Productivity SA 2010/11 Annual Report: briefing, consideration and adoption

NCOP Public Enterprises and Communication

29 May 2012
Chairperson: Ms M Themba (ANC, Mpumalanga)
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Meeting Summary

Productivity South Africa was a Schedule 3A organisation which sought to develop business and competitiveness.  Productivity would also play a role in saving jobs while creating new jobs.  Guaranteed funding was needed to develop the work of the organisation more as Government grants covered only salaries.  Other revenue had to be generated to finance its other activities.  Nevertheless, Productivity South Africa was currently in a financially healthy position.  At present its head office was in Gauteng with provincial offices in KwaZulu-Natal and the Western Cape.  While it did undertake projects in the other provinces, it did have plans to establish more provincial offices as finances permitted.

Members praised the body for its sound financial management, which could be held up as an example to other entities.  Members were curious as to how better productivity could assist in countering the influence of a glut of imported goods, particularly clothing manufactured in China.  This was damaging local industries.  Members were also concerned about the situation in rural areas as the organisation was not widely publicised.  Some Members were unhappy with the background pictures selected for the slides in the presentation.  There were also questions raised regarding the gender balance in the organisation. The Committee adopted its Report.

Meeting report

The Chairperson welcomed those present and introduced herself and called on Members and the delegations to introduce themselves. 

Productivity South Africa Presentation
Mr Alwyn Nel, Chairperson of the Board, Productivity South Africa (SA), said that the mandate of the body was to improve productivity in SA.  Its mandate included serving the interest of Government, business and labour.  It was a Schedule 3A organisation, reporting to the Minister of Labour.  Its head office was in Midrand, with regional offices in KwaZulu-Natal (KZN) and the Western Cape (WC).

Mr Bongani Coka, Productivity SA CEO, listed the strategic priorities.  These included stakeholder management, improving processes and tools, increasing provincial footprint, improving responsiveness, talent management, developing and securing knowledge, demonstrating impact and growth and sustainability.  Productivity SA was looking to establish more of a presence in the provinces.  Response times needed improvement.  The right talent had to be grown using internal resources and through partnerships.  A succession plan had to be in place.  A culture of attracting and retaining staff was needed.  Funders wanted to see a return on investment.  Currently the Government grant of R36 million only covered the salary bill.  Funds had to be used as efficiently as possible. 

Mr Coka said that the first programme of Productivity SA was providing turnaround solutions for companies in dire straits.  The second programme was developing productivity organisational solutions.  There were four components to this programme, namely development of an assessment centre, education and training, small enterprise development, and productivity improvement projects.  The third programme was value chain competitiveness.  The first component of this was research.  A recent focus was on the clothing and textile industry.  The other component was the workplace challenge programme.  Productivity SA had been challenged by the Department of Trade and Industry (DTI) to look at opportunities to create work in underdeveloped areas.

Mr Bheki Dlamini, Productivity SA CFO, introduced the Finance and Administration programme.  In the 2010/11 financial year (FY), a grant of R31 million had been received.  Turnaround solutions had produced R35 million and workplace challenges R11.5 million.  A deficit of R1.2 million in 2010 had become a surplus of R9.9 million in 2011.  In 2011, revenue had been R77.4 million.  R2 million had been earned through exchange revenue and the sale of goods and services for a total income of R79.4 million.  Expenditure was R69.6 million, of which R32.3 million went to compensation and R36.8 for goods and services.  R1.4 million was at hand as non-current assets.  Current assets were R13.1 million, of which R12.2 million was in cash and cash equivalents.  Total liabilities were at R4.4 million.  There were no long term liabilities.  R831 000 was due to consultants, after most debts had been paid.  Provisions of R3.5 million had been set aside for leave and other benefit payments.

Mr Dlamini said that four committees were in place to ensure good corporate governance.  The Board was the Accounting Authority.  There were two sub-committees, namely an Audit and Risk Committee, and a Human Resources and Remuneration Committee.  The Internal Audit facility had been outsourced.  External auditors had oversight over the financial matters.  All reports indicated that the organisation was in good health.

Mr Dlamini said that financial statements were in compliance with Generally Recognised Accounting Practices (GRAP), Generally Accepted Accounting Principles (GAAP), and the Public Finance Management Act (No. 1 of 1999) (PFMA).  The various financial reports had all been unqualified.  Three reports were required regarding predetermined objectives, namely performance information on programmes, compliance with laws and regulations and internal control.  An independent attorney had studied the reports and given the organisation a clean bill of health.  There were no material findings on the laws and regulations, and no significant findings on performance information.  No deficiencies had been identified needing a modification of audit opinion.

Mr Coka outlined the highlights for 2010/11.  Stakeholder partnerships had been created in poorly performing provinces.  Productivity SA had been involved in interventions in Mpumalanga and North West.  The Economic Development Department (EDD) not only gave leads, but also co-funded projects.  There was partial funding from the Unemployment Insurance Fund (UIF).  More than 15 500 jobs had been saved as a result.  Partnerships had been formed with the Provincial Economic Development Departments in KZN and Limpopo.  The Productivity Awards Programme had been expanded into the Eastern Cape, and he was hoping to have coverage in all the provinces by the end of the forthcoming financial year (FY).

Mr Coka was happy to announce that there was more stability in the organisation, with a labour turnover rate of about 6% as opposed to rates of 22% in previous years.  A key partnership in getting business to know what Productivity SA was doing was that with the South African Chambers of Commerce and Industry.  Partnerships had been formed with their provincial structures.  Productivity SA had been included in activities of the African Union (AU).

Mr Coka said there were challenges.  One of these was in turnaround solutions funding.  This had not been forthcoming until assistance had been received from UIF.  It was a challenge that there was no permanent funding, but an approach had been made to the Board of UIF.  If this was secured then plans could be put in place for five to ten years.  It was more productive to save jobs rather than create new ones.  The other challenge was limited resources to market, fund and implement programmes to the critical masses.  Productivity SA was reliant on funding from other sources.  This made it difficult to increase internal capacity.    Guaranteed funding was needed.

Discussion
Mr O de Beer (COPE, Western Cape) said that the Committee was responsible for 24 entities, most of which were based in the Department of Labour (DoL).  He wanted to know how widely known the organisation was even though it played a big role in the economy, as compared to a body such as the Public Protector.  It was important to spread the word to the rural areas as there was a perception that such initiatives were confined to urban areas.   There had been suggestions that labour legislation should be linked to productivity initiatives.  In the previous five years, about 25 000 small, medium and micro-enterprises (SMMEs) had closed down.  Jobs were disappearing.  The country could not afford this.  The CEO had given reasons for the concentration on just two provinces.  It was therefore not surprising that the public was generally ignorant of the institution's work.  The campaigns seemed to be confined to the priority provinces.

Mr H Groenewald (DA, North West) asked what was being done to stop job losses.  South Africa's performance was better than others in the Brazil, Russia, India, China and South Africa (BRICS) group.  If all the money granted to Productivity SA was going to salaries, it did not leave much for programmes.  He queried the size of the staff complement.  The textile industry was a major concern.  Cheap imports from China were compromising the local industry.  South African factories should rather be producing the same clothes at the same cost.  The Committee was worried about the rural areas.  This was where people were suffering.  Productivity SA had a big role to play in developing these areas.  He asked what goods had been sold to generate revenue.  Assets were important.  He asked if there was an asset register and how vehicles were managed.  It seemed that buildings were leased.  He asked how many members were on the Board, and if they represented the whole country.  He asked what role the New Growth Path would play and the proposed youth wage subsidy scheme.  He wanted to know what role the Congress of South African Trade Unions (COSATU) was playing, or if they had any influence.  He asked how long the turnaround strategy would last, as this was delaying the process of moving forward.

The Chairperson asked how appropriate the picture of an orchestra was on the slide featuring the vision of Productivity SA.  She asked for a breakdown of productivity organisational solution interventions.  While there might not be provincial offices in most provinces, it seemed that things were being done in most provinces.  The choice of background pictures on the slides did not reflect the previously disadvantaged communities.  She was very worried.  She would like to see a list of successful graduates.  The clothing industry was based mainly in KZN and WC.  She would like to see a report on the quality of the clothing being produced in order to minimise the dependence on Chinese imports.  She was worried about the lack of female representation in the Productivity SA delegation.  She noted that unusable assets were being sold.  She asked who the buyers were.  The presentation had mentioned that adequate representation of women in senior positions had been achieved, but she wanted to see a breakdown.  The institution claimed to have saved 15 500 jobs.  Members represented provinces, and needed to know where these jobs had been saved so that they could report back to their constituents.  It seemed that there were more female employees from the annual report, and yet the salary bill for men was higher.  She would accept written answers to some of the questions.

Mr Coka replied that the situation had changed since the period covered by this presentation.  Four of the seven executive committee members were women, and there were four female senior executives.  The organisation had been male-dominated in the past, especially at senior level.  The salary balance would change in the future as this balance changed.  He had no control over the appointment of Board members.

The Chairperson said that the DoL Director-General (DG) was present and had noted this question. 

Mr Coka replied that a comparison in visibility had been made to the Public Protector.  The Public Protector was a high profile position with regular media exposure.  Productivity SA was generally only highlighted during Productivity Week.  A cost effective strategy of increasing visibility in the rural areas was by going to labour centres.  There had been discussions in three provinces.

The Chairperson said that the presentation was not talking to the Committee, whose Members had responsibilities to their constituencies.  Productivity SA should not be waiting to be called to Parliament. 

Mr Coka replied that SMMEs had a key role to play in job creation.  They had a short lifespan, many not even lasting two years.  This was being investigated.  Productivity would increase their chances of survival and growth.  The South African National Apex Co-operative (SANACO)  focused on co-operatives, and more than 1 400 had been helped in the previous year.  The activities of the 2011/12 FY had not been covered in the presentation.  A pilot scheme had been initiated in Mpumalanga regarding the Kruger National Park.  This had been a success, and students would graduate later in 2012.  This programme had international accreditation. 

Mr Coka said that productivity SA would look to use labour centres.  When finances permitted it would look at establishing more provincial offices.  The provincial government in Northern Cape had been very receptive.  Chambers in that province were supporting Productivity SA initiatives.  Productivity month was in October, with workshops and media campaigns being held to demonstrate the benefits of productivity.

Mr Coka said there was no simple solution to the question of saving and creating jobs.  Companies could be underfunded, in which case Productivity SA could assist in securing finance.  Secondly the local market could be saturated.  Chinese imports were not just a matter of productivity.  Some foreign labour practices were questionable, and would not be permitted in SA.

Mr Coka said that the guaranteed funding for the current FY was R36 million, which was the same as the annual salary bill.  There were two other sources of funding, but they were not obligatory.  There was funding from DTI which could not be guaranteed.  It was difficult to plan ahead without guarantees in place.

Mr Coka said that there would be more focus on rural provinces.  There would be measurement of projects, and these would be reported in future annual reports.  People in these areas were very receptive.  There was less competition for resources. 

Mr Coka said that tool-kits were created for training.  Companies in the programme contributed money towards the costs of these kits dependent on their means. 

Mr Coka said depreciation of assets was on the decline instead of increasing.  The body could not afford to replace assets on a routine basis.  Whatever equipment was still serviceable would be kept running.  The organisation only possessed one vehicle, which was based in Midrand.  In the provinces it was more cost-effective to use courier services to distribute information.

Mr Coka said that the DTI required Productivity SA to align itself to Government priorities.  Their contribution to job creation centred on productivity improvement.  This could save jobs, while savings achieved could enable companies to create new jobs.  Countries like Singapore had high productivity levels and low unemployment rates.

Mr Nel said that the role of COSATU was to represent labour organisations on the board.  Mr Jonas Mosia, Board Member, Productivity SA, and COSATU Co-ordinator: Industrial Policy,  currently occupied that role.  Information could be disseminated using a quarterly in-house publication.  The DoL had two representatives on the board, business two, and Government two.  It was not a turnaround strategy for Productivity SA, but for companies that were in distress.  It was cheaper to save jobs rather than create new jobs.

Mr Mosia said that the turnaround programme was to assist companies being challenged.  The key initiative was to save jobs.  The CEO had responded on the question of Chinese imports.  There was a need to create the manufacturing capacity.  There were many challenges.  Improving productivity would not solve all these challenges.  Customs fraud was an example of such challenges.  A number of entities appeared before this Committee.  He was not sure that the clothing industry was aware that it could make submissions to the International Trade Committee.  This had been done by the poultry industry in response to imports from Brazil.  There were incentives available from DTI, and companies might not be aware of these.

Mr Coka said that Productivity SA would reconsider the background pictures.  It saw the way an orchestra performed under the guidance of a conductor as an example of what productivity could achieve.  The organisation also had to look into the question of stereotypes.  Productivity was something that was accessible and applicable to each and every environment.  It was not just applicable to manufacturing environments, but to every walk of life.  They were sensitive to the Committee's responsibility to provinces.  Reports would be provided with a detailed breakdown of beneficiaries of the institution's services.  No usable asserts were disposed of.

Mr Dlamini returned to the question of an asset register.  This was the first thing that the auditors wanted to see so there was a register maintained.  Unusable equipment was donated to needy schools or sold at a fair rate.

Mr Xolani Sicwebu, Director: Public Employment Services (PES), DoL, said that some of the female members on the board had resigned.  Only male substitutes had been nominated.

The Chairperson said that the re-appointment process should have been suspended until female candidates became available.

Mr Nel said that the suitability of background pictures would be reconsidered in future presentations.

Mr Sam Morotaba, DoL Deputy DG: PES, said that interest was being incurred from the banks because overdraft facilities had had to be used.  DoL decided that sufficient reserves needed to be kept as a result.  Some staff members had not been paid due to poor cash flow.  The DoL had ruled that a certain reserve margin must be maintained.  The social plan had been agreed to at the National Economic Development and Labour Council (NEDLAC), but no funds had been approved.  The UIF had been an appropriate funder as people who lost their jobs became a burden on UIF.  The board of UIF felt that the interventions to save jobs were necessary and therefore agreed to fund the programme.  A long term solution was still needed.  Staff should be employed on a five year contract..  Productivity SA was looking to find a solution with Treasury and the UIF.

Mr Morotaba said that the cost for building offices was very high.  Where a footprint was to be established in a province, it made sense to use existing offices with shared facilities such as security.  Establishing partnerships made sense.

Mr De Beer said that the President had expressed the need for a master plan.  Productivity SA was an outstanding example of utilising finances wisely.  The question was how other state entities could be encouraged to display the same financial management skill.  He asked what the secret was to retaining staff, as Productivity SA had been able to do recently.

Mr Groenewald still wanted an answer on the BRICS countries.  The labour centres visited by Members could be more efficiently utilised to make space available to Productivity SA.  He was not happy to hear that there was a single vehicle.  That meant that officials were using their private vehicles, which was not a desirable situation.

Ms L Mabija (ANC, Limpopo) asked if officials claimed expenses on the use of private vehicles.

Mr Coka replied that a key goal was the dissemination of best practices.  The strategy was often to create a world class company in an area and hope that others would model themselves on that company.  There was a project with another Government department to bring them up to standard.  An external company had conducted a cultural survey.  There had been areas which were lacking.  Concerns had been grouped into certain areas, and a champion appointed for each, such as performance management systems.   There was no proper link between training and improvement in performance.  One manager had been looking after three provinces, which left resources too thinly spread.  This had required a rethink.  The values in place had to be redrafted.  People could be asked to perform and be trained, but this was not a guarantee of performance. 

Mr Coka said that there would be a press release the following day on competitiveness indicators.  These were a result of co-operation between Productivity SA and the Institute of Management based in Switzerland.  The press release would show up South Africa's strengths and weaknesses.  The report would still highlight issues of unemployment and technology.  He did not want to anticipate too much.

Mr Coka said that when vehicles were bought the level of utilisation should be high.  It was better to get employees to make limited use of their own vehicles than to invest in a vehicle that would not be used optimally.  The scenario was working for Productivity SA at present.  It was easier while travelling in Gauteng and urban areas.  The problems of travel in the rural areas would be addressed later.

Mr Nel said that management would look at the question of possible vehicle abuse by officials.

Mr Nkosinathi Nhleko, DoL DG, noted the positive comments.  It was encouraging to see the partnerships being developed by Productivity SA.  Positive experiences should be shared with other Departments.  Specific questions had been raised on financial management, and best practices could be shared with other entities.

The Chairperson thanked the delegation for their presentation.  She read a report stating that the Committee had considered the report and financial statements for Productivity SA for the 2010/11 FY and completed its deliberations. 

Mr Groenewald moved that the Committee's report be adopted, seconded by Ms Mabija.

Committee minutes: adoption
The Committee adopted its minutes of 16 May 2012. 


The Chairperson noted that the Committee would meet with NEDLAC the following week.  The Committee had to deal with a number of documents which had been referred to it by Parliament.

The meeting was adjourned.

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