Department Economic Development 4th Quarter 2012/13 Expenditure Report

Economic Development

10 June 2013
Chairperson: Ms E Coleman (ANC)
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Meeting Summary

In the afternoon session, the Portfolio Committee was briefed on the fourth quarter 2012/13 performance of the Department of Economic Development (EDD). The EDD submitted, at the outset, that it had exceeded the targets, having over-achieved on 39 outputs, some of which were not originally listed as targets for this quarter. Financial figures were also given but later in the meeting the Committee took issue with the way that these were presented. The EDD, unlike other departments, did not appear to have set a 25% general target for each quarter, but was rather reporting on spending as a percentage of the entire financial year, which made it difficult for the Committee to see exactly what the performance in this quarter was, and how the spending on various programmes compared across the rest of the year. The delegation was asked to clarify the figures for this quarter, as well as in future presentations. The lack of clarity on the spending led to substantial discussion, trying to seek clarity, on certain aspects of the work and spending.

Each of the programmes of the EDD was summarised, and it was also noted that, more as an indicator for the future than a report on the 2012/13 financial year, there would be a need to restructure the EDD, both to bring the programmes and budgets into closer alignment, by having three programmes instead of four, and to combine some of the 22 existing Chief Directorates to drop the number of senior executives, to align the work better and achieve a tighter structure.

Ms Jennifer Schreiner, Director General, Department of Economic Development, tabled the report of the 4th quarter 2012/13 expenditure of the Department of Economic Development (EDD or the Department) and said that when reporting, the Department looked to the strategic outcomes, and the work around the infrastructure outcomes. The Department felt that it had performed particularly well. Out of 46 targets for the fourth quarter, the EDD had delivered 85, thus overachieving by 39 outputs.

In Programme 1: Administration, the numbers of management meetings, improvement of audit capacity and staffing details showed significant progress. 139 posts were filled in this year, with three outstanding. The spending was also above target, at 32%. In Programme 2, surveys had been done, significantly into direct employment through the public service and municipalities, and there had been an agreement with international labour organisations that EDD develop a dynamic social accounting matrix, and there had been work done on employment impact of South African exports to Africa, the transparency report and the South African Development Index, showing trends on employment, inequality and growth. An inclusive sectoral methodology study had been done, and various other interventions in relation to legislative amendments, trade and investment relationships between the BRICS countries and work on infrastructure, education and planning for skills development, were outlined. BBBEE, Gender and youth strategies were also examined.  Programme 3 involved engagements with provincial and local government, and the interventions were outlined, including a partnership with the Presidency, Departments of Human Settlements and Mineral Resources, as well as the work done on the special infrastructure projects and the move to align the State Owned Enterprises, infrastructure projects and Presidential Infrastructure Coordinating Commission work. The special financing, including Industrial Development Corporation distress fund, was described. There was also an indication of what was being investigated in relation to the green economy. Programme 4 measured its performance on the number of social dialogues and engagements to build capacity. In addition to delivering against six set targets, there was engagement with social partners around the youth accord, steering committee in Western Cape, work with distressed mining communities, spatial development planning and the clothing and textile industries. District capacity-building workshops aimed to engage with under-serviced district municipalities and try to link their development opportunities into New Growth Path plans. Finally, the financial expenditure report noted that the total adjustment budget was R696.5 million, and in the fourth quarter R178.5 million was spent, including transfers. There had been virements to the economic planning and coordination areas. The IDC dividends were declared but the figure adjusted and the penalties of R530 million, paid over by the Competition Commission and Tribunal, were paid to the National Revenue Fund. A briefing was given on the current approach to human resources.

Members were concerned that the way in which the report was structured made it difficult to understand and asked that the figures be restated. They asked about the purpose of the reports, what was done with the information from the research, and how the youth employment strategy would be monitored. They were concerned that only four interventions to save or create jobs seemed very little, given the huge needs. More information was requested on transfers to the University of Johannesburg, and Members wondered why there was a strong focus on the construction industry, the coastal provinces, the larger provinces who were likely to contribute more to GDP and what the findings were in relation to jobs created by trade and exports to the rest of Africa. Clarity was sought on amendments to the Competition Act, and why the fines and penalties went through the books of EDD. Members also wondered about the interaction between national and provincial departments, saying that it seemed that sometimes the provinces were not always working to the same national priorities. They cautioned against duplication in the work with the development finance institutions, questioned the scope of the green-economy studies, and training at the proposed institutes. Further clarity was sought on the employment assessment modeling, targets, and the total figure for the distress fund. EDD’s stance on the poultry industry application in relation to poultry imports was sought. These questions were to be answered at a future meeting.
 

Meeting report

Department of Economic Development 4th quarter performance and expenditure report
Ms Jennifer Schreiner, Director General, Department of Economic Development, tabled the report of the 4th quarter 2012/13 expenditure of the Department of Economic Development (EDD or the Department) and said that when reporting, the Department looked to the strategic outcomes, and the work around the infrastructure outcomes. The Department felt that it had performed particularly well. Out of 46 targets for the fourth quarter, the EDD had delivered 85, thus overachieving by 39 outputs.

Details were then given of the performance by programme. Under Programme1: Administration, a summary was given of the main support programmes, including to the Ministry, and it was noted that more management meetings were held in the fourth quarter than planned because the EDD wanted to strengthen governance, review performance reports and files and drive the process leading to the signature of the accord at the beginning of the current financial year. The EDD, in the fourth quarter, had done a lot of stock taking of its own performance in the financial, human resources (HR), and taken steps to improve.

There were initially some internal audit challenges during the year and EDD had therefore put in place capacity to enable it to have a second audit report towards the end of 2012. It had extra capacity that would enable it to do internal audits more effectively.

In relation to staffing, eight people had been appointed, and it had managed to fill 139 posts by the end of the financial year, with three remaining to be filled.

EDD had managed to exceed its targets for expenditure, having developed and driven a strong spending plan towards the end of the third quarter. This programme was responsible for spending 32% of the allocated quarterly budget for the programme, or R16.5 million.  

Programme2: Economic Policy Development, attended to regular surveys of the public sector and a survey had been done into direct employment through the public service and municipalities during the fourth quarter, which pulled together the levels of employment creation within the public sector.

The EDD had started a process with the International Labour Organisation (ILO) and had signed a Memorandum of Understanding (MOU) to develop a dynamic social accounting matrix. This would enable the EDD to develop a model that would compare different states’ interventions on employment, as well as their budget or other constraints. That process was still in a pilot phase, but would be developed further in this financial year.

The EDD had also done a modeling exercise on the employment impact of South African exports to Africa.

Some work had been done on the transparency report, although there were no indicators for the particular quarter. Workshops had been held in Gauteng and the Western Cape with senior management officials of the provincial economic policy and planning, and monitoring and evaluation (M&E) units to focus on the employment impact of the state.

The South African development Index

The EDD had been running a pilot South African Development Index, and had completed the pilot in the fourth quarter, so that it had now moved into test phase. This was a major piece of work. The annual index showed trends on employment, inequality and growth. That work was presented to the Cabinet Lekgotla, which monitored the progress on work done on New Growth Path (NGP) targets, the work that had been done on the key action plan, and what needed to be improved to get enhanced outcomes.

There had been no EDD conference in the fourth quarter hence its exclusion from the report.

The inclusive growth strategy outcome on Sectoral methodology had been developed for African development, focusing on three sectoral case studies returning costly infrastructure. This report had proposed a common approach to sector methodology that would support a prioritisation of employment creation, equality and growth. Three main elements had emerged, and the report also detailed the rationale for sector strategy, taking historical factors into account, and reviewed the constraints in relation to employment creation, equality and growth at sectoral level.

The EDD had reviewed the Competition Amendment Act and, in the fourth quarter, had moved to have section 6 of the Act promulgated and take effect from 1 April.

Work had also been done on the trade and investment relations between the BRICS countries. Other interventions included developments on infrastructure, industrial development and relations, work done on education, and a study into how to improve the management of supply side planning for skills development, to ensure the right skills were available for economic development.

It was noted that EDD had a policy platform on industrialisation in Africa.

The impact of Broad Based Black Economic Empowerment (BBBEE) on NGP targets was also considered in this quarter and that led to a platform in February, where the BBBEE scorecard components were considered by the private sector.

The EDD had also held a review on gender strategy, followed by an analysis on women’s participation on the economy, and proposals were made on how to action these with national experts on gender at the beginning of the fourth quarter.

The Youth Employment Strategy formed a significant part of the work in this quarter. Processes had begun at the start of the year, but had to be reported upon only at the end. A strategy had been presented and endorsed by Cabinet in February and an accord was signed in April.

Work on micro-enterprises livelihoods and social economy was now coming out from a report that was started earlier in the year. EDD must identify strategic interventions to support growth in the micro enterprise sector.

Ms Schreiner pointed out that there were targets and work in the previous quarters around the Economic Development Institute but none in the fourth quarter.

Programme 2 had spent 11% in this quarter, or just over R2 million.

Programme3: Economic Planning and Coordination, involved engagements with provincial and local government. There was engagement with the Free State government’s provincial EDD, around high impact provincial projects, and relationships were built with the provincial planning component. The expediting and transferring of land in Mpumalanga was also accomplished, through engagement with the local government at an earlier stage.

EDD had reviewed some mining sector and infrastructure plans, in support of the work around distressed mining communities. A partnership was formed, between the Presidency, Departments of Human Settlements (DHS) and of Mineral Resources (DMR).

EDD also reported in this quarter on construction, linked with the sector focus on Strategic Integrated Projects (SIPs).

The next indicator for this programme was in relation to Spatial or infrastructure plans, and EDD had reported to Cabinet on the Spatial Geographic construction update developed by the Presidential Infrastructure Coordinating Commission (PICC) technical team, in February.  In addition to the spatial infrastructure programme, an intergovernmental forum, with coordinating agencies, had been formed to look at the development of business plans in relation to SIPs

EDD had held quarterly engagements with the Development Finance Institutions (DFI), and there had been engagements also in relation to the Economic Regulatory Bodies (ERBs). The Minister had, in the fourth quarter, attended the Annual General Meeting (AGM) of the Industrial Development Cooperation (IDC) and discussed strategic direction with the board.

Ms Schreiner reminded the Committee of the move to align the State Owned Enterprises (SOEs), PICC and work on the SIPs, under the national infrastructure plan.

PICC participated in the BRICS leaders Africa Dialogue, which had the theme of “Unlocking Africa’s potential: BRICS and African Cooperation’. That also led to the launch of the SIPs 17, that was the regional infrastructure integration.

This programme also addressed special financing, including the IDC distress fund. R46.9 million was invested in three companies during the fourth quarter, which resulted the creation or saving of 465 jobs, with two of the companies in the textile sector, and the other in the forestry and wood pulp sector. IDC also approved R4.2 billion funding for the growth sector. R120 million was approved for wholesale loans and R84 million for retail loans (unaudited figures).

EDD engaged in interventions to promote economic development, to leverage expenditure and procurement. It had extended an agreement with Lamtek around procurement of stationery, and EDD entities were supporting this local company.

The duty rebate provision was also reported on in the fourth quarter.

Attention was also paid to the green economy and an analysis on employment creation of government programmes within the green economy, including renewable energy and the public employment scheme. The range of interventions to grow the green economy included the solar water heated designation process, the conceptual development of solar skills training centres and knowledge hubs, engagement with KwaZulu Natal on implementation of a green economy strategy, work with the South African insurance industry on the conversion of ordinary geysers to solar geysers, and a joint project, with the Departments of Trade and Industry (dti), Environmental Affairs (DEA), the National Treasury (NT) and DMR on the effect of electricity prices on renewable energy investment.

Programme 3 had spent 26% of the yearly budget, or R15.7 million, in this quarter.

Programme 4: Economic Development and Dialogue, measured its performance on the number of social dialogues and engagements to build capacity. Six targets were delivered which included the poultry strategy, including the application from the poultry industry to the Trade Commission in relation to duties on poultry imports. Workshops were held between EDD, the South African Revenue Services (SARS), Trade and Administration Commission (ITAC), Department of Rural Development and Land Reform (DRDLR) and dti. EDD also had participated on a DENEL land systems supply day, where the focus was on local procurement and the enhancement of the local procurement accord. It took part in a Department of Public Enterprises (DPE) summit on supplier development, which also focused on the role of the local procurement accord, driving localisation, industrialisation and job creation.

EDD had engaged with social partners around the youth accord in February. Work on distressed mining communities had been important in the EDD’s planning and social dialogue branches providing support to Presidency’s interventions within those communities.

The number of economic development agreements was tabled, showing further work on the Steering Committee in the Western Cape, offering skills training on the job to 200 workers, interventions to save and create jobs, the scrap metal projects, and the interaction with communities on rural poultry projects in KwaZulu Natal.  

Ms Schreiner said that the Committee had already received an indication of the reports on implementation of framework agreements, which was produced in the third and fourth quarters, and submitted to the Cabinet Lekgotla in February. The advisory panel functioned during the earlier parts of the year. In relation to knowledge networks, EDD had a network session on spatial development planning, looking at transformation of cities.

Capacity building engagements were focused on the range of different interactions with trade unions from the clothing and textile industry. District capacity building workshops had been conducted, to engage with the under-serviced district municipalities, to ensure a better understanding of the NGP, and to try to link local relevant economic development opportunities to the NGP. There had been three workshops, in the Alfred Nzo, Vhembe and Gariep Districts. Lists of participants and local representatives across the social paths were named.

EDDs held value chain workshops in support of projects on entrepreneurship and innovation in Gauteng, Limpopo, Port Elizabeth and KZN in this quarter, bringing together stakeholders to look at establishing provincial value chain task teams and work to greater productivity.

Programme 4, in this quarter, spent around 20% of yearly budget, or R2.5 million.

Financial expenditure report
Ms Semphethe Thobejane, Chief Financial Officer, EDD, noted that the total adjusted budget of the EDD, as of March 2013, was R696.5 million. In the fourth quarter, EDD spent R178.5 million, including the transfers, or R166.9 million (31%) if the transfers were excluded. As at end of March, EDD’s commitments were at R2.2 million. There had been virements, with shifting of funds to economic planning and coordination (see attached presentation for full details of how and where transfers were made).

EDD had received an additional R30 million during the adjusted budget process, and R10 million was transferred to the University of Johannesburg as part of EDD’s collaboration on the EDD school for economic regulatory matters. R20 million was set aside for the completion of the outstanding economic regulatory matters of the EDD. There had been some under-spending in relation to Compensation of employees, and so R27.7 million was moved from that category to goods and services. There was also underspending on capital spending, with the result that R2 million was moved from that budget to goods and services.

In relation to income it was noted that EDD had received additional dividends of R50 million, declared in June but transferred at the end of the financial year, from an investment with IDC. There were no declared losses at the end of the financial year. EDD also received R530 million from the Competition Commission and Tribunal penalties, but paid these over to the National Revenue Fund.

Human Resources
Ms Schreiner reminded the Committee that the Annual Performance Plan required her to detail how the EDD was to approach HR issues, and she said that she was currently engaging with the Minister on a proposal, which would be formally written up in the next few weeks. EDD was initially approved with 265 posts, but NT funded these on an incremental basis, with funded posts presently standing at 166. EDD planned to fill 146 posts by the end of this financial year, to avoid over-stretching. It had looked at the strengths and weaknesses of its organisational structure, which concluded that the strengths lay in the good combination of managerial and expert capacity, which was very important, given EDD’s nature as a policy department rather than a delivery department. However, there was a challenge in that the specialist posts were set at a certain level, which led to difficulty in career pathing. EDD wanted to engage with the Department of Public Service and Administration (DPSA) to try to have levels attached to posts that would enable EDD to retain specialists for longer.

It had also found a disjuncture between the transitional structure and the budget programme structure, which posed challenges for responsibility; for instance, the transitional structure had four branches, but core business had three programmes. There were also excessive managerial level posts, with 22 Chief Directorates.

As the Department expanded, there had been some dislocations or illogical division of functions, especially in the Policy and Planning programme and Sector and Spatial Development programme. The PICC Technical Team was at that moment located as a Chief Directorate under Planning and Coordination, but that was not appropriate in view of the amount and importance of that work.

EDD’s staffing model required permanent appointments in the Administration programme. EDD had moved from contract to permanent appointments. It intended to ensure that the managerial posts in the core business operations were filled permanently, even if others remained as contract posts. Ms Schreiner reminded the Committee that the Minister had, during the presentation of the Annual Performance Plan, said that EDD still needed to be able to employ people for a certain length of time, to do a certain time-bound project. This would enable it to bring in experts from elsewhere, but quite intensive HR management processes would be needed. EDD had, to date, filled posts as needed. It was putting together a structure to head-hunt to source expertise, as it was aware that, partially because it was so small, it needed top quality employees. In the fourth quarter, and beyond, there had been significant strides in the employment processes. The Administrative Programme now had eight permanent appointments, whilst the Planning Programme had three employees in Policy and two for Social Dialogue, in shorter term posts, and was interviewing for more.

She added that EDD was working closely with DPSA to assess the HR capacity, and was evaluating 30 posts that had not previously been advertised.

Linked to the employment was the need to determine the functional structure. Previously, EDD had four branches and 22 Chief Directorates. It was now moving to three branches speaking directly to the budget programmes - namely to have Economic Policy, Planning and Coordination, and Social Dialogue – with twelve Chief Directorates (some had been combined) The PICC Technical Task Team would be realigned, although she mentioned that this was still not in synch with the budget, although money had been spent. (See attached presentation for full details).

Ms Schreiner hoped this would give a better sense of the work the EDD was doing to resolve the HR issues, and said this work was intensive and ongoing, hoping to put the Department on a more efficient and effective basis in 2013.

She added that there would also be an HR component to the Medium Term Strategic Framework (MTSF) processes, and so ED would be looking at what changes were necessary to the budget programme structure. Ongoing recruitment would be necessary, although it would be careful whether these were permanent appointments. There were some challenges in recruiting permanent senior specialist staff, although middle management was easier. EDD wanted to retain staff, institutional knowledge and expertise.

Discussion
The Chairperson noted that the last points made by Ms Schreiner of course related to the 2013/14 financial year structures, and answered some of the Committee’s questions raised on this point when the Annual Performance Plan was debated.

Mr H Hoosain (ID) asked for clarity on the purpose of the reports on impact of state actions on employment, and the workshop to assess employment in the State. He also wanted to know what EDD did with that information.

Mr Hoosain asked whether the EDD could yet share any information coming out of the report on the impact of BBBEE on NGP targets.

Mr Hoosain asked if there were plans to monitor the implementation and outcomes of the youth employment strategy.

Mr Hoosain noted the interventions to save or create jobs, but said that only four interventions seemed very little, given the massive targets for the NGP and the needs.

Mr Hoosain wanted more clarity on the transfer to the University of Johannesburg and the amount of R20 million for economic regulatory matters.

Mr N Gcwabaza (ANC) wanted know what had been the outcome of bargaining in the construction industry, and wondered why there was such a focus on construction, but not on other industries.

Mr Gcwabaza enquired what were the important findings on jobs created from trade in Africa, asked if there was an increase of South African exports into Africa, and in which sectors, and whether that translated into job creation.

Mr Gcwabaza noted the reference to the amendments to the Competition Act but asked when this was before Parliament.

The Chairperson explained that EDD had explained that the amendments had been assented to and signed by the President, but no effective date had been set for their coming into operation. The Bill was processed by the Portfolio Committee in the third term, but because of certain challenges, the President had delayed in assenting, and consulted, and then only put into operation certain provisions about which the Competition Commission had particular concerns – for instance, the provisions on market enquiries, which enabled the Commission to start those inquiries.

The Chairperson asked how the country had fared in relation to section 6, and whether there had been any improvements in the work of the agencies.

Mr Gcwabaza wondered why the fines and penalties levied by the Competition Commission passed through the EDD, and wondered why these were not reflected on the receipts, even though they were transferred to National Treasury.

Mr Z Ntuli (ANC) referred to the regional and local engagements that the National EDD undertook. At the time when the EDD was established, there were already provincial branches, which were working under provincial strategic plans. He asked what the nature of the engagements now was, because he had the sense that provinces were not necessarily working towards the national priorities, and whether there were Memorandums of Understanding. If so, he thought that EDD should explain them to the Committee. He also questioned why there appeared to have been only a few engagements with selected provinces.

Mr Ntuli asked what EDD resolutions were taken after the Polokwane conference, and what changes might be effected after a review.

Mr Ntuli wondered who was coordinating development finance institutions, other than the Small Enterprise Financing Agency (SEFA), and whether there was monitoring being done to avoid duplicating the work of other bodies.

Mr Ntuli asked if there had been other results, apart from the solar water heaters, arising from green-economy feasibility studies

Mr K Mubu (DA) wanted to know who would be trained by the institutes that were mentioned in the report. He also wondered about the coordination for the EDD engagements that had been listed in the quarterly report, asking if there was any danger that participants would drift away, and how this was prevented.

Ms D Tsotetsi (ANC) asked about the original goal of the senior management workshops of the EDD, and asked what the reasons and criteria were for including senior managers, who were presumed to be quite experienced, in these workshops.

The Chairperson wanted clarity on the financial statements, particularly the remarks on adjustment of receipts. She asked how an adjustment of R 51.124 million was made, whether this was endorsed by NT, and what the money was finally used for.  

The Chairperson asked for an indication of the annual budget for the EDD for the first quarter of 2012/13.

Ms Thobejane replied that the EDD had no set allocation per quarter, but had R696 million for the year 2012/13. The percentages of spending she had outlined were percentages of the total allocation for the year.

The Chairperson reminded her that the EDD had referred to spending after adjustments.

Ms Thobejane responded that this was true. She said that the R696 million included the transfers made to the entities, but the EDD had, for purposes of reporting, excluded those transfers and reported on the budget remaining, of R166 million for the whole year.

The Chairperson asked whether the 26% was the quarterly expenditure.

Ms Thobejane replied that it was just for the first three months of the year.

The Chairperson then continued that if this was so, the fourth quarter amount was R178 million and asked if was then correct to say that the EDD had, in this quarter, spent 26% inclusive of the transfers.

Ms Thobejane said that R61 million was the amount outside the transfers.

The Chairperson interjected that the total, excluding transfers, was then 31%. She asked if in monetary terms, this was R23.7 million. The report was not very clear, as it only showed expenditure percentages, but no actual figures per quarter.

Ms Thobejane clarified that the R178 million was actual expenditure for the whole quarter.

The Chairperson asked how this compared to the budget for the quarter.

Ms Thobejane said that the EDD did not make quarterly allocations in 2012/13, only worked against the yearly figures.

The Chairperson then asked how then the EDD came up with quarterly expenditure percentages, if there were no quarterly budget allocations.

Ms Thobejane explained that this was done by dividing the R696 million into four.

The Chairperson was not sure that this was the normal way to deal with these matters.

Ms Thobejane said that effectively there was a “budget” of R152.482 million, but it was not recorded as a “planned expense”. That was recorded in the Annual Performance Plan.  

The Chairperson asked whether then, for that quarter, the EDD had adjusted positively. However, she was still not satisfied with the figure and questioned where the figure of R23.7 million came in.

Ms Thobejane responded that the R23.7 million was for the whole year. If the Committee referred only to the figures of R178 million (spent) and R152.428 million (planned) they differed by R25.975 million, which was more than was planned to be spent in this quarter.

The Chairperson asked what the point was of using percentages.

Ms Thobejane answered that they originated from the adjustments. The EDD was working with the total budget allocation for the year.

The Chairperson interjected that at this point, the Committee was not dealing with the annual figures, only the fourth quarter. This was not a satisfactory way of presenting the figures, as it was not giving a full disclosure.

Ms Schreiner said that the first column (see attached financial statement presentation) gave the actual expenditure for the fourth quarter, for each item, and the percentage was calculated against the percentage for the full financial year. EDD could therefore say that, in this quarter, it had spent 31%, excluding the transfers. The percentage expenditures for the previous quarters had been set out below.

The Chairperson understood what Ms Schreiner was saying but maintained that it was not a proper way to present matters. Effectively, EDD had overspent in this quarter, having spent R178 million, when it had only R152 million.

Ms Schreiner said that in theory this was correct, if the NT starting point of dividing the budget into four 25% amounts was followed. However, the EDD had developed a spending plan, and she maintained that this was the prime consideration. In a quarter, it could be perfectly legitimate to have spending over or under 25%, and in fact the EDD had, at the end of the third quarter, sat down and developed a spending plan that would specifically address some of the spending problems that it had had to date.

The Chairperson reiterated that this presentation was not giving fully correct information to the Committee. Effectively, EDD had overspent against NT quarterly budget projections. The whole reason for having the quarterly budget was to tie in with the adjustments in October, where a department could adjust if it found it was not going to spend according to initial plans. If there had been an under-estimate, the departments would adjust, and that was why the EDD had been able to move money away from compensation of employees to goods and services, according to the report. The percentages should have been shown as percentage spending against the quarterly target.

Ms Schreiner said that the EDD could re-do its adjustments.

The Chairperson said that the Committee was simply asking for the correct picture of the spending, and this should have been apparent from the report. Normally the NT would give the EDD its year on year adjustments comparatively, to date, and that generally helped.

Ms Thobejane accepted that the EDD should have used the estimated projections for quarter four against the actual expenditure for quarter four, instead of using the total allocation as a base. She would submit a corrected version later.

The Chairperson wanted clarity on the employment assessment modeling. She noted that an MOU had been signed, but previously, when the assessment of the employment impact was being discussed, the EDD had said that it was working on the model with different departments, sectors and provinces, across the three spheres of government, including the state owned entities. She asked if the EDD was now working on the model by itself, because it had reported that modeling was completed.

The Chairperson asked for an explanation of the acronym “RIA” and the EDD responded that it referred to the Regulatory Impact Assessment.

The Chairperson again said that the targets were seemingly annual targets.

The Chairperson asked if EDD had targeted the big provinces, who made the largest contribution to the Gross Domestic Product (GDP) when running workshops or assessments, or what other rationale it might have in selecting one area above others.

The Chairperson asked which sectors within the IDC were to get R4.2 billion funding and asked also if this figure formed part of the distress fund that was budgeted for by the IDC as part of its intervention during the world economic crisis. Since IDC showed a surplus of R2 billion, she wondered if it had added to that to reach the figure of R4.2 billion.

The Chairperson commented that the targets seemed to be focusing on the coastal provinces, and she asked why, and the reason for its particularly high focus on the Western Cape.

The Chairperson asked for the view of the EDD on ITAC poultry issue, and the application for the poultry imports, since there was an opposition to the increase in tariffs against imports. She wanted more detail on that issue and what advice EDD had given.

Ms Schreiner firstly explained the figures for the adjustments. In relation to the R30 million adjusted Estimates of National Expenditure, she noted that this was intended for capacity building for the ERB. R10 million was paid to University of Johannesburg to design a course that would capacitate people employed in ERBs widely, and not only those within the EDD, and this was also intended to capacitate people who would be exercising oversight over the ERBs. The remaining R20 million was part of the rollover request to the NT, and there was, in principle, an indication that this would be approved, particularly since the EDD had been informed of this allocation only late in the financial year. The EDD would now liaise with the University of Johannesburg and other departments to look into how to use the rest of that allocation. In essence, the mandate behind that allocation was capacity building in ERBs.

The Chairperson asked if the EDD was simply managing the allocation.

Ms Schreiner said it was, and said that the allocation was designed as an intervention that was a once-off allocation for capacitating ERBs, and was not intended to be an additional baseline for the EDD.

She added that it would be useful to share with the Committee how the EDD kept track with what it was doing in the interventions. It had put in a lot of work, during the last quarter, towards designing strategic projects within EDD that would enable it to have clear work streams going forward, and to ensure they were monitored. She cited the example of small business promotional support, where the branches attending to policy, planning and social dialogue may all be playing a part, but EDD would have to maximize the synergy between all initiatives. If a project was designed around small business that would enable the EDD to deal with a variety of work streams, it could even improve the EDD’s ability to monitor the work it was doing, set clear deliverables through those projects, and determine whether this would be a single or multi-year process. It would also help to improve the Annual Performance Plan, as the targets would cease to be merely numerical. That could include a project on the green economy and a project on rural development strategy, where EDD had partnerships with other departments and other institutions. Those mechanisms could all improve the monitoring as well.

The work the EDD had been doing on monitoring the implementation of the social accord had highlighted to it the importance, from the beginning, of developing monitoring mechanisms that would enable generation of information as the work moved forward. The work the EDD had done on the PICC, concerned with in-depth monitoring and collecting of data, had also put the EDD on a very steep learning curve. At EDD monthly management meetings, the senior managers tabled monthly reports on the EDD’s APP, and collectively “owned” the information, to ensure that work done on one indicator that was linked to another was dealt with in a coherent manner. That would also help to improve planning.

Ms Schreiner next dealt with the question of how revenue from fines and penalties was handled. The entities received the revenue. It was then recorded in the books of the EDD and transferred to it, from where it was transferred over to the National Revenue Fund. It was also reported on in the Annual report.

She spoke to the question of the adjustment of the dividend figures. The MTEF estimates included potential dividends of R101 million, but during the adjustment process, EDD realised that because R50 million had been declared in June, this figure was not accurate, and it had revised its original estimate down to R51 million.

The Chairperson followed up by asking if the same principle applied for future corrections, because it seemed that the R51 million adjustment was on the basis of the annual estimates. In the report, the fourth quarter figure was R50.054 million. She had thought the figure in the main appropriation was the budget for the year, and asked for clarity.

Ms Thobejane replied that IDC declared annual dividends, and this was what was anticipated, but even then it would need often to be adjusted. However, the money was expected to be paid in the fourth quarter. The original anticipation was for R101 million, but the third dividend was R50 million, hence the reason for revising the estimate.

The Chairperson wanted to know if the post-adjustment was the annual figure. She also asked if the main appropriation listing R631.493 was the full yearly budget.

Ms Thobejane confirmed that it was. This was estimated when EDD did the ENE.

The Chairperson asked if this meant that EDD had under-collected by R508 million.

Ms Thobejane clarified that R50 million was the dividend from IDC, but the figure of R508 million represented fines and penalties paid over by the Competition Commission.

The Chairperson asked again for the reason for the R51 million adjustment.

Ms Thobejane replied that the adjustment was necessary because the declared dividend was not the same as the estimated dividend. The dividend was declared in June, but only paid out in March. When it was doing the adjustments, therefore, EDD already knew that the dividend would not reach the R101 million figure, but would only be R50 million, so it had revised the dividend estimate to match more closely on what would be paid out. By end of March, however, it had also collected R508 million by way of fines, which was recorded in the books and then paid over.

The Chairperson asked that the EDD should correct the structure of its reporting, as it was confusing.

The Chairperson noted that, in view of the shortage of time, the answers to other questions should be deferred to the following week.

Ms Schreiner asked if the Committee would prefer written responses. This would save on bringing the whole delegation down again in the following week, as that meeting would be limited to discussing the Youth Accord and she was not expecting to have a full team present.

The Chairperson replied that that was the EDD’s choice but in general the Committee would rather engage with the officials than have written responses. However, if there was no alternative those responses would need to be talked to during deliberations on that day.

Ms Schreiner said that she would bring a delegation.

The meeting was adjourned.
 

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