Impact and outcomes of job creation measures: by Economic Development Department and Department of Performance Monitoring and Evaluation

Economic Development

14 November 2011
Chairperson: Ms E Coleman (ANC)
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Meeting Summary

The Economic Development Department (EDD) and the Department of Performance Monitoring and Evaluation (DPME) were coordinating work to deepen their understanding of the impact of the state on employment. In 2009, the global crisis had led to a sharp decline in employment but the trend had since improved with a small gain of 2.7% recorded in the year up to September 2011. The sectors showing gains were the business, government and the retail sectors. Losses occurred in the agricultural and domestic worker sectors.

It was difficult to assess what the impact of government policies were because of many other influences on employment; however the economy had benefited from the counter-cyclical fiscal strategy and strong public investment. Microeconomic measures had been implemented which enhanced competitiveness and supported labour intensive activities. Government had impacted on employment directly through programs like the Expanded Public Works Programme, through regulations, through government goods and services, through its procurement programmes and through incentives and subsidies. Government consumption of goods and services accounted for 7% of the GDP.

The monitoring and evaluation process to date was focussed on the set-up of information systems which fitted in with the DPME efforts to have a national evaluation policy across government which would not only assist by providing feedback but would help in improving a programme’s performance. Not only would the numbers be monitored but also a programme’s impact would be assessed. Employment creation would be the central criterion in the evaluation process. The monitoring and evaluation programme consisted of surveys, workshops, and the development of common methodologies using modelling.

Key findings in the first survey conducted was that direct employment in the government remained stable, while the private sector lost jobs reflecting the importance of the public sector to stabilise employment. There was evidence that there were too many administrative workers in comparison to core business staff. The EPWP was currently government’s main employment scheme. Few government departments were systematically attempting to increase job creation. Government had agreed to increase the number of internships from the current 5 000 to 60 000.

Few departments were conscious and aware of the role they could play in ensuring that goods were sourced locally. The challenge was to improve all departments’ understanding of the role they could play. Government procurement of goods and services was R120 billion in 2010, however only a few departments could say that they bought local.
Another challenge was that departments were often guilty of delayed payments to suppliers.

There would be a new round of surveys in the coming year, workshops would be held and the development of a model would continue while they would pursue the establishment of a standard for reporting on projects and also engage with the Department of Labour on labour market trends.

Members asked what caused departments to make late payments to suppliers. Why was senior management staff being employed instead of frontline workers? What could be done by government to ring-fence local procurement for cooperatives? What was the definition of employment or jobs? What was the Poverty Datum Line in SA? Did the Department use labour brokers? What was the status of the National Planning Commission document? Was there an impact assessment programme in the National Planning Commission document? How would the document assist departments like the EDD and others? How many foreign skills were imported? Did the mandate of the DPME allowed it to go into any department to check on the quality of a housing project for example.

Meeting report

Economic Development Department (EDD) briefing
Prof Richard Levin, EDD Director General, said the Department was coordinating with the Department of Performance Monitoring and Evaluation (DPME) to deepen their understanding of the impact of the State on employment. The departments had used employment figures from the Quarterly Labour Force Survey, the Quarterly Employment Survey and the Census. The Quarterly Labour Force Survey figures were found to be the most reliable over the long term. In 2009, the global crisis had led to a sharp decline in employment but the trend had since improved with a small gain of 2.7% recorded in the year up to September 2011. The sectors showing gains were the business, the government and retail sectors. Losses occurred in the agricultural and domestic worker sectors. South Africa was a country characterised by large income inequalities. Unfortunately, the inequality survey was only undertaken every five years. The Gini coefficient, which was a measure of inequality in a country, measured 0.7 in 2010. The old Bantustan areas contained 30% of the population and had a median income of R1 580, compared to the country’s median income of R3 080. Employment in these areas was 22% while the country’s employment rate was 49%. These figures were reflective of the inequalities in the country.

He said it was difficult to assess what the impact of government policies were because of many other influences on employment; however he could say that the economy had benefited from the counter-cyclical fiscal strategy and strong public investment. Microeconomic measures had been implemented which enhanced competitiveness and supported labour intensive activities. Government had impacted on employment directly through programmes like the Expanded Public Works Programme (EPWP), through regulations, through government’s production of goods and services, through its procurement programmes and through incentives and subsidies for example the Industrial Development Corporation would be investing R102 billion over the next five years. Government consumption of goods and services accounted for 7% of the GDP.

He said the monitoring and evaluation process to date was focussed on the set-up of information systems which fitted in with the DPME efforts to have a national evaluation policy across government which would not only assist by providing feedback but would help in improving a programmes performance. Not only would the numbers be monitored but also a programme’s impact would be assessed. Employment creation would be the central criterion in the evaluation process.

The monitoring and evaluation programme consisted of surveys, workshops the development of common methodologies using modelling while acknowledging that the link between government and employment would never be fully quantifiable.

Key findings in the first survey conducted were that direct employment in the government remained stable, while the private sector lost jobs, reflecting the importance of the public sector to stabilise employment.

There was a 1.5% vacancy rate in the public service while on the Persal programme it stood at 10%. The discrepancy could be attributed to unfunded vacancies, or vacancies not being in line with programme needs. There was evidence that there were too many administrative workers in comparison to core business staff.

The EPWP was currently government’s main employment scheme. Few government departments were systematically attempting to increase job creation. Government had agreed to increase the number of internships from the current 5 000 to 60 000.

On the output of goods and services, he said few departments were conscious and aware of the role they could play in ensuring that goods were sourced locally. The challenge was to improve all departments’ understanding of the role they could play. Government procurement of goods and services was R120 billion in 2010 however only a few departments could say that they bought local. It was more than
just buying from a local supplier as the supplier might be getting imported goods. Another challenge was that departments were often guilty of delayed payments to suppliers.

He said there would be a new round of surveys in the coming year, workshops would be held and the development of a model would continue while they would pursue the establishment of a standard for reporting on projects and also engage with the Department of Labour on labour market trends.

Discussion
Mr Z Ntuli (ANC) asked what caused departments to make late payments to suppliers. Why was senior management staff being employed instead of frontline workers? What could be done by government to ring-fence local procurement for cooperatives?

Ms Tsotestsi (ANC) asked what the agreement between the departments and senior management were. Did the department not have bookkeepers to see where goods were bought from?

Dr P Rabie (DA) said he had read that one million spaza shops had closed down due to foreign shopkeepers with an aggressive pricing strategy and the consequent decline in employment of South Africans.

Mr N Singh asked what could be done to make South Africa the destination for foreign direct investment. What was the definition of employment or jobs? Was a job for 200 days annually a job or was 40 jobs at two days a week a job? What was the Poverty Datum Line in SA?

Mr Mabasa asked if the government had a mechanism to ensure the inequality gap was narrowed. Did the Department use labour brokers?

The Chairperson asked what the status of the National Planning Commission document was. How much coordination with municipalities was there to establish the number of foreigners working on farms? Was there an impact assessment programme in the National Planning Commission document? How would the document assist departments like the EDD and others? Auditing was still not outcomes based and it was important for impact assessment purposes? How many foreign skills were imported? The EPWP still had challenges of inaccurate reporting.

Professor Levin replied that it was a concern that a lot of the appointments were at the top levels and very little on the front line. The Department was trying to raise the consciousness in departments of taking decisions with the priorities of government in mind.

The management of leave was a Human Resources function.

On the number of administrative hires, he said that they had identified this as a risk, it being the unintended consequence of departments attempting to comply with the filling of vacancies by hiring administrative staff.

On the share of goods bought locally he said even the stationery used in Parliament was from abroad and diligence and care was needed in procurement.

Labour brokers were not used.

Mentoring was not yet on a systematic level.

The National Planning Commission document was a discussion document, the participatory process was taking place before the document reached Cabinet.

Performance auditing and financial regulatory auditing were two different audits with different skills and methodologies needed. The departments were in talks with the Auditor-General. The performance auditing aim in the audit process was to use tools, techniques and approaches that would empower and improve. One of the current recommendations of the National Planning Commission report was the strengthening of the mandate of the amendments to the Public Service Commission Act for compliance monitoring.

Dr Sean Phillips, Director General of the Department of Performance Monitoring and Evaluation, said late payments to suppliers could be ascribed to a basic reason, poor management.

Dr Neva Makgetla, Deputy Director General of the Policy branch in the EDD, said there was widespread non-payment of invoices even for legitimate invoices. There was a lack of adequate controls over payments - with managers not tracking the payment of invoices. The President had raised the issue and it had been discussed in detail in the last Coordinating Council meeting. Timely payment was one of the most important things government could do to support small business. The DPME were working on additional measures. They wanted the act of not paying within 30 days recognised as an act of financial misconduct and that action be taken against officials. They also wanted to create a monitoring mechanism on the BUS. The Office of the Auditor General had to report on late payment. Enforcement mechanisms needed to be strengthened, with Treasury and the Office of the President working together.

The Chairperson asked whether this managing of timely payments was not part of the Director General’s performance agreement.

Dr Phillips said it was part of the accounting officer’s performance agreement. He said the large amount of senior management staff had also been discussed in government by the Department of Public Service and Administration (DPSA). Tight controls had been relaxed because of understaffing since 1994 and the DPSA was looking at tightening control once again. He said leave was not a right but a privilege.

On local content in the sourcing of goods, he said that the departments did not know where supplies were coming from. Buying from a local supplier did not necessarily mean that the goods were locally sourced.

On the poverty datum line, he said that the country did not have a measure and used the international norm of $2 per day.

Dr Makgetla said there had been an improvement in the country’s poverty level if one used this norm. In the past, two thirds of the population was living under the poverty datum line while currently it stood at one third.

Mr Singh said that the measure was important as it was needed to determine the basis for social payments.

The Chairperson said the auditing outcomes were still not being properly reported.

Dr Phillips replied that the Auditor-General carried out regulatory audits while his Department sought to perform audits on objectives to evaluate whether the departments’ performances were accurate and reliable. He added that it required academic rigour to identify the real causes of the problems. Proper monitoring was the solution. The evaluation had highlighted the complex relationship between the state and the promotion of job creation.
 
Mr Singh asked if the mandate of the DPME allowed it to go into any department to check on the quality of a housing project, for example.

Dr Phillips said they did not have that mandate.

Ms Makgetla said small business had not developed in South Africa because of apartheid. The market infrastructure was not there, there was no access to markets, to skills or to capital. The Department of Trade and Industry (dti) wanted more business incubators but South Africa was not going to turn into an India which gave subsidies and protection to small businesses.

On the definition of jobs, she said any change or improvement on the jobs figures, even if the employment definition was simplistic, would be a significant improvement. She said the dti were responsible for the incubators. There was a low survival rate for small businesses; the risk of failure was great.

She said the median wage was R2800 per month with a quarter of the population living off less than R1400.

She did not have the figures for foreign skills employed in South Africa but would get that from the Department of Home Affairs.

Mr Singh said that it appeared there was a lack of compliance and enforcement of minimum wage standards.

Dr Makgetla said that the unions needed to push for minimum wages to be paid and where people did not know the minimum wage nor had any contracts, there would inevitably be exploitation.
 
The meeting was adjourned.




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