Commission for Conciliation Mediation and Arbitration, National Economic Development and Labour Council, Umsobomvu Youth Fund Annual Report 2008/09 presentations

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Employment and Labour

26 October 2009
Chairperson: Ms L Yengeni (ANC)
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Meeting Summary

The Committee met with the Commission for Conciliation, Mediation and Arbitration (CCMA), National Economic Development and Labour Council (Nedlac) and Umsobomvu Youth Fund (UYF) in order to hear presentations on their Annual Reports.

CCMA gave an overview of its Governance structures and also laid out its objectives. It had hoped to achieve these objectives by 2010. As a result of a fraudulent tender deal it, it had implemented a Risk Management policy. In the interest of transparency, and to try to overcome problems with fraud, all decisions made by the sub-committee in charge of tenders were made accessible to its employees. Factors which affected its performance were its limited operating budget, as well as the economic downturn. Despite this, the CCMA had made significant progress in terms of its public perception. It outlined that, in response to the economic crisis,  it had adopted a general approach to dealing with job insecurity, had partnered with institutions that could provide assistance to employees and employers, had empowered Commissioners who dealt with facilitations, had developed and implemented guidelines for retrenchment and severance pay matters, and was implementing the Training Layoff Scheme. Members questioned recent complaints that people trying to access services had been referred from one department to another, and also questioned the tender deals in which false black economic empowerment credentials were supplied, asking how this had been addressed. There were further concerns that senior management may have been implicated, and members also asked about the forensic investigation. The Chairperson asked the CCMA to provide the Committee with all documentation around the tender deal. Members also asked how many applications for training layoffs had been received, suggested that the reach be extended to the further parts of the Eastern and Northern Cape, enquired how services were being made available to those in poorer, rural areas, and enquired about the irregular expenditure.

National Economic Development and Labour Council (Nedlac) gave its presentation in which it highlighted the issues which it had to deal with within the period under review. These included the electricity crisis, rising food prices, an increased number of bills en-route or before Parliament, the World Trade Organisation (WTO)-DOHA round, the elections, the global recession and xenophobic attacks. Although it had dealt successfully with most of these issues, a major challenge still lay in the fact that many Bills were being tabled before Parliament without passing through Nedlac first. The Nedlac representative asked for the Committee's assistance in this regard. Another challenge was the fact that it had only been granted a R14 million operating budget for the year. These funds were set aside for its constituencies' capacity building. Nedlac had, for the period under review, received an unqualified Audit Report, but concern was raised around its work programme deviating from its strategic plan. This was however as a result of the unforeseen energy crisis and xenophobic attacks. Members asked what solutions were proposed to the problems of Bills being referred to Parliament before coming through Nedlac, questioned the media and communication strategy, asked whether further details on the research on labour brokering were available, what it had looked at during the review into Sector Education and Training Authorities, why it was charged with investigating the xenophobic attacks, its reporting to parliament, and employee demographics.

The Umsobomvu Youth Fund (UYF) gave a brief presentation to the Committee. UYF outlined the number of jobs it had created for the youth along with its other achievements. Its success had however been hampered by the limited grant of R5 million it had received from Government for the current year. It was on its way to being successfully integrated into the National Youth Development Agency, but there were concerns that the merger was not being funded. Members asked how the UYF had spent R14 million on IT, when it had only received a R5 million grant, and asked whether UYF was really assisting the youth or profiteering from them. The Chairperson noted that the Committee had found it difficult to understand the report as it was not specific enough on the issue of finances.

Meeting report

Commission for Conciliation, Mediation and Arbitration (CCMA) Annual Report 2008/09 Presentation
Ms Nerine Kahn, Director, CCMA, said that, in terms of corporate governance, the CCMA was established in terms of the Labour Relations Act and was governed by a Governing Body which was made up of representatives from Government, organised labour and organised business. Members of the Governing Body were appointed by way of nominations put forward by the social partners at National Economic Development and Labour Council (NEDLAC). The Governing Body, in turn, appointed the Director who performed the functions of a Chief Executive Officer. In order to fulfil its mandate, the Governing Body had various sub-. Each of these sub-committees was chaired by members of the Governing Body. The CCMA also had an independent audit committee, headed by an independent Governing Body-appointed Chairperson.

In terms of the Public Finance Management Act (PFMA), the CCMA was a Schedule 3A institution. The CCMA had an Internal Audit Section as well as a newly established Risk Management Unit. It also had a Bid Adjudication Committee which considered all procurements in excess of R200 000. In order to ensure transparency, all decisions made by this Committee were made accessible to all employees. The CCMA was audited by the Office of the Auditor-General (AG) annually. The Auditor-General's findings were discussed and adopted by the Audit Committee, the Finance and Risk sub-committee, as well as the Governing Body.

The CCMA's Tsoso Strategy (which outlined its projected path until 2010) had been approved by the Governing Body in 2007. Its Strategic Goals defined its intended delivery over a three-year timeframe.

Ms Kahn noted that the strategic goals were to promote social justice through the professional delivery of services, while ensuring compliance with legislation at all times, to ensure user-friendly, quality services that were delivered with speed, and to maintain operational effectiveness while ensuring services were cost-effective. The Strategic Focus Areas had been determined to provide a context for the work that needed to be done in order to achieve these goals. She outlined that these would ensure the CCMA's repositioning in the Labour Market, where social justice and the restoration of dignity were the focus of its processes. CCMA would also ensure high performance, and high impact delivery of services with a balance between quality and quantity. There would be repositioning of the CCMA in order to meet the strategic needs of the organisation. CCMA would also enhance and entrench internal processes and systems to ensure the cost-effective deployment of resources.

Each area had specific targets as well as specific criteria for internal performance within the CCMA, in order to ensure both effective performance and delivery on its mandate.

CCMA had, during the last financial year, made significant progress, although it was still in the process of finalising its customer satisfaction review. Another goal was to ensure that the CCMA was recognised as a market leader in the field of Continuous Professional Development in the field of Labour Law. CCMA's role with regards to Labour Relations Practices had been set. It had partly achieved its goal of developing materials and training course for commissioners and panelists. Although it had not achieved its target of settling all disputes at conciliation phase, there had been an encouraging increase in the settlement rate of disputes. This was attributable to the continued focus on putting mediation first. It had also achieved its goal in reducing the number of CCMA cases referred to the Labour Court. A total of 1 813 (out of 23 431) awards had been taken on review. 150 of these had been deemed to be successfully reviewed. With regard to seeing a material reduction in the non-compliance of arbitration awards, CCMA had set the baseline at 24%.

Although it had not achieved its goal in relation to ensuring no administrative errors, there had been an improvement in this over the previous financial year. With regard to reducing process rework, it had partly achieved its goal, due to the unanticipated rise in its caseload. It had, however, achieved its goals of conducting all conciliations within 30 days, and reducing the average tine to process arbitrations. Although there was a late awards rate-drop from 3% to 1%, the target of 0% had not been met. It had partly achieved its goal of settling 70% of all disputes of national interest where offers of assistance were made. Performance here had been erratic, as disputes of this nature were generally difficult to resolve. CCMA had seen a significant improvement in working towards achieving its goal of having 75% of parties accept offers of assistance in disputes of national interest.

The CCMA staff turnover had increased by 2% from the previous financial year. It had therefore not met its objective in relation to this. This added to its loss of key skills target of 7% also not being met. Since funding from the Department of Labour (DOL) had remained unchanged from the previous financial year, whilst costs in respect of staff and case disbursement had increased, CCMA had not achieved its target of having 100% funding of services to be rendered. It had engaged with the Department of Labour as well as National Treasury to look at ways of better funding the CCMA. In regard to stabilising the 'unit costs' for the delivery of compulsory services, it had not met its target of 5%. Performance here had also been affected by the economic downturn as well as inflationary pressure.

In terms of its operating efficiencies, the CCMA had seen none of its conciliations heard outside of 30 days. It also had a settlement rate of 67%, while the number of late awards had dropped from 3% to 1%. The arbitration period had also been reduced from 42 to 41 days. It had also broadened its reach by opening more satellite offices in various provinces and by implementing a web-enabled case management system.

Mr Obed Sekgololo, Chief Financial Officer, CCMA, gave the presentation on the annual financial statements. He listed the highlights. Grant income had not increased, but case disbursements had increased by 32.66%, which translated into an increase of R25 million. Employee costs had increased 13% year on year, which was attributable to an increase in head count and the implementation of the collective agreements. Other operating expenses had increased by 37.61%, which translated into an increase of R17 million, which he noted was due to an increase in travelling and lease costs, as well as general expenses. CCMA noted a net deficit of R36.9 million. Although the Auditor-General had given it an unqualified audit opinion, matters of emphasis had been raised.

The AG was concerned about the net deficit, as well as a law suit of R3.5million in which the CCMA was a co-defendant, which raised questions as to its viability as a going concern. There was also a SARS liability, and the question of fruitless and wasteful expenditure relating to the SARS settlement of R11million. There had been irregular expenditure of R2.3million, made up of the rental of a PABX machine (R953 000), accounting and payroll system implementation (R816 000), human resources VIP system implementation (R216 000), and renovations to the 10th floor at the CCMA head office (R795 000). Management had subsequently obtained approval from the Governing Body for this expenditure.

A forensic audit was conducted as a result of an anonymous complaint of improper conduct on the part of management, which was sent to the Office of the Auditor-General. The investigation did not establish any improper conduct on the part of management, though one contractor appeared to have misrepresented itself on the shareholding in gaining BEE points in the evaluation. The CCMA was in the process of terminating this contract.

In response to the economic crisis CCMA had adopted a general approach to dealing with job insecurity, had partnered with institutions that could provide assistance to employees and employers, had empowered Commissioners who dealt with facilitations, and had developed and implemented guidelines for retrenchment and severance pay matters. It had also implemented the Training Layoff Scheme.

Mr I Ollis (DA) asked what was being done to ensure that people were not referred to different places when accessing the CCMA's services. He asked whether the CCMA, like the Department of Labour, had IT problems. He enquired how many applications from companies it had received with regards to the Training Layoff Programme. He further suggested that its outreach must be extended to the further parts of both the Eastern Cape and Northern Cape.

Ms Kahn answered that CCMA had been working together with the Department of Labour to try to ensure that people were not being referred from one place to the next. The CCMA, in this regard, functioned as a independent entity and had a world-class Case Management System. Five cases in relation to the Training Layoff Scheme had been received, three of which were yet to be processed and the remaining two were being processed.

Mr A Louw (DA) asked how CCMA planned on addressing the issue of qualified people from certain provinces, especially the Northern Cape, being overlooked for those from outside those provinces. He enquired as to how it was ensuring that its services were more accessible to those in poorer, rural areas. He asked if it planned to get a larger grant from the Department of Labour. He asked for further details on the case involving fraudulent BEE credentials, what this contract was for, and how much it was worth.

Ms Kahn answered that Commissioners were appointed by the CCMA's Governing Body. In the Northern Cape there were factors which gave rise to problems, such as the caseload there having increased and there not being enough Commissioners to deal with the increase in mining industry retrenchments in that province. The CCMA, together with the Department of Labour, had traveled in mobile offices into rural areas advertising the services it offered. Commissioners also travelled to communities in the further reaches, along with interpreters, to deal with cases. The CCMA was managing its budget as frugally as possible and was, to this end, channelling its entire budget into its caseload and not into add-on services.

Mr Sekgololo added that the contract under discussion had been to supply machinery over a five-year period. The amount paid to date was R2.7million. Legal action had been taken against the company.

Mr E Nyekembe (ANC) asked the CCMA to elaborate on the details behind the anonymous letter sent to the Auditor-General, especially in regard to allegations made around senior management members being implicated. He also asked how the irregular expenditure had come about and what was done upon discovering this.

Ms Kahn answered that were governance structures in place which dealt with this. CCMA had subsequently done a risk management strategy which it hoped would limit the chance of this issue recurring. Investigations which had been undertaken, by both internal and external auditors, had found there to be no involvement of management in this regard.

Mr Louw asked what was done when there was non-compliance with the CCMA's rulings.

Ms Kahn answered that, although the CCMA engaged with the Labour Courts to ensure the process ran more effectively, it was still an area of concern.

The Chairperson asked how the tender went wrong, and where the problem had emanated.

Ms Kahn answered that the CCMA had decided to engage in a verification process so as to ensure that a situation of this nature did not recur. Legal action had been taken against the company concerned.

National Economic Development and Labour Council (NEDLAC) Annual Report 2008/09
Mr Herbert Mkhize, Executive Director, Nedlac, said that Nedlac had been established in terms of the National Economic Development and Labour Council Act of 1994. Its principals were made up of representatives from Government, Labour, Business and Community. The Department of Labour also served as overall convener of Government in Nedlac. Each of the four constituencies had 18 seats in the Council and were allocated a quarterly period annually in which they presided over all Nedlac matters.

He outlined the Nedlac mandate. It was to strive to promote the goals of economic growth, participation in economic decision-making and social equity, seek to reach consensus and conclude agreements pertaining to social and economic policy, and consider all proposed labour legislation relating to the labour market policy before it was introduced in Parliament. Nedlac must also consider all significant changes to social and economic policy before it was implemented or introduced in Parliament. It should encourage and promote the formulation of coordinated policy on social and economic matters. Its modus operandi included negotiations, consultations, information-sharing, research and socio-economic dispute resolution.

For the period under review, Nedlac had to deal with issues such as the electricity crisis, rising food prices, an increased number of bills en-route to, or before Parliament, the World Trade Organisation (WTO)-DOHA round, the elections, the global recession and xenophobic attacks. During this period it had concluded the Nedlac Accord on the Electricity Crisis as well as established the National Stakeholder Advisory Council on Electricity. It took particular pride in its Ministerial Roundtable on Public Transport Strategy with Minister Radebe, the Higher Education Amendment Bill, and the Policy Session with Deputy Minister of Trade and Industry, Dr Rob Davies.
In regard to demarcations, it had considered and finalised ten applications within the 2008/09 period. The National Key Points and Strategic Installations Bill had been withdrawn as a result of Nedlac's intervention.

With regards to the Changing Nature of Work and Atypical Forms of Employment, a Green Paper had been tabled by the Minister regarding Labour Brokering. It was in the process of dealing with Phase Two of the Decent Work Country Programme. The Single Public Service Bill, Medical Aid Bill as well as the Superior Courts Bill had been withdrawn, though further discussions were set to be held around the latter.

It had also completed dealing with the Consumer Protection Bill, the National Technical Regulatory Framework, Broad Based Black Economic Empowerment (BBBEE) Codes of Good Practice, the National Industrial Policy Framework as well as the Energy Bill.

Mr Umesh Dulabh, Chief Financial Officer, Nedlac, noted that Nedlac had, for the period under review, received a grant of R14 million. From this, funds were set aside for three of its constituencies' capacity-building. It had a deficit as a result of its activities exceeding its funding. Although it was given an unqualified Audit Report, concern was raised around its work programme deviating from its strategic plan. This was however as a result of the unforeseen energy crisis and xenophobic attacks.

Mr Mkhize then listed Nedlac's Special Projects. These included the Nedlac Review (a self-commissioned independent review of the Council), the Decent Work Country Programme, the Sector Education and Training Review (SETA Review), the Growth and Development Summit Review, the 2010 FIFA World Cup Framework Agreement and the National Framework on South Africa's Response to the International Economic Crisis.
It still faced challenges in the re-surfacing of adversarialism of the past, tight timeframes within which to finalise issues with little or no flexibility from Government departments, and the absence of a formal protocol with Parliament on how to ensure compliance with the Nedlac Act by the departments.

Its key priorities for the future included ensuring that the Nedlac work programme continued to reflect and gave greater attention to the country's key priorities, keeping the organisation focused on all the efforts made to give effect to the statutory mandate, and the agreed strategic objectives.

Mr Ollis asked Nedlac whether it had any suggestions towards solving the problem of some laws going to Parliament before Nedlac had a chance to comment. He also asked if the Green Paper on Labour Brokering as available for the Committee to look at.

Mr Mkhize answered that it had agreed that the best way would be to alter the rules governing the submission of legislation to Parliament. Failing that, an annexure would need to be added to the existing rules, which would regulate this.

Mr Mkhize noted that he had used the term 'Green Paper' loosely. The Department had tabled concepts based on research it had done into this matter.

Mr Louw asked Nedlac what the urgency was behind certain Bills being pushed through, and he asked what contingency plans it had in place when it was found wanting. Mr Louw also enquired how it operated efficiently on the budget of R14 million.  He suggested a proposal be drawn up that all Bills went through Nedlac first before they appeared before Parliament.

Mr Mkhize answered that Nedlac had created subtle ways to ensure that constituencies that were not adequately prepared could prepare for matters, and, to this end, also set aside constituency capacity funds. There were processes that needed to be followed in order to receive a larger grant from Government. It had recently initiated efforts towards addressing this.

Mr Mkhize noted that although he felt that Nedlac had made some progress, it still would wish to call for assistance from the Committee in dealing with the issue of Bills not going through Nedlac before they were referred to Parliament.

Mr Nyekembe asked Nedlac whether it had looked at the issue of SETAs with the context of the Skills Development Act in its entirety, and how it would view the removal of SETAs within the context of a focus on economic development.
Mr Mkhize answered that Nedlac, in its SETA review, had looked specifically at the functioning and operating of the SETAs. As the matter had not as yet been discussed, there was no official position taken by Nedlac.

The Chairperson asked whether Nedlac consulted with the Department of Labour when dealing with other departments. She asked how the xenophobic attacks had fallen under the attention of Nedlac. She also asked for an indication of how it was addressing the challenges it faced, whether there was an existing media strategy that publicised the work that Nedlac did. She further enquired as to its employee demographics. She also wanted to know if there were deadlines imposed in relation to discussions with its social partners in order to fast-track decision-making, and what it was doing to keep Parliament informed on what was happening within Nedlac.
Mr Mkhize answered that the Act through which Nedlac was established spelt out the briefs for each of the four chambers. A decision was taken that it be 'housed' by the Department of Labour until such time as the debate around where it should be positioned in Government had been settled. As Community and Government were represented in Nedlac, it had to try and determine a coordinated response to the xenophobic attacks.

Nedlac had initiated interventions in dealing with some of its challenges, although was still looking into what the best possible interventions for other challenges could be. Nedlac had a communication strategy, though it faced challenges such as public involvement in Nedlac deliberations undermining its processes. Certain information was also not suitable for the public domain.

Mr Mkhize conceded that there were no white, coloureds or disabled employees, and the majority of the employees were black females, so it was not fully representative.

Mr Mkhize confirmed that Nedlac reported to Parliament three times a year.

Umsobomvu Youth Fund (UYF) Annual Report 2008/09
Mr Malose Kekane, Chief Executive Officer, Umsobomvu Youth Fund, said that the UYF's mandate was to create a platform for job creation and skills development transfer for the youth. In terms of its 8-year review it had trained over 300 000 youths through National Youth Service (NYS) and Skills Development Programmes and had supported over 100 000 young entrepreneurs through loans and business support. It had also leveraged over R2 billion from the private sector. In addition it had created over 199 000 jobs, created a network of 151 Youth Advisory Centres visited by 1.9 million young people, as well as created a market for lending to the youth, who had previously been seen a high-risk group.

UYF had received a budget of only R5 million from National Treasury for 2008/09, so much of its operations had to be funded through money raised from its own resources. The fact that the value of loans issued decreased, despite the fact that the number of loans issued had increased, was due to its focus on small and micro loans. The number of business opportunities facilitated had decreased, as a result of the economic downturn. For the 2008/09 period it had impacted on 38 304 jobs.

According to research it had conducted, Government spent too little skills development for the youth. It also found that only six out of 34 national departments had specific youth budgets and that the value of financial resources allocated as part of the youth budget was very small when viewed as a proportion of total allocations to the departments. Another finding was that youth development was not mainstreamed into core service delivery processes and mechanisms. The private sector had also put very little resources into unemployed youth.

In terms of its transition, both the Executive Chairperson and Deputy Executive Chairperson had assumed office in May 2009. The National Youth Development Agency (NYDA) was launched on 16 June 2009. A board of sub-committees had been appointed and transfer of staff from National Youth Commission and UYF to NYDA had been effected.

In relation to its financial statement, the grant utilised had dropped significantly as a result of most of it being allocated in the previous financial year and this accounted for the number of project disbursements increasing. Operating expenses had increased as a result of it investing in a new Information Management System. In terms of its assets, its cash on call dropped significantly as a result of the R5 million it received from National Treasury. There was concern about the merger not being funded, as money which should have been utilised for the youth was instead needed to cover overheads in relation to the merger. It was, however, in discussions with National Treasury around this matter. There was, despite this, a strong platform which had been created on which the NYDA could build. The NYDA would require significant support in order for it to make any significant impact.

Mr Ollis asked whether UYF had been profiting off the youth in order to maintain profitability. He asked why it had not cut the budget on what it saw as frivolous spending. He also enquired why there was such a discrepancy in the number of jobs created. He asked whether the R720 million allocated for job creation related specifically to the youth. He further asked how it was possible to spend R14 million on IT, when it only received R5 million from Government.

Mr Kekane answered that providing young entrepreneurs with loans was akin to assisting them. Money for this spending was within the national budget, so UYF was not in a position to cut it. The study it had conducted into Government-spend on youth was merely a way of raising consciousness around this issue. The figures presented were not stated in full, so they were not inclusive of all projects. These figures had also been audited independently. The study that yielded the figures on spending on youth were taken from a perspective of impact on the youth. Most of the money spent was not solely on IT, but on other capital expenditure as well.

Mr Nyekembe asked how UYF had arrived at the figure that 50% of youth in South Africa were found in Gauteng, the Western Cape and KwaZulu-Natal.

Mr Kekane answered that the figures were from a Labour Force survey. There was major migration from rural to urban areas which made for a tenuous balance to strike in terms of UYF's spend in these areas.

The meeting was adjourned.


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