Five Year Review: Departments of Labour and Public Enterprises; Select Committee on Labour and Public Enterprises Legacy Report

NCOP Public Enterprises and Communication

30 June 2009
Chairperson: Ms M P Themba (ANC, Mpumalanga)
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Meeting Summary

The briefing on the Five Year Review of the Department of Labour and the Department of Public Enterprises looked at the key policy initiatives and the legislation enacted over this period. More importantly, it identified items currently on the table that would require attention during the Fourth Parliament. Finally the key labour  issues in the State of the Nation address for implementation by the DOL were identified. The Chairperson acknowledged that raising these issues allowed the Select Committee to become familiar with important oversight matters and prepared them for discussions with the DOL.

Members posed questions about the implementation of the Department of Labour’s skills development and unemployment initiatives. Issues about the profitability, challenges and ongoing recapitalisation of State funding of State-Owned Enterprises such as Denel were raised.

The 2004-2009 Legacy Report of the Committee was adopted, pending amendments and supplementation.

Meeting report

Department of Labour (DOL): Five Year Review
Ms Sindisiwe Mkhize, parliamentary researcher, presented an overview of the key issues and challenges for the DOL over the period 2004 – 2009. The DOL over the past five years had experienced a stable period in which little legislation was passed. She said that although the period 2004-2009 was characterised by economic growth, unemployment was still a significant challenge for the DOL. The DOL had made it a priority to focus on skills development.

The Growth Development Summit Agreements (GDS) were an important development for the DOL. The National Skills Development Strategy (NSDS) of the DOL had included a commitment to the creation of decent jobs for all. In order to facilitate the DOL’s commitment to this goal, the DOL’s investment priorities had been skills development and job development. The Ministerial Programme of Action was concerned with the key area of labour relations. In terms of the focus on skills development by the DOL, the NSDS had been developed and implemented in 2004. A new NSDS had been drafted by the DOL and was ready to be implemented following the end of the current NSDS at the end of 2009.

The role of the DOL with regard to the new Skills Development Amendment Act of 2008 was discussed.

Some shifts in the budget for 2008/09 were noted in comparison to that of 2006/07. The most important change in the 2008/09 budget was the increase in increment for employment and skills development programmes. In the audit report, however, the Auditor General (AG) reported some major concerns, specifically around asset management in the DOL and these concerns were raised and the DOL appeared before the SCOPA. Another area of concern raised by the AG was the allocations for skills development.

The major issues on the table for consideration by the new Select Committee were reviewed:
▪ The decentralisation of core services, particularly the establishment of labour centres and satellite offices which would provide career guidance. The procurement of career guidance offices to this end was already underway.
▪ The importance of achieving Employment Equity (EE) targets and specifically, the need to monitor and enforce Employment Equity legislation.
▪ The high vacancy rates in the DOL was a challenge
▪ The proposed changes to the skills development programme. It had been proposed that the Sector Education and Training Authorities (SETAs) be transferred to the Department of Education.
  The impact of the amendments made in 2008 to the SETAs needed to be monitored.
  Oversight and monitoring of the DOL’s entities, especially the Compensation Fund.

The key labour issues addressed in the June 2009 State of the Nation address needed to be implemented by the DOL, particularly within the framework of addressing the impact of the international financial crisis. Specifically, the key issues for the DOL were:
  Providing avenues for re-skilling workers who were facing retrenchment. This programme would involve the Education and Training Sector authorities.
  The Commission for Conciliation, Mediation and Arbitration (CCMA) would be required to develop alternatives to retrenchment.
  The Unemployment Insurance Fund Act was being reconsidered. The extension of beneficiaries under this Act as well as the increased payment increments would need to be put forward for consideration.
  Participating in the creation of 500 000 jobs. However, it was noted that it was not the main function of the DOL to create jobs. Rather the main function of the DOL was to create and maintain a stable labour market within which jobs would be created and sustained.

Discussion
Mr Z Mlenzana (COPE – Eastern Cape) queried the impact of the movement of the SETAs to the Department of Education on skills development.

Ms Mkhize responded that although the transfer of the SETAs and their entities to other departments was being considered, no formal documentation of this transfer had yet been produced. The SETAs were still uncertain about the details of process of the transfer due to this lack of formal documentation.

Mr D Feldsman (ANC- Gauteng) queried the function of the DOL’s satellite offices. He asked how the DOL had envisioned that available jobs were recorded and monitored.

The Chairperson responded that some questions, like Mr Feldman’s question would not be able to be answered by the parliamentary researcher and would need to be directed to the DOL itself. However, she acknowledged that raising these issues allowed the Select Committee to become familiar with the important issues and to be able to prepare themselves for discussions with the DOL.

Mr M Jacobs (ANC- Free State) asked for clarification about the difference between private sector learnerships and apprenticeships. Also, he asked how many vacancies were available in the DOL and suggested that part of the job creation and development strategy of the DOL should target the vacancies within the DOL.

Mr H Groenewald (DA- North West) responded that filling the vacancies at the DOL would not constitute job creation. He re-iterated that his understanding of job creation as suggested in the State of the Nation address was the creation of new jobs, not the filling of already created but vacant posts.

Ms Mkhize, parliamentary researcher, responded to Mr Jacobs that the learnerships were different from apprenticeships in that they were shorter programmes and that apprenticeships were more intensive, long-term training programmes.

Mr Sibongiseni Ngcobo, parliamentary researcher, explained that government departments play a role in developing and establishing apprenticeships but that the private sector was encouraged to take up apprenticeships but that each employer’s own policies dictated whether they did this or not. The DOL was not able to enforce employers to take up apprenticeships. Learnerships, however, were distinct from apprenticeships in that they addressed the unemployed population and were run by the DOL.

Ms Mkize responded to the question of vacancies within the DOL. She attributed the vacancies to the high staff turnover at the DOL. The DOL’s training programmes equipped staff with highly sought after skills and these staff members were often head-hunted for other government departments which offered better benefits. The merging of various functions between departments, for instance the merging of inspectorate services across departments would address this challenge and would offer these staff members better benefits and upgraded salaries. Specific queries on the programmes addressed at reducing unemployment would need to be directed to the DOL. However, the SETAs had originally been established to develop the skills of staff who were already employed. The mandate for the SETAs was now being extended so that they would be involved in providing training to the unemployed. However, there was some confusion regarding what limits, if any would be placed on this new, extended role of the SETAs and this would need to be considered. Currently, however, the National Skills Fund focussed its efforts on the vulnerable sectors of the community (the disabled and previously disadvantaged) in terms of skills development for employment. Also the agencies within the department like the Umsobomvu Youth Fund addressed youth skills development.

The Chairperson noted that information on all the SETAs would be required.

Department of Public Enterprises (DPE): Five-Year Review
Mr Eric Boskati, parliamentary researcher, noted that there are nine state-owned enterprises in the Public Enterprises portfolio.

The Chairperson requested that the presentation be focussed on those State Owned Enterprises that concerned the Select Committee on Labour and Public Enterprises.

The policy priorities were outlined. Pre-2003 the shift was towards privatisation but this changed at the beginning of 2004 with a move away from privatisation as it was believed that these SOEs could play a significant role in the development of the South African economy. The turnaround strategies implemented in regard to these SOEs meant that non-core assets and operations were sold off and some SOEs require recapitalisation or capital injections from the State. To date, most non-core assets and operations have been disposed of. South African Airways was released from Transnet and the legislation in this area enabled SAA to operate as a stand-alone enterprise. The introduction of the Accelerated and Shared Growth Initiative for South Africa (ASGISA) in 2004 enabled the DPE to play a lead role in job creation strategies within the SOEs.

The important matters requiring consideration by the new Committee were summarised with particular emphasis given to the challenges experienced by some SOEs, particularly Eskom, SAA and Denel, Alexkor and the Pebble Bed Modular Reactor. The importance of the Risk Management Framework was identified as an important early warning tool for oversight.

Discussion
Mr Feldsman (ANC- Gauteng) noted that Mr Boskati had not mentioned state expenditure on the PBMR and queried this.

Mr Boskati responded that the PBMR would contribute 2000 megaWatts of power to the grid and that it would be an important source of energy. However there had been question around the investment in the PBMR and particularly on whether the investment would reap worthwhile benefit. Currently investment in the project was already in the region of R6 billion. However, Mr Boskati pointed out that the ongoing development and implementation of the PBMR was an issue that needed to be addressed at the political level.

Mr Groenewald (DA - North West) queried why the SOEs were facing so many challenges, particularly Denel, the South African Airways (SAA) and the South African Broadcasting Corporation (SABC).

Mr Jacobs (ANC - Free State) queried the intention behind establishing the SOEs and suggested that the SOEs should be profitable business ventures. He queried why the state was still required to fund the SOEs.

Mr De Beer (COPE – Western Cape) noted that in terms of the constitutional mandate on SOEs, government spending on these SOEs has become a standard trend. He queried whether there was still a need to fund these enterprises.

Mr Boskati responded that the problems in general about SOEs was not a uniquely South African challenge and that for most SOEs, the process of learning to function independently was ongoing. In the case of SAA, for instance, the challenge was to learn to function as an airline company within a competitive airline industry. In the case of Denel, some negotiation on deals with India and Brazil were ongoing, although no further information in this regard was currently available. In the case of Denel, the enterprise was not primarily a commercial one and there had been challenges in adapting to function as a commercial company. This reflected mostly legacy issues.

From an economic point of view, the government’s role in establishing and maintaining SOEs which are not profitable serves the broader public’s interest in that was these enterprises are wholly independent, the private sector dictates the running of these enterprises according to a profit incentive. In the example of Eskom, the provision of energy could not be wholly based on the ability to pay for these services and therefore had to be state subsidised. Further, many of the SOEs were not fully capitalised and they required recapitalisation in order to become profitable. Once these enterprises were profitable, these profits could be redeemed by the State. The turnaround strategies for the various SOEs were aimed at making the SOEs profitable in their own right.

Finally, SOEs gave the government leverage with regard to bilateral relationships and were important in that profit from these SOEs was for the Treasury and they were also crucial for job creation. Further in an economic crisis, it was important that these crucial services remained owned and managed by the government and not by foreign investors.

Legacy Report of the Committee 2004 - 2009
The Legacy Report was presented by the committee secretary, Ms P Sibisi. The programmes and work of the Committee was set out. Ms Sibisi noted that due to the high turnover of secretarial staff for this Committee, some information was not included in the report.

The Chairperson confirmed that the lack of information needed to be addressed by making contact with the previous secretaries for this information to be provided and clarified.

Mr Mlenzana (COPE; Eastern Cape) suggested that, although information was missing and there was limited mention of the function of oversight of the DPE entities, the Legacy Report be adopted, pending amendment and supplementation.

The Chairperson supported this suggestion, noting that after the budget presentations by the DPE and DOL, these issues could be revisited and amendments to the report be made in more detail. New issues which emerged, like the issue of oversight, could be brought forward at this later date, guided by the provision of further information by the relevant departments.

Mr Groenewald (DA; North West) moved to adopt the report with amendments and pending the inclusion of new issues. Mr Feldsman (ANC; Gauteng) seconded the motion.

Select Committee on Labour and Public Enterprises Adoption of Minutes
The minutes of 5 June 2009 were adopted. Mr Z Mlenzane (COPE; Western Cape) moved to adopt the minutes and Mr M Sibande (ANC Mpumalanga) seconded the motion.

The meeting was adjourned. 


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