Progress in implementing the Social Accords: Deputy Minister & Department briefing

Meeting report

The Chairperson welcomed the Deputy Minister Economic Development Department (EDD) Deputy Minister, Mr Madala Masuku and the delegation from the Department. She gave over for the presentation.

Social Accords: Implementation and Progress

The Deputy Minister said the New Growth Path (NGP) required that the state facilitated national and workplace productivity accords, supported community organisation and strengthened existing institutions for social dialogue. The Department had facilitated five major social accords in the past three years in the context of the National Economic Development and Labour Council (NEDLAC) that focused on skills, education, local procurement, the green economy and youth employment. The EDD had engaged with officials of government departments, state-owned companies (SOCs), private companies, business associations, unions and community organisations, to implement the social accords.

The National Skills Accord had been signed on 13 July 2011. The commitments included an expanded level of training and an improvement in funding for training. Other commitments were the improvement of Sector Education and Training Authority (SETA) governance and financial management, the alignment of training to the New Growth Path (NGP), to improve the performance of further education and training (FET) colleges, and to set annual targets for SOCs. There had been work placements, or internships, provided for 8 025 students from Further Education and Training (FET) Colleges since 2012. Internships were provided to 14 287 third year University of Technology students and Eskom had provided 5 078 trainees and work placements. An overview of the progress made on the performance at FET colleges showed that 11 SOCs had contributed R8.8 million to the project.

The Basic Education Accord aimed to campaign to adopt poorly performing schools and implement whole school development programme interventions. 1 180 underperforming schools across the country had been identified and adopted by the government and social partners since 2011/12. Adopted schools had benefited from support in the form of buildings and furnishings, teachers, food and uniforms. As a result, there had been a commitment to build 500 schools in disadvantaged areas. To date, 77 schools had been completed under the Accelerated Schools Infrastructure Delivery Initiative (ASIDI) and another 180 schools had been completed at the provincial level.

The Deputy Minister listed the commitments made under the Local Procurement Accord. The national government had committed to procure goods and services worth R60.5 billion in 2014/15, with state entities and provincial departments securing around R130 billion more. The Medium Target Strategic Framework (MTSF) had set a target of 75% local content for procurement by 2019. The Department of Trade and Industry (DTI) and National Treasury (NT) had designated specific industries where it was required that state tenders prescribed a share of local manufacture. Some of the designated sectors were bus bodies, power pylons, rolling stock and solar water heater components. The Presidential Infrastructure Coordinating Commission (PICC) had made local procurement a priority by including this criterion in the Infrastructure Development Act of 2014. The PICC had also set up a localisation office with the Industrial Development Corporation (IDC), and was currently exploring various other avenues for local production. Eskom had awarded contracts for capital expansion programmes with a local content of R3.1 billion. The IDC had supported a R600 million investment in a new bus factory in Tshwane to support the Bus Rapid Transit (BRT) system, as well as assembling heavy vehicles for construction and mining, creating almost 1 000 permanent jobs. Between 50% and 75% of recent pharmaceutical tenders worth billions of rands had gone to local producers. The private sector contribution was still being audited, and was expected to be finalised by September 2014.

The Green Economy Accord had seen 443 947 solar water heaters being rolled out, and the Department of Energy was preparing to procure an additional 200 000 units by March 2015 and 250 000 units by March 2016. The Department of Energy had entered into a memorandum of understanding (MOU) with relevant FET colleges to train students in the installation and maintenance of solar water heaters. Renewable energy for the grid had a target of procuring 3 725 Megawatts under the Renewable Energy Independent Power Producers programme. This target had been surpassed, with a total of 3 916 Megawatts to come on line in the next few years.

The ‘Second Chance Matric’ programme, under the Youth Employment Accord, saw 3 648 second chance matric learners assisted through tutoring services and assisted with tuition. The Deputy Minister gave an overview of the highlights of the programme, as well as the Gauteng matric re-write programme and other initiatives. Government had facilitated the placement of 3 159 youths and financial sector institutions, and had supported the youth through learnerships, training programmes and graduate programmes. Through the work experience agenda for graduates, 11 963 Technical and Vocational Education and Training graduates, and 3 731 University of Technology graduates, were placed. Since 2009, over 77 000 young people had benefited through the public sector internship programme. In 2013/14 alone, 15 952 interns had been employed. The IDC had set aside R1 billion, and the Small Enterprise Finance Agency (SEFA) R1.7 billion, for youth empowerment enterprises for the coming three to five years. The National Youth Development Agency (NYDA) had spent R40 million to benefit 43 000 young people as part of the youth enterprise programme. The Employment Incentive Tax Act had come into effect with the aim of reducing the cost of hiring young people through a cost sharing mechanism with government. Beneficiaries should be between 19 and 29 years old and should receive a salary between the minimum wage and R6 000 per month. The incentive was expected to benefit 133 000 young people and 11 000 employers.

In conclusion, the Deputy Minister said the social dialogue process had made huge progress in setting priorities and mobilising stakeholders to foster inclusive growth and development. Monitoring and evaluation should provide the basis for identifying blockages and addressing them.

Discussion

Mr S Marais (DA) asked that the actual role of the Department, in terms of the accords, be explained. He asked what was meant by the minimum local content to the industries, because often products were passed off as being 100% South African, when most of the parts were not South African, or the manufacturing was not local. The contracts awarded by Eskom were being guaranteed by the government and he asked whether the Department was sure that it was the most affordable option and what the details of the opportunity cost assessment were. He asked that the monitoring and evaluation process be explained.

The Chairperson said the social accords initiative was a coordination mandate given to the Department. After the NGP, there had been a need for acceleration, and the coordination mandate had been given to the EDD. The work was still done mainly by the Department of Labour, but EDD’s role was to make sure everything was being done. It was encouraging to see that NEDLAC had been very active in fast tracking procedures that needed to be implemented.

The Deputy Minister said the Department’s interest was in the implementation of the NGP through job creation and inclusive growth. These aspects were stimulated in different areas, but EDD’s role was to consolidate what should be done in all the areas. The Department intervened if work was not being done, as well as intervening when opportunities that were in line with the implementation of the NGP were identified. The progress report given today had also been given to the social partners so that they could be aware of what was being achieved and what was still outstanding or stagnant. Even those that did not initially want to sign the accords, were beginning to see the work being done and wanted to sign on to participate. The work needed to be consolidated at an institutional level. Local content was guaranteed by making sure that goods were not imported if there was a local company manufacturing the same product. It was also guaranteed that components should be sourced locally, even if the whole product could not be manufactured locally, to maximise industrialisation capacity. If a component was patented somewhere else, the DTI and Treasury guidelines on localisation were considered in negotiating the extent to which parts should be manufactured locally or imported. Transformation had a cost involved, especially when conditions of localisation were included. Monitoring and evaluation was being done and in most cases, a status report on what an entity had been doing was enough to warrant analysis and follow-up.

Ms Jennifer Schreiner, EDD Director-General, said Eskom, as the preferred choice, also depended to a large extent on how the tender process had been crafted, and what the expected outcomes of such a relationship were. She asked if the details on the opportunity cost assessment could be forwarded to the Committee in writing.

Mr Christian Prins, EDD Director: Economic Planning and Coordination, said the second commitment of the accords was to establish local content specifications. This was implemented through a designation process where the DTI, together with the South African Bureau of Standards (SABS) put in place technical specification standards for local content for a specific product. It would then go via the local verification office and once it was designated, it would be incumbent on the chief procurement officer to ensure that the technical specification standards had been complied with.

Mr Marais said the Deputy Minister’s answer on whether an opportunity cost assessment had been done was not adequate. When all the accords had been done, there should be a mechanism in place that could identify problems and challenges before they happened, and it would provide evidence of real economic development. The reality was that car bodies were advertised as 100% local content when in actual fact they had not been produced from 100% South African manufactured components.

The Chairperson said the Department had indicated that they would respond in writing to the question on the opportunity cost assessment. It was evident from a recent visit to Volkswagen (VW) South Africa that external companies were still involved, and there needed to be commitment from all role players on localisation.

Mr P Atkinson (DA) asked where exactly the artisans were being trained. In terms of pharmaceutical tenders, was a lot of business being given to Aspen, or were other smaller pharmaceutical companies being empowered? He asked if the roll-out of the 443 947 solar water heaters were spread out across the provinces, or concentrated in a few areas. He asked what the Renewable Energy Independent Programme was, and how much the placed interns in the public sector internship programme were being paid.

The Deputy Minister said the FET colleges were the centres for the training of artisans, while both Eskom and Transnet had their own training institutions. A number of private companies, such as Sasol and BP, also had accredited training institutions. Every province had a solar water heater programme, but the bigger numbers were in the more densely populated areas. The minimum stipend for interns was set at R4 500 and could be adjusted, based on the volume of work.

Ms Schreiner said the Renewable Energy Independent Programme was part of the Integrated Energy Plan. It was a mechanism whereby renewable energy was provided by private companies. It covered sun, wind, hydro and bio-gas processes, which were the full range of renewable energy, and the process was led by the Department of Energy. It was a procurement process, and three rounds of the bid had been completed. Each round had seen a particular energy allocation, with around 60 preferred bidders that had been identified, which in turn would generate about 10% of South Africa’s energy requirements. As the programme progressed, the need for localisation and capacity building were important concepts that needed to be considered.

Mr Atkinson said 10% of South Africa’s energy requirement equated to the extent of Nigeria’s energy requirements. It would be very interesting if the Department, in future, could provide the Committee with examples of the Renewable Energy Independent Programme.

The Chairperson said perhaps a joint meeting with Eskom could be arranged.

Mr M Mbatha (EFF) asked what mechanism was used by the Department to assess annually if the accords were implemented in accordance with the plans. He suggested an annual dialogue of peer reviews, where all the stakeholders were called together to share experiences. A lot of progress had been made by the Department of Higher Education and Training (DHET) on Technical and Vocational Education and Training (TVET), but there were not enough internships. The private sector needed to assist government in giving these students the necessary practical training and experience to obtain artisanship. He asked the EDD to partner with the DHET in pushing the private sector on this issue. The statistics released by Statistics South Africa did not seem to give positive employment prospects for black youth, and these types of programmes should perhaps be scaled up to make a bigger impact. Role players were often allowed to increase their profits from these programmes, instead of socially playing their roles. It was high time that the Department, during negotiations, increased the amount of dedication to increase the intake of black youth.

The Deputy Minister said the private sector role in the social accords was important. The Deputy Minister in the Presidency shared the same sentiments around the Youth Accord, as well as the idea that best practices should be shared among the principal role players. He thanked Mr Mbatha for the suggestion to strengthen partnerships, because the importance of strong partnerships was evident in the work that had already been done. The Department was continuously trying to balance the profits made by social partners with increasing the impact of the work.

Mr S Tleane (ANC) said the Department should be commended for continually delivering on the government mandate. The SOCs were delivering through their initiatives, but it seemed clear that the private sector was not necessarily doing enough. It was critical that the EDD engaged with the private sector to ensure more opportunities were created for disadvantaged youth to participate in the economy. The initiatives by ABSA were recognised, but most banks employed youth on a temporary basis and it demoralised young people because they could not see a future for themselves at the banks. It was important to build confidence in the youth by ensuring proper employment and the Department should investigate this matter. He asked how much of the R3.1 billion in contracts awarded by Eskom, had been given to emerging companies.

The Deputy Minister said the issue around the young people in the financial sector would be discussed with social partners as a weakness in the work that was being done. Tax incentives should not be a condition of employment, and the outcomes of the discussion would be communicated to the Committee. The EDD could possibly do an analysis on the conditions and sustainability of employment in the financial sector. The Department would have to give the breakdown of the R3.1 billion to the Committee in writing, but SOCs like Eskom were bound by Broad-Based Black Economic Empowerment (BBBEE) codes in their allocations.

Ms D Rantho (ANC) said the community in Aliwal North had a problem with solar water heaters. It was an area that got very cold during winter and the solar water heaters that had been installed could not withstand the extreme cold. This had caused leakages and some houses had burned down, and the municipalities could not explain where the solar geysers had come from. It angered the community to such an extent that Ms Rantho said she had had to move out of her house, because of the threat of violence. She asked that the training of students to install and maintain solar water heaters was speeded up.

The Deputy Minister said the Department would engage with the Department of Energy to investigate the matter. It was not a situation that could be postponed until the students were trained on solar water heaters, but the area and the community needed to be visited to assess the conditions.

Mr I Pikinini (ANC) said monitoring and evaluation was important for these programmes. The coordinating role of the Department should focus more on the localisation aspect.

The Deputy Minister said localisation was a focus area for both EDD and DTI, because when there was growth in the Gross Domestic Product (GDP), job creation for local people would allow them to start industrialising.

The Chairperson asked how many employment opportunities had been created through the R600 million given to the Industrial Vehicles Corporation (IVECO) to increase local content. She also asked if this R600 million empowered any local companies. Although the success rate of 75% for the ‘Second Chance Matric’ programme was quite good, she asked what the Department did to follow-up on those that were not successful. She asked what the timelines were for the training of students to install and maintain solar water heaters, and how many students would be targeted for this programme.

The Deputy Minister said the IVECO investment was from the IDC, co-funding a factory under construction. The investment would create 1 000 permanent jobs. There was a team that looked at struggling entrepreneurs and critical initiatives that would create employment. The Department would provide the information on the unsuccessful ‘Second Chance Matric’ and the students undergoing the solar water heater training at a later stage.

Mr Tleane asked how far South Africa was in building and assembling its own car. He referred to the booklets that summarised the accords and asked if they could not be made available to the public.

The Chairperson said support from all departments was necessary to drive innovation.

The Deputy Minister said the science and technology sector was doing intensive research, and some of the research focused on critical issues that drove industrialisation. The electric car was also a focus of the research.

Ms Schreiner said the distribution of the booklets had until now been restricted only to engagements with social partners and the Department’s own engagements. Through the discussions today, it had become clear that it would be good to make it more publicly available. The Department would, through their communications department, work out a distribution schedule.

The Chairperson said the accords were for the public and they should be publicly discussed. She gave an overview of the outstanding responses from the Department. She thanked the Department for the progress report, as well as Committee Members for their input.

The meeting was adjourned.