Department of Labour 2009/10 Annual Report

Meeting report

Department of Labour 2009/10 Annual Report briefing
Mr Sam Morotoba, Acting Director General, Department of Labour, briefed the Select Committee on the Annual Report of the Department of Labour (DoL or the Department) for 2009/10. He explained the challenges and progress made in five sectors of administration, service delivery, employment and skills development services, labour policy and labour market programmes, and social insurance.

Mr Morotoba highlighted the progress made in administration, in relation to legal services, marketing and media production, and the progress in employment equity. There was under-representation of males at lower levels. There was progress in filling vacancies, and the vacancy levels were now down to 11%. There had been a smooth transfer of skills development staff to the Department of Higher Education and Training (DHET). A Risk Management unit had been established during this financial year, and was in the process of implementing a new Risk Management Strategy, Risk Policy and Fraud Prevention Plan. The security services of the Department had provided security as well as security awareness programmes in five provinces, and provided support to Ministerial izimbizos. However, the Vetting Unit could not be established due to non- allocation of funding by National Treasury.

In the service delivery sector, the Department had planned to increase the percentage of work-seekers placed in employment, to 70% of registered opportunities per year, using the employment services database. The Department focused on contributing to job creation, promoting equity in the work place, and protecting vulnerable workers. Its main challenges were the lack of case management system, lack of competence, and the lack of human resources, with system readiness requiring a hybrid implementation of a manual and electronic system. The signing of contracts was also stopped with effect from 1 November 2009, due to the transfer of skills development functions to the DHET. To address these, new case management was being established, together with a roving team of inspectors of work places. The Department’s target of finalising 70% of unemployment insurance claims was not met, as only 51,5 % were finalised.

The Employment and Skills Development Services and Human Resources Development sector had targeted reducing unemployment by placing 70% of registered jobseekers in jobs after developing their skills, to support the National Skills Fund (NSF) and Sector Education and Training Authorities (SETAs). It also hoped that 2 000 non levy paying enterprises, non-government organisations and co-operatives received skills development funding by 2010, and aimed to increase the pool of qualified people with scarce skills by providing funds to assist 26 000 unemployed learners to enter scarce and critical skills programmes. The challenges in this sector included the economic recession, which had resulted in a lesser number of apprentices indentured than planned, outstanding provincial reports that made it difficult to verify the number of new learners who completed learning programmes, the insufficient number of learners who applied for funding, and uncertainties about funding allocations, due to the transfer of skills development functions to the Department of Higher Education.

The labour policy and labour market programmes sector planned to improve employment equity by inspecting additional Johannesburg Stock Exchange (JSE) listed companies each year for substantive compliance with legislation. Other functions of this sector were to protect vulnerable workers, regulate child labour, promote sound labour relations by registering labour organisations, and de-registering non-genuine and non-compliant organisations. The protection of vulnerable workers had exceeded the targets set. Another key component was the monitoring of the impact of new legislation. This sector ran the Sheltered Employment Factories (SEF) and planned to improve the administration, production and financial control of the employment centres for the disabled.

The report concluded that the Department had received a qualified audit finding from the Auditor-General. The audit found that the issues raised in the previous year around the asset register, incorrect values, and reconciliations had been cleared. However, there was an incomplete Public Private Partnerships assets register. There was also unauthorised and wasteful expenditure, a contingent asset where the Department was claiming R5 million from a service provider due to overpayment, non compliance with regulatory and reporting requirements, and investigations into alleged internal control deficiencies at the Indlela Institute in the year. The investigations on allegations of fraudulent payments had been completed.

Discussion
Ms L Mabija (ANC, Limpopo) complained that the national departments were not using correct methods to brief Select Committees, and that, although this report was quite well presented, it had not addressed any provincial programmes and challenges, as befitting the Members of this Committee who were their provinces’ representatives. The current format of the report had not assisted Members to evaluate progress.

The Chairperson agreed with Ms Mabija that a new format should be used for briefings to the NCOP, outlining provincial concerns for the members.

Mr Morotoba explained that the format of the Annual Report presentation was based on a template provided by the National Treasury (NT) and that the Department was not supposed to deviate from this template. The Department therefore produced separate research reports on specific subjects, and these were referenced in the Annual Report. In future these reports would also be provided to the Committee.

The Chairperson asked if the Department had any information specified by province, and if so, asked that it should be sent to the Committee.

Mr M Sibande (ANC, Mpumalanga) was concerned about the lack of staff and adequate financial accounting at the Sheltered Employment Factories (SEF). This concern had been raised by a Portfolio Committee about four years ago, and that Committee had been told that the issues had been resolved, yet the Auditor-General was raising them again. He reminded the Department that SEF had been created to assist those with disabilities. He questioned whether the factories were nation-wide or only in specific provinces. He was also concerned by the unauthorised and irregular expenditure of SEF which had been raised by the Auditor-General.

Mr Morotoba replied that there were factories in seven provinces, but not in Limpopo and Northern Cape. These factories were established in 1945. The Department was looking into whether to expand this programme or not. There were 300 similar factories under the Department of Social Development, but these were mainly subsidised.

Mr Morotoba confirmed that the Department had instituted processes to try to achieve an unqualified audit report. One of the major challenges in this year had resulted from the retirement of one Chief Executive Officer, while the replacement officer had suffered a stroke. A Finance Officer had been hired, and it was planned to recruit a Marketing Officers. However, National Treasury had also slowed down on recruitment as it had insisted on due processes being followed.

Mr Sibande reiterated his concerns about the SEF, as the Department had made a commitment to solve the issue four years ago. He was also concerned by the conclusions reached by the Auditor-General on the mismanagement on funds.

Mr Sibande also raised his disquiet that money was allocated to deal with issues such as employment, skills development and human resources development but was not being utilised. He cited that in Programme 3,  R406 million was allocated for 2009/10, of which R16,3 million was not spent. He asked if the people coming to work in South Africa fell within the category of scarce skills. He also asked whether the inspectors were involved in risk management.

Mr Bheki Maduna, Chief Financial Officer, Department of Labour, replied that where only 96% of the budget had been spent, there were challenges in implementing the proclamation by the President, which in turn affected the spending. National Treasury gave an indication that the money that was not spent would automatically  roll-over but this money went to the Department of Higher Education and Training as start up capital.

Mr Sibande asked why there was a table in the presentation that showed ten provinces instead of nine.

Ms Caroline Mutloane, Chief Operations Officer, Department of Labour, replied that the ten provinces included the division of Gauteng into North and South. This policy had now changed and the statistics were now merged.

Mr Sibande was worried about the financial implications of the division.

Mr M Jacobs (ANC, Free State) asked who had broken these areas down, and how this was done.

Mr Sibande reiterated the Auditor-General’s findings that there was wastage of resources due to a lack of case management system, lack of competence, and lack of proper monitoring of entities. He asked that the Committee be given the list of bogus unions.

Mr Thembinkosi Mkalipi, Chief Director, Department of Labour, agreed to supply the Committee with a list of the bogus unions. He warned that that unions would only be placed on the list after the deregistration process had been completed.

Mr O De Beer (COPE, Western Cape) asked how the vacancy rate of 11% in the Department affected service delivery and client services. He felt that this was too high. He asked if there had been any improvement in the backlog of claims in the Compensation Fund.

Mr Risimati Chauke, Chief Director: Human Resources, Department of Labour, replied that the vacancy rate had decreased from 17,2% to 13,8% during the last financial year. This had further decreased to 11% in August 2010. The Department was targeting a 10,5% rate. He conceded that 11% was not entirely desirable but noted that progress had been made.

Mr De Beer commented that the presentation by the Department stated that the law enforcement officers would be “professionalized”. The Minister had indicated that the law enforcement officers should be integrated with those in other national departments. He questioned whether the vehicles bought for the law enforcement officials had been used, whether they were sufficient, and whether there had been any measurable improvement in services since buying the vehicles.

Ms Siyanda Zondeki, Deputy Director-General, Department of Labour, replied that the Cabinet had decided that all occupational health and safety inspectors from all departments should be integrated under the leadership of the Department of Labour. However, this process could not be completed, as some departments had pulled out. The Departments of Mineral Resources, Energy, and Health established their own separate entities to regulate their own inspectors. The process was thus brought to a halt by lack of co-operation. The vehicles bought for inspectors were launched in October in Limpopo. 50 vehicles had been purchased, but she described this as a “drop in the ocean” when compared to the 125 labour centres across the country. The Department hoped to get more funding to buy more vehicles.

Mr De Beer asked how much the Department had spent on the numerous consultants it used.  

Mr Maduna replied that a summary of the payments was shown at note 5.3 on page 137 of the Annual Report. The Department did have the individual details if this was necessary.

Mr De Beer asked when the asset register would be finalised.
Mr Maduna explained that it was a coincidence that while issues raised by the qualified audit were being cleared, the issues of classification of the Public Private Partnership (PPP) contract were raised by National Treasury. When the contract was signed in 2002, it was treated as a service contract, and there was no requirement that the Department must account for the IT assets. However, during the period of the contract this was reviewed. The period of the PPP contract now had to be accounted for as a finance lease. In 2009/10 this classification was cleared, but now the IT assets register had to be accounted for. The PPP partner was, in terms of the contract, supposed to provide an asset register to the Department but had failed to submit this. Mr Maduna was now leading the work on compiling an asset register with the PPP partner. 

Mr De Beer commented that the Department’s Employment Creation project was not successful enough, although he did recognise the successes in assisting people with no skills to become semi-skilled and employable.

Mr Morotoba replied that previously the Department had had three ways of assisting individuals with job creation. The first was skills development, and that had now been moved to the Department of Higher Education and Training. The second avenue was through the Umsobomvu Youth Fund, which had now been merged into the National Youth Development Agency. The third, and currently the sole assistance offered by the Department of Labour, was through the  Employment Services Programme, which assisted with career counselling, recommended placement and matched jobseekers with jobs. The Unemployment Insurance Fund (UIF) dealt with retrenchments, trying to limit or delay them, by offering programmes giving  alternative forms of employment, even if these were only able to pay a lower salary.

Mr M Jacobs (ANC, Free State) asked if the report reflected what was happening on the ground. He felt that the Committee members needed to visit labour centres to corroborate what was said in the report. He asked why no report on Aurora Mines had been included.

Ms Zondeki replied that the Aurora issues were presently before the Labour Court. A compliance order had been amended and there had been progress. The Department would consolidate this information and submit it to the Committee.

Mr Jacobs asked what progress had been made on the labour law amendments.

Mr Mkalipi replied that the Department planned to have submitted the labour law amendments to Cabinet by March. However, this could only be done in June. The Cabinet then required an impact study, which was done and the Amendment Bill was resubmitted to Cabinet. During the Cabinet reshuffle, a new Minister of Labour was appointed. The Department had withdrawn the Bill, and would brief the new Minister on it before taking it back to Cabinet.

Mr Jacobs noted that the report to the Committee did not make mention of farm evictions, although there had been a recent increase in these.

Mr Mkalipi replied that farm evictions were regulated, but this was not done through the Department of Labour unless the issues revolved around the non-payment of wages. Because these evictions followed a process outside of the Department, he did not have any further information on them.

Mr Jacobs stated that the Department needed to improve, not stagnate as it had been doing for the past five years. He stressed that the Department should achieve an unqualified report. He asked specifically how the provinces were benefitting from the learner programmes, and requested a provincial breakdown of the bursaries.

Mr Morotoba confirmed that he would provide the information on the bursaries.

Mr Jacobs asked what notice period was set out in staff contracts, and the impact of this on the vacancies.

Mr Mkalipi replied that according to the contracts, one month’s notice was required if the person had worked for the Department for longer than a year. He stressed, however, that it was often not beneficial to hold people to their contracts, and could even be detrimental to service delivery if they were not prepared to work well during their notice period, and it was not possible to discipline them. It was better to let unwilling workers leave immediately rather than trying to keep them.

Mr Jacobs asked what the Department’s retention strategy was.

Mr Chauke replied that the retention strategy appeared to be inadequate for all levels but did enable the Department to fill vacancies at levels 3 to 6 internally. There were also performance systems in place to reward high performance.

Mr Z Mlenzana (COPE, Eastern Cape) appreciated the layout of the report but would have liked a foreword or overview from the Director-General or the Minister. He asked about the progress in implementing the professionalisation of inspectors. He noted that the strategy plan of the Department had selected the hospitality, tourism and security sectors for inspection, and asked how the provinces had performed in these sectors against the set targets.

Ms Zondeki explained that so far the Department had reviewed the job profiles of the inspectors and had created three categories, being a general entry-level inspector, a principal inspector, and a specialist inspector at one level (such as health, or safety). The challenge in implementing these categories was the lack of funding. The professionalisation of the inspectors also required that a body be established to regulate them, and the Department had communicated with tertiary institutions and professional bodies. The Code of Conduct for labour inspectors had been developed. However, she pointed out that professional Inspectors needed higher salaries, and the Department needed to be able to attract the right skills to enforce its policies, and then to retain those professionals.

Mr H Groenewald (DA, North West) emphasised that the primary focus of the Department should be on creating sustainable jobs for South Africans. There was a problem if the Department was training people to acquire skills, only to find that there were no jobs for them. There was also a problem with foreigners taking South African jobs, as often foreigners provided cheap labour, and there appeared to be no control. There had been a new trend whereby the foreigners were going into the rural areas, while South Africans were forced to move from the rural areas to cities. He asked if the Department was doing anything to help people stay in rural areas rather than migrating to the urban centres.

Mr Morotoba replied that a good working relationship with the Department of Home Affairs had assisted the Department of Labour in working around the issue of foreigners.

Mr D Feldsman (COPE, Gauteng) reiterated concerns by other Members that the report given to the NCOP should be more specific in its focus, and therefore different from reports presented to the National Assembly committees.  

Mr R Tau (ANC, Northern Cape) expressed congratulations on the new Minister’s appointment. He indicated that the Annual Report document illustrated the real issues that the Committee wanted to hear about, but these were not included in the oral presentation. He commented that there were inconsistencies around the protection of vulnerable workers. This did not include domestic workers.

Mr Tau noted that according to the Annual Report, a report on the hospitality industry had been finalised, and he asked how far this had gone, and whether the Committee could be provided with the information. He also wanted information on the number of inspectors in the Northern Cape, how effective and able they were to implement the Department’s policies, whether they had capacity to protect the vulnerable, and reiterated Mr Jacob’s point about farm workers. He emphasised that this was a national problem, and so were concerns around child labour and the abuse of domestic workers. He urged that the Department should be looking after the inspectors, and making an effort to ensure that they were highly trained, well paid, and highly motivated to be able to protect the vulnerable, particularly the working classes and the poor who were not unionised. These inspectors should not be poached away by the private sector.

The Chairperson thanked Mr Morotoba for sending the presentation to the Committee early. However, she felt that the oral presentation should have been better integrated with the Annual Report. She too enquired about provincial breakdowns. She also asked what the top ten risks were that had been identified in the new Risk Management Strategy, what kind of contracts had been finalised, and what had been meant by the  ‘smooth transfer’ of staff to the Department of Higher Education and Training, asking what challenges there had been.

Mr Chauke replied that there had been no challenges in the transfer of staff.

The Chairperson asked what the current status was of the attempts to hire a new Chief Information Officer, noting that the structure of the CIO office had been reviewed and critical posts were identified.

Mr Chauke replied that the appointment of the new Chief Information Officer was pending. The post had been advertised, candidates had been shortlisted, interviews had been held and a candidate had been selected. This selection had been submitted to the Department of Public Service and Administration, who had to finalise the appointment.

Mr Vikash Sirkisson, Chief Information Officer, Compensation Fund, replied that the loss of staff had resulted in the Department being left with no IT staff, and thus no longer being able to engage effectively with the service provider at a technical, contractual or legal level. A review process was done, to see what staff were needed by the Department.

The Chairperson asked why National Treasury declined the funds required to establish the Vetting Unit.

Mr Chauke clarified that the Department was trying to establish a vetting unit in pursuance of all departments doing their own vetting.

The Chairperson asked how many of the registered jobseekers had their registration on the database initiated directly by the Department, and asked that details be provided of how many found employment, how many times people had been contacted by the Department after they had registered. She also asked for clarification of the term ‘vulnerable workers’.

Mr Mkalipi replied that ‘vulnerable workers’ were those involved in sectors where there was no collective bargaining. These included domestic workers, and those employed in the security and hospitality industry.

The Chairperson stated that although this Department was monitoring other departments and institutions on their gender balance it had too many men at managerial level itself. Shse asked if the Department had a gender focal point to advise the balance on gender, and if so, at what level was the leader of this unit.

Mr Chauke replied that there was a gender focal point unit, whose leader was at Deputy Director level. This unit was being re-examined at present.

The Chairperson commented that this rank was not high enough to effect real change.

The Chairperson asked what was being done to help jobseekers to find positions. The Department had previously reported a shortage of inspectors, and she asked what was being done to recruit people.

Ms Zondeki explained that the Risk Management Unit had been established recently. This unit had measured the risk profile of each programme. From the current year, templates had been developed to gather information per sector in each province, and the information would be available from April.

Mr Tau explained that from 2011 the Committees would be empowered to review the budgets of departments. He hoped that the Department of Labour was aware of this.

Mr Morotoba stated that there was a general agreement within the clusters to work collectively, particularly as many of the issues to do with labour crossed over into other departments. The Department of Labour was  attempting to co-ordinate interdepartmental interventions. He used the issue of Aurora as an example.

The public portion of the meeting was adjourned.