMSA that any of the members are illegally converting panel vans into people carriers, their membership would be removed. NAAMSA will be more than happy to take off those members from the membership list because they are obviously putting the name of NAAMSA and the industry into disrepute and doing something illegal.

NAAMSA will not condone any member illegally converting panel vans into people carriers. He said he could not confirm whether the conversations that took place in 2009 were because of wanting to bring more vehicles for the 2010 World Cup since there was no evidence for this. From the understanding of the past records, the current leadership are convinced that the issue was brought to the attention of the industry at that time because DoT wanted to address it as decisive as possible.

On protecting companies that are creating jobs, he agreed with Mr McDonald, because this is the mandate of NAAMSA. Having illegal conversion of vehicles in the country is eroding economic growth, not just the creation of jobs, because these unscrupulous operators who are converting the vehicles are not paying taxes and this is a huge erosion of the market. It is also an issue when considering grey imports because it not just about dealing with the illegal conversions, since the industry is also dealing with importation of second-hand vehicles into the South African market that are not supposed to be on the roads. As earlier indicated, NAAMSA will not represent any of its members doing illegal conversions. If there is compelling evidence to show that members of NAAMSA are doing illegal activities, those members will be dealt with very harshly in relation to the NAAMSA code of conduct.

He apologised if he had given an impression that he had no statistics on meetings attended. The point was that because DoT convenes different meetings with different stakeholders, NAAMSA does not have data on those meetings. The information that NAAMSA has is for the meetings that NAAMSA attended with DoT. He said the team addressing the Committee in this meeting is fairly new, and they had to familiarise themselves with all the details, background, and history of what happened. The CEO joined NAAMSA two years ago. But obviously because the issue is on the table now, the new team needs to take responsibility, find out what happened, and what corrective measures can be put in place to assist Parliament and Government in addressing this issue as decisively as possible. The team will do everything in their power, within the confines of NAAMSA’s mandate to find solutions quickly as possible.

The Chairperson said that this Subcommittee welcomes the presentation and NAAMSA’s willingness to assist the Committee to bring this issue to a close. Members raised concerns about the role of NAAMSA. This might be based on not fully understanding how far NAAMSA can go. Members are concerned that consumers do not know what exactly they are buying, as it was said that they do not do due diligence. There is a feeling that NAAMSA tells the consumer “You are on your own.” Can NAAMSA find ways to protect the innocent consumer? NAAMSA does not sell vehicles, but it represents organisations that do.

Members have also raised the issue that although NAAMSA is doing audits, it appears that these audits are to the manufacturers, not the dealers in the towns who are selling. Can NAAMSA investigate this and probably see what is happening in the value chain, if it is within NAAMSA’s mandate? What is the involvement of NAAMSA as it relates to “mother-bodies”? For example, Toyota is owned in Japan, and VW in German. Is NAAMSA interacting in any way with the organisations where NAAMSA members come from? If so, to what extent are these manufacturers aware of the actions that would have been done by their members? If they are aware, does NAAMSA know of any actions that they might be taking? NAAMSA has explicitly said none of its members are conducting illegal conversions. Members will take the word of the CEO on this. 

Follow-up discussion

Mr Hunsinger thanked the CEO for sharing with that he was appointed fairly recently, for two years. As such, this gives a context of the presentation. He said he had asked earlier about RT57 as relates to ambulances and homologation, but probably missed the response because it may have been a short answer. Can NAAMSA explain what RT57 means? Is it a particular regulation or specifications? If this information is not available, NAAMSA can send a written submission to the Committee afterwards.

Another question that was not answered was on whether the CEO is aware of NAAMSA’s involvement with the Public Protector, given the fact that he is aware of 13 other vehicle types that also stand under possibilities of conversion. This is because it was well known that there was an investigation by the Public Protector for several years. While the CEO is new in the position, is he aware of any effort from his predecessors at NAAMSA while the investigation was ongoing, so that all manufacturers and vehicles brands would have been included and not just one?

On international conventions and agreements, and the importance of protecting the brands that rely on their property and patents being protected, what is the role of NAAMSA as one of the watchkeepers?

The Chairperson said that Mr Hunsinger’s question on international conventions could be linked to his last question of NAAMSA involvement. The question on RT57 was answered; the CEO had explained that it is an abbreviation of a universal tender that is administered by National Treasury. Any company that wants to supply a vehicle to any department, in any sphere of government, would be invited to be part of this panel for a particular time. When they say vehicles were sold through RT57, it means that NAAMSA members would have been part of RT57, and municipalities and provinces can participate in RT57 in acquiring a vehicle. RT57 is a tender number. That is how National Treasury calls it. The CEO may want to add on and respond to the rest of the questions.

Mr Mabasa thanked the Chairperson for assisting in responding to the question on RT57 as it was done very eloquently. The CEO said he and the Chairperson both worked for DoT many years ago, together with former Minister Dullah Omar. That is where they knew each other from, and where they have interacted with RT57 and many other pieces of legislation, including the creation of the Road Traffic Management Corporation (RTMC) at the time.

He agreed with Members on the need for NAAMSA to look very carefully at consumer protection, because consumers are lured to buying these types of vehicles. Consumers take their money and, in some cases, their retirement money to buy these vehicles. NAAMSA is very concerned about this and there have already been conversations within the NAAMSA ecosystem because they really want to work directly with the RTMC.

Unfortunately, NAAMSA currently does not have access to e-NaTIS. This is one of the inadequacies in the system. NAAMSA needs to have access to RTMC e-NaTIS system. Obviously, NAAMSA and RTMC can be able to build the necessary safeguards to ensure that the information that is shared is not made public. A nondisclosure agreement can be signed. That data can be used to track and trace movement of the vehicles as they appear on showrooms, so that NAAMSA can have a sense of what is happening. This would give NAAMSA an extra eye. Currently, NAAMSA does not have any visibility of how the vehicles are moving. There needs to be a way for NAAMSA to protect the consumers from getting into deals where they buy these illegally converted vehicles in the market.

On the involvement of NAAMSA in relation to international principles, he said all the eight brands that NAAMSA is representing are international brands. None of them are South African brands. There is an organisation called Organisation Internationale des Constructeurs d’Automobiles (OICA), which is like the international NAAMSA. Different countries, including NAAMSA, are sitting at OICA level, together with all international brand makers. These include VW from Germany, KIA from South Korea, Ford from the United States, among others. Through OICA, NAAMSA has direct interaction with the brands. At this platform, different countries are able to escalate all the issues from different territories so that the global brands are aware of what is happening. The Public Protector’s report was shared with all NAAMSA’s brands and they are aware of their obligations in relation to the remedial actions made by the Public Protector.

On patents and international conventions, because these are global brands, they all comply with and observe the international conventions. NAAMSA looks at international benchmarking and best practices around the world on to how best to protect these brands locally in South Africa. As indicated earlier in the presentation, NAAMSA is convinced that there are syndicates operating these illegal conversions. Individuals cannot be able to do the illegal conversions at the current scale that they are happening. This needs to be approached in a very sophisticated way, because there are sophisticated organised criminals that are using the loopholes in the system to advance their own interests.

On the other 13 brands that were not consulted, he said NAAMSA reached out to all the brands, and they all indicated that they had made submissions to the Public Protector. Unfortunately, the Public Protector at the time did not interview them. For example, in preparation for this interaction with the Committee today, NAAMSA received written submissions from some of the members who confirmed to NAAMSA that they would have liked an opportunity to address the Public Protector directly, because unfortunately, as a consequence of the decisions that were taken by the Public Protector, there are unintended consequences that are starting to be seen on the market. For example, the Western Cape DoT decided not to issue permits for all vehicles converted in the province, irrespective of which brands. This is also having a huge implication, particularly in terms of the economy in the province, because new taxis that have been legally converted cannot register in the Western Cape, following the decision of DOT in that province. This is happening because the companies were not given an opportunity to present their case before the Public Protector. NAAMSA would like to create a platform where all the companies get an opportunity to present their case and reconfirm to the Committee that they are not converting any panel vans illegally in South Africa. He reassured the Committee that as far as NAAMSA knows none of its members are illegally converting vehicles in South Africa. He agreed with Mr Sithole that if South Africa decides to ban all conversions in the country, it means the laws must be changed. Currently, the laws allow conversions as long as they are done in line with requirements and legislative frameworks imposed by NRCS. But if a decision is made to ban them, the Committee, which is responsible for changing laws and making amendments, will facilitate the process.

NAAMSA is available to assist the Committee and will continue with the interaction. NAAMSA has taken note of the comments from Members and will see what more can be done. The Chairperson clearly underscored the point that there is an impression from most Members that NAAMSA has not done enough. NAAMSA is taking this in good spirit and will see what more can be done.

The Chairperson thanked the CEO and the team from NAAMSA for appearing before the Committee and for the effort to prepare since the team is new, but it did not appear such had they not declared it. He said NAAMSA was free to leave the meeting to allow Members to wrap up.

Committee deliberations

The Chairperson indicated that the Committee received a letter from Banking Association of South Africa (BASA), indicating that they are not able to meet the Committee as requested. BASA has requested a deferment of the requested meeting to have additional time to engage with its members on the contents of the Committee's letter to be able to respond. This Subcommittee has met with many organisations. The RTMC is closer to the Committee that any of the other organisations.

He was of the view that the meeting with BASA can be cancelled, to rather start framing the Subcommittee’s recommendations towards the Portfolio Committee. He felt that the Subcommittee had gathered enough information and should thus close any interaction. Further interaction could be with RTMC on the e-NaTIS or DOT should a need arise.  

Mr Sithole said the Subcommittee has a lot of information, but it would be proper to get information from BASA if possible. The Committee needs to know the involvement of the banking institutions in these illegal conversions.

Mr Hunsinger said the Subcommittee has been exposed to a lot of information, in addition to the basis the report. He said he was convinced that at this stage, there is adequate information to formulate a report to the Principal Committee, which is desired after the engagement with the different organisations. This does not close the function and role of the Subcommittee. Following the submission of the report to the Principle Committee, the Subcommittee can continue in a more focused way. He proposed that the Subcommittee meets to share notes and draft a framework for the report. The legal and research support staff can be included to conclude content of the report to be submitted to the Portfolio Committee with recommendations. The Subcommittee can then continue the work following that.

Mr McDonald said that he agreed 100% with other Members. The Subcommittee can use the next meeting, which was supposed to be the meeting with BASA, to structure the report so that something concrete is presented to the main Committee. If the Subcommittee eventually gets to meet BASA by the time the report is ready to be submitted to the main Portfolio Committee, something can just be added to the report in relation to BASA. There is enough information. What happened was injustice to the people of South Africa, and the Subcommittee has enough information to make a proper recommendation.

Ms Nolutshungu said that she agreed with the proposal.

The Chairperson said that there was agreement to ask the Secretariat to use the next available slot for a Committee meeting without inviting any person, where Members can start structuring views to close the matter. BASA’s request is being accepted and will be left open that should the Committee need to meet them; they will be advise in time. Hopefully by then, BASA would have got a mandate from their members. It is not a must for the Committee to meet BASA, but should the need arise, that window is still open. A response will be sent to BASA.

He thanked Members for tolerating him for all the weeks, as he is not very easy to tolerate. He thanked the team for the support and said the Portfolio Committee on Transport has the best team. The Secretary will communicate when there is a possible slot for the Subcommittee to meet without any presentation to then close the matter to the Portfolio Committee.

The meeting was adjourned.