National Development and Labour Council (NEDLAC) 2008/09 Annual Report

Committee: NCOP Communications and Public Enterprises

Chairperson: Ms M Themba (ANC, Mpumalanga)

Date of Meeting: 10 Nov 2009

Summary

The Executive Director of the National Development and Labour Council (NEDLAC) briefed the Committee on the 2008/09 Annual Report. The four constituencies of NEDLAC were business, labour, Government and the community. NEDLAC was funded by the Department of Labour and the four constituencies were represented on the Council by mandated representatives. NEDLAC consisted of a Labour Market Chamber, a Trade and Industry Chamber, a Development Chamber and a Public Finance and Monetary Policy Chamber. The major challenges faced by NEDLAC were the electricity crisis, the rising food prices and the effects of the global recession on South Africa.  NEDLAC had exceeded its budget by R3.2 million but had received an unqualified audit report for the 2008/09 financial year.

Members asked questions about the relationship between NEDLAC and the Committee, the role played by NEDLAC on the contentious issue of labour brokering, the non-adherence to protocol by certain Government Departments when Bills were first referred to NEDLAC instead of to Parliament, the synchronisation of provincial and national NEDLAC’s, the role played by NEDLAC to ensure that African countries were in accord on trade agreements with the EU and the WTO, the protection of the clothing and textile industries against cheap Chinese imports, the implementation of the labour standards, the obstacles faced by SMME’s, the possible merger of certain trade unions, the monitoring by NEDLAC of legislation before Parliament, the consideration of the number of jobs lost when reporting on job creation statistics, the fixed assets and equipment owned by NEDLAC and the gender and racial representation of NEDLAC employees.

Minutes

Briefing on the 2008/09 Annual Report of the National Development and Labour Council (NEDLAC)
Mr Herbert Mkhize, Executive Director, NEDLAC was accompanied by Mr Thembinkosi Mkalipi, Senior Executive Manager: Collective Bargaining, Department of Labour.

Mr Mkhize briefed the Committee on NEDLAC’s Annual Report for the 2008/09 financial year (see attached document).  The governance structure of NEDLAC consisted of four constituencies, i.e. business, labour, Government and the community.  None of the constituencies had a formal or official veto.  NEDLAC was funded by the Department of Labour and the Council comprised mandated representatives from the four constituencies.

NEDLAC consisted of four chambers i.e. the Labour Market Chamber, the Trade and Industry Chamber, the Development Chamber and the Public Finance and Monetary Policy Chamber. The Labour Market Chamber considered all proposed labour legislation relating to labour market policy before it was introduced to Parliament. The Trade and Industry Chamber seeked to reach consensus and make agreements on matters pertaining to the economic and social dimensions of trade, industrial, mining, agricultural and services policies and the associated institutions of delivery. The Development Chamber attempted to reach consensus and concluded agreements on matters pertaining to social and economic policy, urban and rural implementation strategies and developmental programmes. The Public Finance and Monetary Policy Chamber seeked to develop and reach consensus and concluded agreements on all matters pertaining to the framework within which financial, fiscal, monetary and exchange-rate policies were formulated. A comprehensive breakdown of the focus areas, key performance indicators, performance measurements and current status of each of the NEDLAC chambers was included in the presentation.

Major challenges included the electricity crisis, rising food prices and the effects of the global recession on South Africa. NEDLAC achieved an unqualified audit report from the Auditor-General in spite of a R3.2 million deficit.  The deficit arose as a result of unforeseen expenditure on responses to the effects of the economic crises.  Other challenges faced during 2008/09 were the adversarial attitude of some of the parties, tight timeframes and the inability of certain Government Departments to follow protocol when dealing with the Council.

Discussion
Mr M Sibande (ANC, Mpumalanga) noted that the NEDLAC Annual Report was sent to Members of the Committee via e-mail prior to the meeting. He pointed out that the presentation did not include mention of the interaction between NEDLAC and the Committee. The presentation only referred to interaction with the Portfolio Committee on Labour. He felt that the National Council of Provinces (NCOP) needed to be recognised by NEDLAC as well. He noted that the Mpumalanga Province had established its own provincial NEDLAC and asked what powers it would be given and how responsibilities would be synchronised. He was concerned over the agreements concluded by the European Union (EU) with certain African countries, in particular in respect of the World Trade Organisation (WTO) and the DOHA Rounds. The EU wanted access to African products and in the past, Africa had been the dumping ground of the developed countries. He asked what role was played by NEDLAC to ensure that all the African countries were moving in the same direction. He asked what steps NEDLAC was taking to protect local manufacturing industries in the clothing and textile sector from the global economic crises and the negative effects of massive imports from China. He wanted to know what progress was made by NEDLAC on the issue of labour brokers. He likened labour brokers to the slave traders of the past. He asked what challenges were faced in the implementation of labour standards in terms of the Co-operatives Act and if there were any unintended consequences.

Mr Mkhize agreed that interaction with the NCOP needed to be on a more frequent basis. He pointed out that NEDLAC had never requested to appear before the Portfolio Committee on Labour and interaction took place because the Portfolio Committee demanded that NEDLAC reported to it. NEDLAC came to Parliament only when summoned. He welcomed increased interaction with the Committee.  He explained that there was no intention for the Mpumalanga Provincial NEDLAC and the National NEDLAC to undermine each other. The National NEDLAC operated within a broader framework whereas the Provincial NEDLAC was tasked with the development of strategies. Other Provincial NEDLACS existed in the North West and Western Cape Provinces. The Western Cape NEDLAC was experiencing some problems but the North West NEDLAC was working well. The intention was not to have a NEDLAC in every province as the National NEDLAC was the driving force.

Mr Mkhize said that the United States of America (USA) and the EU had adopted a divide-and-rule strategy. In Africa, there were many separate blocks that preferred to negotiate individually. The position of South Africa at the WTO was developed by NEDLAC. South Africa ensured that the developmental position of the country at the WTO was not sold out. He pointed out that the NCOP had approved the Co-operatives Act and it was signed into law. Certain provisions of the Act exempted certain co-operatives from labour legislation. Companies converted themselves to co-operatives in order to take advantage of the loophole.  The clothing and textile industries were considered by NEDLAC to be a huge problem. Quotas on imports from China had been applied for two years. Other interventions required the industry to identify strategic items in the tariff book that should be protected and the successful seizing of illegal imported goods by SARS.  He pointed out that China was a major trading partner of South Africa.

Mr H Groenewald (DA, North West) reported that the Chinese were buying up properties in Zimbabwe on a major scale. He was concerned that the same thing would happen in South Africa and that the Chinese would set up more Chinese factories and employ only Chinese workers. The average South African would not benefit and risked losing his job.

Mr Mkhize replied that there were diplomatic ties between South Africa and China. There were no free trade agreements between the two countries. He said that there was no need for major concern about Chinese involvement in South Africa. He felt that the matter was considered to be a delicate issue. He advised that NEDLAC had commenced the investigation into the contentious issue of labour brokering. The trade unions NACTU and SACTU supported a total ban on labour brokering. On the other hand, FEDUSA called for labour brokering to be regulated. The Business sector wished for labour brokering to be regulated by a statutory body. The Department of Labour needed to decide on what should be included in the proposed legislation and had to take into consideration what the various constituencies required. The parties concerned were currently widely separated on the matter.

Mr Mkhalipi advised that the intention of the Department was to have the Labour Brokering Bill approved by Parliament in January/February 2010. The Department hoped that the parties in NEDLAC would have discussed the Bill by the end of the 2009/2010 financial year and that the Bill would be presented to the National Assembly and the NCOP during the next session of Parliament. Changes to the Basic Conditions of Employment Act and the Labour Relations Act would also be necessary. Public hearings as well as discussions with NEDLAC were considered useful by the Department. He said that it was difficult to please everyone when one tried to do the right thing.

The Chairperson understood that there were many Committees and even more institutions that appeared before the Committees that were involved in the labour brokering issue. The Select Committee welcomed a greater degree of interaction with NEDLAC on the matter.

Mr Z Mlenzana (COPE, Eastern Cape) asked what lessons were learnt from the public hearings in terms of the different political views on labour brokering. He said that if Mr Mkhize preferred not to respond to the question, it would be acceptable. He referred to NEDLAC’s persistent challenge of having to contend with “forum hopping” and in particular, the reluctance by some Government Departments to adhere to protocol by first referring legislation to NEDLAC before it went to Parliament. He pointed out that the Committee had an oversight responsibility and therefore required details of which Departments were not adhering to protocol. He asked what NEDLAC’s plan was to strengthen the Development Chamber. He referred to the promotion of small, medium and micro enterprises (SMME’s) and said that the presentation had stated that an investigation into the obstacles faced by this sector was pending. He wanted to know how far the investigation had progressed and what lessons had been learnt. Reference was made to Black Economic Empowerment (BEE) and he wondered what measures NEDLAC had put in place to ensure that BEE benefits were broad-based and that fronting was eliminated.

Mr Mkhize replied that certain Departments continued to ignore the protocol. “Forum hopping” could be a useful instrument but it was being used to undermine NEDLAC. He conceded that the Development Chamber was weak. The Development Chamber had been placed under his care and responsibility in order to stabilise it and to give it direction. The Chamber had the potential to be powerful and could make a significant difference. Government was considered to be the biggest difficulty with the promotion of SMME’s. In terms of the Public Finance Management Act invoices had to be paid within 30 days, however Government killed the SMME’s by late payments. Another reason was regulations. The Department of Trade and Industry was to review the regulatory framework of SMMEs. Legislation passed in 2007/08 criminalised fronting in order to take advantage of BEE but the current issue was about the enforcement of the legislation. Procurement processes had to be proper and the right questions needed to be asked. Regulations concerning procurement were in the process of being formulated but had not yet been finalised.

Mr Groenewald asked why the relationship between NEDLAC and the NCOP was virtually nonexistent. He gained the impression from the presentation that there was a breakdown in communication between Government and NEDLAC and wanted to know what the reason was for the breakdown. The briefing claimed that progress was being made to meet the President’s target of creating 500 000 jobs by the end of the year. He wondered how this statement was reconciled with the fact that more than 1 million people had lost their jobs.  He remarked that poverty went hand in hand with education. The education system in South Africa was currently considered to be in a mess. He asked what inputs were made by NEDLAC on the new education system. He was under the impression that NEDLAC prescribed to Government what had to be done. He requested further details of NEDLAC’s fixed assets and equipment.

Mr Mkhize explained that the Executive Council was part of the NEDLAC process and included Government, labour, business and communities. He stated that there was no breakdown of communication between NEDLAC and Government. Government was part of NEDLAC. He refused to comment on the state of education in South Africa. NEDLAC would however become involved as soon as the Minister of Education decided that the education policy needed to be amended. He agreed that job losses had to be taken into consideration when considering job creation as the one without the other did not make sense. The progress made on job creation was in the context of the President’s comments that 500 000 jobs should be created in 2009. The comment did not take into consideration other factors. He advised that NEDLAC owned the premises in which they were housed. The premises were of a high standard and the furniture and equipment was top of the range. He said that NEDLAC hosted the WTO twice a year.

Mr M Jacobs (ANC, Free State) referred to NEDLAC’s labour constituency and asked how the possible merger of certain unions affected NEDLAC. Decisions in NEDLAC were taken by consensus and he wondered what happened if there were divergent views. He asked whether NEDLAC made submissions during public hearings and if the submissions made by other interested parties found its way to NEDLAC. He remarked that parastatal organisations often had problems with the mismanagement of funds and he wanted to know how NEDLAC functioned with a budgetary deficit.

Mr Mkhize advised that NEDLAC had not been informed by the unions of a possible merger into a single confederation. NEDLAC briefed the National Assembly and the NCOP but the labour constituents of NEDLAC also appeared before Parliament in their own right. NEDLAC did not participate in public hearings in the conventional sense and was only involved at the conceptual stage of formulating policy. NEDLAC became involved once policy was adopted.  He explained that NEDLAC was funded by the Department of Labour. The fact that NEDLAC had a deficit led to the assumption that there was a mismanagement of funds. The deficit did not make a material difference to the operation of NEDLAC as the organisation had a healthy balance sheet. NEDLAC ran into a deficit during the 2008/09 financial year because it had to deal with unforeseen emergencies such as the electricity and global economic crises. He gave the assurance that there was no irresponsible action on the part of NEDLAC. The auditors had commented on the fact that NEDLAC had deviated from its strategic plan but NEDLAC’s explanation had been accepted.

Mr D Feldman (COPE, Gauteng) referred to the reference to a summit that was held on the electricity crisis and asked when the summit took place and what the outcome was. The Committee needed to have insight into the review reports.  He remarked that the management of human resources was important in any organisation. NEDLAC had a small staff but the breakdown of the racial composition revealed a lack of representation. For example, there were no coloured persons and no disabled persons employed by NEDLAC. He noted that Proudly South African rented premises from NEDLAC but the organisation was funded by NEDLAC. He asked for clarity on the arrangement between Proudly South African and NEDLAC

Mr Mkhize undertook to make the review reports available to the Committee. Information on the plans on contending with the economic crisis would also be forwarded to the Committee. He noted that for 2008/09, there were no white or coloured persons represented on NEDLAC and gave the assurance that plans were being implemented to address the issue.

The Chairperson asked how NEDLAC monitored the Bills that came before Parliament. She asked if the gender issue was taken into consideration when NEDLAC considered Bills. She was concerned that females were under-represented in NEDLAC’s Chambers. She wanted to know if NEDLAC had a gender policy which offered guidance to Chambers, Departments and trades unions.  She asked how NEDLAC ensured that information was filtered down to the provincial levels.

Mr Mkhize replied that a distinction needed to be drawn between NEDLAC’s social partners and its secretariat when considering gender representation. The secretariat was his responsibility but the social partners decided whom to appoint to the Executive Council. Female representation in the secretariat was high and there were only four males in a total staff of 21.  The Development Chamber was tasked with ensuring that Bills and policies were compliant with the national policy on gender representation. The weakness of the Chamber resulted in instances of non-compliance. Bills were monitored with the assistance of the reports posted by the Parliamentary Monitoring Group (PMG) and information was obtained from the Parliamentary website.

Adoption of Minutes of Committee Meetings
The Committee adopted the minutes of the meetings held on 19th and 26th August 2009, 2nd and 16th September 2009, 7th, 14th and 28th October 2009 and 4th November 2009.

Mr Jacobs asked how the Committee would deal with following up the matters that were mentioned in the minutes of previous meetings.

Mr Sibanda explained that a platform and procedures existed for follow-ups.

The Chairperson asked the Committee Secretary to make a note of any outstanding matters that needed to be followed up by the Committee.

The meeting was adjourned.