Department of Labour and Compensation Fund 2012 Strategic Plans

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Employment and Labour

13 March 2012
Chairperson: Mr M Nchabeleng (ANC)
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Meeting Summary

The Department of Labour (DoL) presented its Strategic Plan, saying that it worked predominantly in line with government outcome 4, relating to employment creation, equity in the labour market, protection of vulnerable workers, strengthening social protection, promotion of sound labour relations and monitoring of the impact of legislation. The institutional capacity of the DoL would also be strengthened. re was also an emphasis on strengthening the institutional capacity of the Department as well as the supporting budget. It would work on decent work programmes, rebuilding of the Public Employment Services, registration of job-seekers and up-skilling. The inspectorate was also to be strengthened. The Department was intending to finalise the Employment Services Bill. 403 000 job seekers were presently registered, and must be raised. There would be a focus on Small, Medium and Micro Enterprises. The Sheltered Employment Factories would also receive attention, in a bid to move them to breaking even and even becoming self-sustaining. There had been only 72% compliance with employment equity legislation, below the DoL’s target of 80%. DoL had reviewed and published sectoral determinations, but had under-achieved in workplace inspections, having managed to cover 59 000 instead of its target of 130 000. It would focus on inspections in workplaces that exposed workers to silica dust. It was drafting the Occupational Health and Safety Amendment Bill, and had identified iron and steel, chemical, agriculture and forestry sectors as high risk sectors. 98 910 complaints were received in the past year. It would continue support of companies in distress, would try to ensure that invoices were paid timeously to small businesses, hoped to protect vulnerable workers by establishing a medical aid scheme, as well as a provident fund for domestic and farm workers. The budget for 2012/13 was just over R2 billion and the Department had sought permission for a rollover from the previous year, and received an adjustment for higher-than-expected salary settlements. From an internal perspective, DoL was trying to bring down the current 7% vacancy rate, and although it had exceeded its goal for employment of women in management, it was below the 3% target for employment of disabled persons. The Committee voiced serious concerns at the fact that the presentation was received by Members only about an hour before the meeting, noting that this prevented the Committee from engaging constructively, and also noted its concerns that this was not the first time this had happened. The Chairperson ruled that questions on that presentation should be deferred to another meeting.

The Compensation Fund (the Fund) presented its Strategic Plan and Annual Performance Plan of the Compensation Fund (the Fund). Some of the challenges were outlined as failure on the part of claimants to submit full documentation in support of claims, the need to further promote policy advocacy and enhance understanding of worker and employer rights, obligations and entitlements. The Fund needed to strengthen its own corporate governance, including the internal audit, and to ensure access to its services. Effective revenue collection and well-trained workers were essential. The major challenge at the moment was the lack of effective IT, and many of the systems were still being run manally, pending a complete data migration to new systems that were designed with Siemens. The turnaround time in paying claims was another challenge resulting from manual systems, and this led to a backlog. However, it was hoped that this would be addressed by the new provincial structures and a new system was launched to process claims. Amending legislation would deal with rehabilitation, reintegration and return to work policy, as well as better surveillance. There was a need to ensure that relationships between the Fund, the Minister of Labour and Director General of the DoL were clearly articulated. Details were given of payments effected, and the target was to finalise 80% of new compensation claims within two months. The Fund hoped to implement an internship programme, and engage 100 interns by the end of the year. Vacancy rates needed to be brought down. All the fraud and corruption cases were to be finalised, and enterprise risk management policies implemented. Legal services would increase their assistance in compensation matters. The recommendations of the Auditor-General were being implemented. Strengthened quality management systems would be introduced. Members thought that the timeframes were not always consistent. Although some of the audit problems resulted from inherent systems problems, Members urged the Fund to deal with them, and questioned why manual systems were still used. Members asked about the decentralisation of services to provinces, asked if the pilot projects in provinces were still running, what they had shown, and what concerns were raised. The Public Protector had received complaints, and these were interrogated, as well as the backlogs, and the problems of lost documentation. Members asked why mining claims and occupational diseases claims were not dealt with under one Fund, and asked if claims would be paid out after death, questioned the administrative costs and the number and amount of claims, and the relationship with Siemens. They urged that any consultants must be required to pass on skills, and said internal communications had to be improv

Meeting report

Briefing by the Chief Operations Officer of the Department of Labour on their Strategic Plan for 2011/12
Ms Caroline Mutloane, Chief Operations Officer, Department of Labour, presented the Department’s Strategic Plan for 2011/12. She said that the Department of Labour (DoL or the Department) predominantly worked in line with government Outcome 4, which spoke to the contribution to employment creation, the creation of equity in the labour market, protection of vulnerable workers, strengthening of social protection, promotion of sound labour relations and monitoring of the impact of legislation. There was also an emphasis on strengthening the institutional capacity of the Department as well as the supporting budget.

The goals of the Department (to be reached through various projects in the Department) included the implementation of decent work programmes  and the rebuilding of the Public Employment Services (PES). These would focus on registration of job-seekers and matching/placement, as well as up-skilling. There was an intention to strengthen the inspectorate to ensure that there was improved capacity to act on new legislative enactments. The DoL also aimed to strengthen social security, including the reintegration of workers into the labour market and to restructure the Sheltered Employment Factories (SEFs). The last goal was to strengthen the institutional capacity of the Department.

Ms Mutloane noted that the main issue in relation to the contribution to employment creation was the need to finalise the Employment Services Bill, as the process had now been completed at the National Economic Development and Labour Council (Nedlac). The number of job-seekers registered on the system had risen to 403 000, but she noted that this number was still very low. The current situation could be largely attributed to the economy, but the DoL was trying to address the problems. The main creator of jobs was the Small, Medium and Micro Enterprises (SMMEs), which was the reason for the DoL’s focus on this area. The Department had trained over 2 000 managers. The legal status of the SEFs was being addressed, and it was hoped to move them from their current loss-making position to one where they could at least break even, and, hopefully, over time, for them to become self-sustaining.

In relation to the promotion of equity in the marketplace, the DoL was still considering what needed to be done, and which key players to target. It was hoped, in the last year, to achieve 80% compliance with the employment equity (EE) legislation, but the Department was only able to achieve 72% compliance. There had been work on the protection of vulnerable workers and reviewing of sectoral determinations, and these determinations had been published within the Government Gazette. DoL was also trying to strengthen various civil society organisations. The DoL, in furtherance of the protection of vulnerable workers, had targeted the inspection of 130 000 workplaces and try to achieve 80% compliance. However, it had only managed to inspect just over 59 000, and found the percentage of compliance at 74%. The DoL had, in the past year, received 98 910 labour related complaints, 80% of which were resolved within 14 days.

She then expanded further on social protection initiatives. The DoL was focusing on conducting inspections in workplaces that exposed workers to silica dust. There had been 96 inspections conducted, to try to establish a baseline for silica dust exposure, and then to be able to reduce it over the coming years. The Occupational Health and Safety Amendment Bill had been drafted and would be presented to Parliament after engagement with various key sectors on its content. The iron and steel, chemical, agriculture and forestry sectors had been identified as high risk sectors, and “blitz inspections” were done in these sectors.

Eighteen collective agreements were being drawn by the Department with various parties (see presentation for further details). The DoL was attempting to bring down its vacancy rate, which was currently at above 7%. She noted the fluidity of the public sector as being the cause of this vacancy rate. Consideration was also being given to people with disabilities, as well as vulnerable people, such as women. Internally, the DoL had managed to reach and exceed the goal for employment of women at management level, managing to secure 37% representation of women, as well as 2.6% representation of disabled people, which was just short of its 3% target.

Studies were being conducted in the Johannesburg Metro, as well as the Ethekwini Metro, to gauge accessibility of the Department.

Mr M Mothiba, Chief Director, Department of Labour, took over the presentation, and said that the content of the strategic plan was also reflective of work already being done by the DoL, so it could be seen as a continuation of the current work plans. The DoL had identified the strategic objectives as to establish a focus for the future. In the current financial year, the Department wanted to achieve finalisation of the Public Services legislation, for the purpose of effective employment placement as well as employer registration of opportunities. He repeated that the DoL also aimed to enhance the capacity of the sheltered employment factories to ensure that people with disabilities were protected. There was a move to focus on supporting companies that were in distress, in a bid to protect jobs that they created. The DoL also hoped to support SMMEs further in the future, as they provided key employment opportunities. Part of the support would be to ensure that their invoices were paid on time. The DoL also hoped to reduce income disparities based on racial and gender lines.

The Department aimed to protect vulnerable workers by providing a medical scheme for them, as well as establishing a provident fund for domestic and farm workers. He noted that the Occupational Health and Safety Bill amendments aimed to address and reduce the high risks in various sectors, as this should reduce the prevalence of injuries in these sectors (see presentation for more details).

Mr Bheki Maduna, Chief Financial Officer, Department of Labour, presented a brief overview of the budget and adjusted estimates. The original budget was R1.981 billion, and the budget for 2012/13 was just over R2 billion. The adjustments occurred owing to the rollover of R2.9 million that was requested from National Treasury to meet commitments in the previous financial year. The second adjustment was due to the funding for salary adjustments granted to the Department as a result of the higher than expected settlement with the Department of Public Service and Administration (DPSA). Unexpected expenditure also resulted from assistance given to employees who had been injured on duty, since the money allocated had not been enough to cover the total injuries incurred. The increment in the allocation came to just above 6% annually. He outlined that the majority of the allocation went to administration of the Department, with other transfer payments to other public entities housed within the Department of Labour also constituting a substantial amount (see attached presentation for full details).

The Chairperson noted that this presentation was only received by the Portfolio Committee an hour or so before the meeting, which limited the Members’ ability to effectively engage with the content of the presentation. He asked the Chief Operations Officer to tell the Director General that all documents and presentations must be received timeously in future, as late submission seriously impeded the Committee’s ability to engage effectively with the information presented.

Mr E Nyakemba (ANC) echoed this sentiment and sought an explanation as to why the presentation had been received only that morning.

Mr F Maserumule (ANC) also raised this point, noting that this was the third time it had happened.

Ms Mutloane extended her apologies for the documentation being received late and promised that this would not happen again.

Mr Nyekemba referred to the statement that distressed companies would be assisted, and sought clarity if money from the Unemployment Insurance Fund (UIF) that remained unspent would be used for this function. If this money was no longer available, he asked if this would then mean that the companies would no longer be assisted.

Mr A Van der Westhuizen (DA) sought clarity as to the use of the term “targets” in the portion of the presentation that dealt with Key Performance Indicators, and asked what time periods were covered by these targets, and whether they were current targets that had been reached, or targets that the department was aspiring to in the future.
Ms L Makhubela-Mashele (ANC) sought clarity on the Public Employment Services Bill. The Committee was not privy to the content of the Bill. She was concerned how the Department expected the Committee to work on it when it had not completed the Nedlac process, let alone been presented to the Committee. She also voiced her concern that there was no legislation that compelled companies and employers to provide the Department with information on job opportunities, and her concern that there was no indication that the registered job-seekers would be channelled to the right sectors. There seemed to be no real monitoring tools in this regard.

The Chairperson noted that this was not the first apology extended by the Department, and indicated his concern. He suggested that the presentation be closed, and that engagement be postponed to a later date, reiterating that the Committee was placed in an invidious position because of the late delivery of the documentation.  

Compensation Fund Strategic Plan and Annual Performance Plans
Mr Shakes Mkhonto, Commissioner, Compensation Fund, presented the Strategic Plan and Annual Performance Plan of the Compensation Fund (the Fund). He noted that he would highlight some of the challenges it faced, and some of the solutions that were proposed to address these challenges in the future.

Mr Mkhonto noted that the Fund was set up to Compensation for Occupational Injuries and Diseases Act (COIDA), and was a public entity of the Department of Labour. The Fund aimed to settle a claim made within 90 days of receipt of complete documentation. He noted the difficulties that resulted from submission of incomplete documentation (see attached presentation). The work of the Fund was in line with the Department’s work in protection of workers, and assisting them should they be injured at work.  He noted that the Fund had a responsibility to create the infrastructure necessary to carry out the work. One of the main objectives of the Fund was to promote policy advocacy for employers and workers so that they could understand their obligations, rights and entitlements. He also noted the need for the strengthening of corporate governance, to ensure that the organisation functioned properly, and noted that this included the internal auditing structures and their respective functions. There was also a need to ensure that stakeholders, workers and employers were able to access services, wherever they were based. He noted the importance of effective revenue collection to protect the beneficiaries of the fund. It was essential that the Fund have well trained workers who were able to provide the proper services to the organisation. Infrastructure and technologies that support the services provided were also essential. Mr Mkhonto also noted the importance of rehabilitation services, which was emphasised by the fact that they were included.

Mr Mkhonto said that the Fund faced various challenges that hindered it from living up to the legislative mandate given to it. The main challenge related to the systems; the Fund was still using largely manual systems as its IT systems were not up to par.  The Fund would be calling upon Siemens to assist it in upgrading its IT services. However, one of the main problems with this was to ensure effective and accurate data migration to the new system. The Fund was currently operating on two systems, while waiting to complete the effective migration of data to the new system. The turnaround time in paying claims had also been a major challenge and this was attributed to the current systems, as well as issues around document collection. Accident reporting had also been a anomaly, and often claims were made where accidents had not been reported. There had been some challenges in acquainting the employees with the new systems. The main problem, as already set out, was the Fund’s over-dependence on paper-based systems, which was something that the Fund would be addressing in the near future.

He noted that the Fund had succeeded in establishing new Fund structures in all provinces, and this should help to reduce the backlog. He said that a new system had been launched, to assist in the processing of the claims. The Fund’s Amendment Bill was also ready, which dealt with rehabilitation, reintegration and the return to work policy, and this Bill also compelled employers to accommodate workers who had been injured for extended periods, as well as being involved in the worker’s rehabilitation process. The issue of compliance was also dealt with in the new legislation, which provided for surveillance to ensure that vulnerable people could access medical attention and compensation before it was too late.

The issue of governance in the Fund had also been brought to the fore. There was a need to ensure that relationships between the Fund, the Minister of Labour and Director General of the DoL were clearly articulated. Provincial stakeholders had also been engaged to help to spread the awareness and therefore reach of the Fund. A database would be created to help monitor injured workers in various regions. The decentralisation programme had been completed within the nine provinces, and the next step now was to roll-out the programme and place the right people in the provinces to carry out the work. There were attempts to enhance the current claims system and finalise the data migration, as well as automation of some of the processes of the Compensation Fund (CF). There had been continual engagement with medical aids through South African Medical Association (SAMA) and other entities, in order to be able to provide various medical aid requirements.

Mr Mkhonto then moved on to note eleven programmes that were effecting payments (see attached presentation for details). He said that the Fund aimed, in 2012/13, to adjudicate 80% of new compensation claims within two months of registration, and aimed to try to do the same with the  medical services. The Fund was aiming for full compliance with performance management policies, and it hoped to implement an internship, or learnership programme, and engage 100 interns by the end of the year. He noted that vacancy rates needed to be brought down, and vacant positions needed to be filled timeously.

He then addressed risk management issues. The Fund wanted to finalise all of the fraud and corruption cases that had been received or detected and to implement Enterprise Risk in accordance with the Risk Management Framework. Legal services must find an effective way to deal with extra compensation from an employer, and he noted that this unit also should assist employees who were not happy with the compensation received, or the way in which cases were handled, and to ensure that they did have a remedy open to them. The Fund proposed to extend its commitment to running three media advertisements a year, which it was presently doing. The Fund also expected to be able to collect around R1 billion in debts, an increase of 8% from the previous years. It also aimed to achieve a clean audit by 2014, through the effective implementation of the recommendations made by the Auditor-General (see presentation for further details).

Mr Mkhonto said that in order to promote organisational effectiveness, it would be important to introduce strengthened quality management systems. The Fund wanted to work with Productivity South Africa to help improve the processes, and to ensure that these were qualitative, and could be monitored and improved. The key responsibility of the internal audit structure was to produce the methodology and get the audit plan approved in the first quarter of the new year, so that the plans could be rolled out.

Mr Mkhonto then tabled the budget estimates for the coming year (see attached presentation at slide 46).

The Chairperson thought that there was lack of consistency in the timeframes allocated to certain undertakings. He wanted to see the number of Matters of Emphasis on the financial statements being reduced, although he did acknowledge that some of the problems cited by the Auditor-General (AG) had to do with inherent systems problems and it would take time and effort to address them. He noted that despite the amount of money spent on improving the systems, the manual systems were still in use.

Mr Mkhonto responded that most of the points raised by the AG related to the collection of revenue. The problem arose when invoices were not captured, but were released and then paid. The new system being put in place would help to ensure that invoices were processed faster. There may be a need for increased monitoring as well, to ensure that the amount that employers were reporting matches with the payroll information. An automated system was believed to be the solution to these problems.

Mr Nyekemba noted that mention of decentralisation of some services to Provinces, and said that some years ago there had been an indication of pilot projects in provinces, when the question arose whether services could be easily accessed at this level. He asked about the outcome of these past pilot projects. There had been some reference, in the past, to the difficulties in rollout because some provinces had signed, while others had not, and asked if this was still the case, and what might require signature.

Mr Mkhonto responded that the pilot projects were working, and continued to run in the provinces. The aim was that when decentralisation occurred fully, it should impact positively on the services being provided by the Fund at provincial level. He noted that the policy that was now in place forced the employer to report the injury. He also noted the need to change how injured workers were treated, as opposed to incapacitated workers. There were certain concerns raised and a complaint made to the Public Protector about outsourcing of services, which it was claimed was done without following the requisite legal steps. The Fund was waiting upon the findings of the Public Protector, and this complaint had created some uncertainty. He noted that the unions had become involved, and staff members were deployed from Pretoria to carry out Fund functions regionally, as part of the pilot programme, but this proved to be very expensive, as the Fund was paying hotel costs.

Mr Nyekemba said that the backlog was the very reason why Mr Mkhonto had been brought in to assist the Fund. He wondered if there had been anything done in reality to address those backlogs and whether the situation was turning around. The backlog could not be allowed to continue indefinitely.

Adv A Alberts (FF+) noted that he had received a complaint about backlogs that had not been dealt with and that now warranted the involvement of the Public Protector. Documents apparently got lost continually and there was a constant need to re-submit information to the Fund.

Mr Mkhonto responded that the backlogs were very difficult to quantify, owing to the manual reporting systems, which meant that the Fund actually had to call upon the various players to submit reports before claims could be processed. The Fund system differed from the medical aid systems, as there was a need for other reports to be submitted before claims could be processed. He also noted that when the determinations on a person’s condition, and the extent of his or her injuries was made, there would invariably be objections raised and this added to the time taken to finalise the claims, and therefore also to the backlog. Another issue was the difficulty in quantifying claims for psychological injuries, which became a problem since the Fund did not employ its own  psychological experts to measure the value of these claims.

Mr Nyekemba said that at one stage the Fund was using Rand Mutual Assurance (RMA) systems, but this was changed in 2010. He wondered if it was not feasible to require the Department of Mineral Resources (DMR) and the Department of Labour to establish one Fund to cover all occupational diseases and injuries.

Adv Albert, having noted the slow processing of cases, asked if the Fund would still pay out even after a claimant had died. He questioned how it could happen that false diagnoses occurred with those who were working with toxic substances. He wanted to know, overall, how the Fund intended to deal with its apparent capacity issues.

Mr Mkhonto asked for details of the complaint lodged with Adv Alberts, so that he could try to assist with it. He noted that claims would be paid, if justified, to the family of a deceased injured worker, and death did not disqualify the claim being settled.

Mr van der Westhuizen asked how large the Fund was, what its administrative costs were, and the income of these on the income of the Fund.

Mr Mkhonto said that the Fund was currently at a staff complement of around 700 people, and there were about 5 000 people in Discovery. Operational costs were in the range of about R500 million, which was about 10% of total revenue.

Mr van der Westhuizen noted that the Fund was “sitting on” R24 billion in accumulated funds and wanted an indication of the value of the claims that the Fund faced, to compare it to these accumulated funds.

Mr Mkhonto noted that on average, the Fund spent around R4 billion a year, and, on the basis that the backlog could be around three months, then the backlog amount may be at around R800 million.

Mr van der Westhuizen said that the relationship between the Fund and Siemens on the software system was not ideal. He asked about the experience of the Fund in this regard and whether the new system was effective.

Mr Mkhonto said that when the Fund had contracted with Siemens, the problems around data migration were unfortunately not anticipated, but Siemens was making every attempt to assist the Fund by outsourcing, to try to counter the problem.

Mr S Motau (DA) noted the frustration resulting from delayed claims and wanted the Commissioner to quantify this backlog, and try to relate it to the objectives. He then wanted to know exactly how the Fund intended to achieve these commendable goals.

The Chairperson noted the issues that may arise when consultants were hired, saying that they were often reluctant to train officials. However, he said that they had to do so, even if this appeared to conflict with their own interests and fears that they would be rendered redundant if they did the training. He then noted that internal communications had to be improved, to ensure that there was adequate buy-in by all parties.

The meeting was adjourned.


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