NEDLAC & Department of Labout on their 2013/2014 Annual Reports

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Employment and Labour

17 October 2014
Chairperson: Ms L Yengeni (ANC)
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Meeting Summary

The Portfolio Committee met to receive presentations from the National Economic Development and Labour Council on its 2013/2014 Annual Report, the Department of Labour on its Annual Report Achievements and Challenges, the Department of Labour on its presentation on the mining sector, and the Department of Labour on its Quarter 1 Report for the Financial Year 2014/15.

NEDLAC presented on their Annual Report 2013-14 to the Labour Portfolio Committee. NEDLAC noted the challenges that had been encountered in the previous year mainly due to the fact that it was the year in the run up to elections. Several key pieces of legislation had been passed and substantial strides had been made to improve internal governance. An unqualified audit had been received from the AGSA and steps were being taken to become compliant with PFMA regulations as well as Treasury regulations. All matters on the Annual Performance Plan (APP) had been taken into consideration and 53% of the arising matters had been dealt with. NEDLAC had managed to keep inside its budget in terms of actual spending and was conducting several different researches.

During the discussions which followed the presentation, a Member of the DA raised a couple of important questions on whether small businesses had a voice at NEDLAC, and what had been the status and outcome of the Special Audit Report. The Committee was very concerned on how they had been operating without a risk management committee. The Chairperson was not convinced about the presentation format of the Finance Report and ordered NEDLAC to produce a quarter on quarter financial report by Tuesday 21 October 2014.

The Department of Labour made a presentation on its annual report 2013-14. The department managed to attain most of its targets in all four programmes. The Department managed to receive an unqualified audit and had spent 87% of the budget.

Most of the Committee welcomed the report of the AGSA. However, a Member of the DA did not share the same enthusiasm and optimism as his colleagues and pointed to the perspective that the Department was actually receding in terms of performance. Another Member of the DA noted that the Department had come out 144th on an international survey with 148 countries.

Meeting report

NEDLAC 2013/14 Annual Report Presentation

Mr Alistair Smith, NEDLAC Executive Director, started by saying the past two years had been difficult for the country. There was a need to address unemployment and other challenges.


Significant progress had been made in improving the performance of NEDLAC. This had been mainly due to the efforts of beefing up the secretariat. There was generally a perception that NEDLAC was the domain where legislation came from. This was not the ideal perception. Social partners of NEDLAC were now also keen to deal with key pieces of legislation. The previous year had been challenging as it had been the year preceding elections. A number of key pieces of legislation were passed however. In terms of the internal governance of NEDLAC, there was a dramatic improvement. NEDLAC managed to receive an unqualified audit and strove to be compliant with key pieces of legislation such as the PFMA and the Treasury Regulations.

Role and Functions

There was also a need to consider the role and function of the Executive Council. Performance was dependant on the partners and the commitment of government was critical. Challenges had been experienced at the commencement of the year with the Tax Amendment Bill.  NEDLAC also managed to set up a meeting with Cyril Ramphosa, the Deputy President of South Africa.  President Jacob Zuma in his State of the Nation Address 2014 (SONA) said there is a need of social dialogue to address economic challenges and poverty. He called for people to work together to achieve economic growth. Social partners of NEDLAC were beginning to heed the calls of the President. The current challenges of NEDLAC had much more to do with capacity. There had been calls for a leadership and paradigm shift to a position where there is more focus on leadership and relationships. The challenge that had been central to this problem is how the democracy can be deepened whilst at the same time accelerating economic change. Government stressed on the need for collaborative change. There was also a need for quick-fixes to address problems.  Conclusively, NEDLAC should not be abandoned as a platform for facilitating discourse.

Performance Report

Mr Mahandra Naidoo, NEDLAC Head: Programme Operations, presented on the Performance Report, and also considered the challenges in terms of performance objectives. The report was set to give a synopsis of the annual report. This was based mainly on two categories namely, matters on the APP and arising matters. In terms of matters on the APP, all matters had been dealt with, whilst on the other hand in terms of arising matters, there had been eight pieces on legislation tackled accounting for 53% of the arising matters.

Considering NEDLAC’s achievements in implementing the Annual Performance Plan 2013/2014 (APP), generally the key challenges had arose in terms of governance, and in that regard there was substantial progress. Year-on-year delivery improvement had moved from 33% in 2011, to 76% in 2012, and stood at 80% in 2013. Success had also been realised in the passing of the Restitution of Land Rights Amendment Bill, Gas Amendment Bill, Expropriation Bill, Public Administration Management Bill, and the Unemployment Insurance Management Amendment Bill. The following matters had not yet been tabled by Government comprising of the Housing Consumer Protection Bill, Amended Occupation Health and Safety Act, Compensation for Occupational Injuries Act, Regulations for assessment of work of work of equal value, Review of the Code of Good Practice on Dismissal and the Housing Consumer Protection Bill. Functioning of governance structures had improved, but executive representation and leadership commitment required further effort.  

Ms Michelle Govender, Acting CFO, NEDLAC, presented the summary of expenditure for the year 2013/14. She said the plan was to meet expenses with income received. All in all, at this point a good job had been done. Considering the Actual Expenditure against the Budgeted Expenditure, NEDLAC had come in line with expectations in all the different facets inclusive of capital expenditure, core operations, capacity support, administration, and staff cost. Only the administration cost exceeded the budgeted cost.

Mr Smith spoke on the organisational priorities for 2014/15. He said priority and focus had been given to performance, increasing the competence of the secretariat, and polishing overall systems. Initially, NEDLAC had received significant turnover of staff, but this trend had however stabilized and NEDLAC has managed to recruit a young crop of staff comprising mostly of young black personnel. Effective leadership had remained an enormous challenge for NEDLAC mostly in the areas revolving around research and networking. The core focus had been to adhere to the NEDLAC protocol.

Mr Naidoo gave a summary of the year through the form of a year-to-year performance update.

Programme 1 which related to enhancing organisational efficiency and efficiency received the following highlights; a NEDLAC Annual Summit was convened, summit satisfaction survey completed, EXCO session with the Governor of the Reserve Bank, ICT Masterplan and Governance Framework developed and a document management system was also implemented. The outstanding priorities in terms of this programme were the establishment of a risk management committee and the completion of renovations on the NEDLAC house.

For programme 2 which was core operations, the highlights of the programme were as follows:

In terms of the development chamber, there was engagement on the Extension of Security Amendment Bill, Chamber Session on EPWP concluded, Research on EPWP initiated to inform planning for EPWP3 and chamber satisfaction surveys undertaken. The remaining priority was on the conclusion of arising matters, namely the National Land Transport Amendment Bill.                                    

On the Public Finance and Monetary policy chamber, there were sessions convened, National Budget, measures to encourage household savings, Financial Sector Charter and scorecard, tax review and sector volatility. There were also capacity building sessions for chamber representatives as well as research on tax initiated as an input to the Davis Tax Commission. There were sessions on household access to finance and SMME financing.

In the trade and industry chamber, strategic sessions with the Minister of Trade and Industry were held, research on electricity supply and pricing initiated, research on creation of employment in the South African mining industry was finalised, and engagement on the Gas amendment Bill was concluded. The remaining priority was on the Engagement on the Promotion and Protection of Investment Bill.

In terms of the labour market chamber, the main highlights were the completion of the Decent Work Country Programme Country Profile, engagements undertaken with institutions that fall within the labour market ambit, and engagement completed on amended Employment Equity Regulations. The remaining priorities were the engagement on the Occupational and Health Safety Amendment Bill and the convening of the Labour Relations Indaba.


Ms Mantashe welcomed the report. She asked for NEDLAC to elaborate on their concern about the functioning of the executive. NEDLAC was the only formal platform and over the years there had been much broader discourse on the policy agenda.

Mr Smith replied that the matter was not formally tabled on the executive.

Mr I Ollis (DA) stated that he had several questions to ask. He asked about the resignation of the Executive Director, Alistair Smith. He asked about the summit on labour relations on who had been involved, current members of NEDLAC involved, political parties involved and overseas parties. How much the cost of the revamp of the NEDLAC office had been, and queried on the current status and what was still in progress on the special audit report.

Mr Smith replied that the people directly implicated had left the employ of the organisation. The report was now in the hands of the relevant authorities.

On the question of his resignation, he said he had reached that point in his life where he had a 5 year old grandson and wanted to concentrate more on his social responsibilities. He wanted to regain a bit more of his own life. This had been more of a personal decision.

Mr D America (DA) asked whether the different parties were ready to reach consensus given the challenge of ideological differences that had been alluded to. He further asked on whether AMCU would be accepted as a member if they applied to join NEDLAC.

Mr Smith replied that whether or not consensus was reached, it is always important to separate issues. When there are political issues there would always be differences. NEDLAC however focuses on particular issues

Mr Ollis asked whether small businesses had a voice. He was of the opinion that was difficult for small businesses to have a voice at NEDLAC. When had been the last time this matter had been discussed, whether it was currently being debated, and if so, what had been the outcomes in the matter? He had been raising the matter since 2009 without any headway.

The Chairperson asked NEDLAC whether they were in a position to engage with the committee.

Mr Smith asked for clarification on the question from the Chairperson.

The Chairperson said she asked NEDLAC on whether it was ready to tackle question on that very day.

Mr Smith said NEDLAC was ready to engage with the committee. On the issue of AMCU, labour was represented around the 3 major federations. That had been the way since the formation of NEDLAC. AMCU is a member of NECTU and is therefore represented.

On the question of revamping the office, he said the cost was estimated at about R 30million. One of the reasons for the movement had been that the old building had fell into a state of disrepair.

The Chairperson stated that the slides on the NEDLAC presentation did not give any clarity on the budget. She said it would have been preferable if they had given a quarter on quarter presentation of the budget not a combination of all quarters. She sought clarity on what capacity support entailed, how much had been budget for and lastly how much had been spent.

Mr Ollis stated that his questions had remained largely unanswered. He was still not happy about the special audit report; the committee still did not have the report and did not know what happened. He said although the special audit report was before Mr Smith’s time, people could not be left to run away, resign and work somewhere else. Such conduct in the private sector would result in the prosecution of the responsible parties. He asked who in NEDLAC would be responsible for prosecuting the alleged offenders.

The Chairperson said she did not think the Executive Director could not answer, and that questions must be directed to him.

Ms F Loliwe (ANC) asked how the organisation had been working without the crucial risk management committee. She further asked if investigated had been completed, and if not, what was the stage they were in.

Ms Mantashe said NEDLAC was in a good capacity to respond.

Mr Smith said in terms of capacity support, this related to support to social partners. There was a specific allocation for this which amounted to about R 3million.

The Chairperson asked for clarity on the administrative cost and capacity support.

Mr Smith said capacity support historically formed part of NEDLAC support to its partners. The idea was that the funding would assist them in their research and technical needs. NEDLAC however does check-ups on a quarterly basis. Administration cost covered staff cost. Staff cost had increased over the past year because in the previous years there had been understaffing. The other part of the administration cost came about as a result of compliance costs. In the past there had been no proper internal audits. AGSA compliance costs had also contributed to the administration cost. Administration cost also included the cost of entity management.

The Chairperson asked whether the capacity support cost was subtracted from the administration cost. She asked how much the administration budget was, how much had been spent, and whether NEDLAC partners were required to account for their monies they received.

Ms Govender stated that in terms of the Annual Performance Plan, capacity support was on its own. The budget was about R5.5 million.

The Chairperson advised that when NEDLAC comes before the committee, they should account for the money budgeted for by program and show how much had been spent. What had been shown by NEDLAC did not amount to readiness to engage in discourse with members of the Portfolio Committee. She stated that members of the committee would not be able to see the progress when figures were bunched up together. She called for NEDLAC to give a better finance report before the committee, and inferred that she believed that they had one. She ordered that by close of business, Tuesday 22 October, a proper finance report should have been sent to the committee.

Mr Smith stated that they would break the figures down.

The Chairperson said they needed to break down their figures according to programs given on their strategic plan.

Mr Smith stated that in terms of the forensic investigation, the report had been handed over to the Minister, Treasury and the Executive Council. On the point of criminal sanction, he stated that no criminal action had been taken. The Executive Council had been tasked to take the necessary legal action. On the issue of governance, NEDLAC had done a lot in order to strengthen internal controls.

Mr Ollis said Mr Smith was trying to avoid implicating people, but the problem had been that there was no report before the committee on the subject matter in question. He asked how much money had been involved in the financial irregularities. He asked whether the acting Director General of the Department of Labour, could account for the matter.

The Chairperson stated that the Director General of the Department of Labour was also acting. She said she did not want to say that NEDLAC cannot account because they were also acting. If any person took over an entity, they would be briefed on the pertinent matters. Equally, all the relevant parties could answer the questions. She stated that the committee would ask the Department because NEDLAC reports to the Department. On failure to secure a satisfactory answer from the Department, then the committee would ask the Minister to come before the committee to account.

Ms S Van Schalkwyk (ANC) said she supported the Chairperson on points mentioned.

Ms Loliwe stated that she also supported the Chairperson.

Department of Labour 2013/14 Annual Report Achievements and Awards

Mr David Khumalo, The Acting Director General of the Department of Labour, presented the 2013/14 Annual Report Achievements and Challenges.

The Department had a briefing on the key issues that take place in the compensation fund, Unemployment Insurance Fund, CCMA and NEDLAC.

Ms Teboho Maruping, Chief Director Operations at the Department of Labour, led the presentation.

Programme 1 focused on corporate services progress. The target had been to achieve 10 labour centres in two provinces however this was not achieved because of the limited number of service providers on the database.

Programme 2 dealt with inspection and enforcement services protection. An annual target of 150 entities had been posted with a target of 37 entities in the quarter. This target was not realised as only 13 entities had been inspected. This was mainly due to postponement of appointments by employers.

Programme 3 focused on Public Employment Services Achievements. The programme sought to provide assistance to companies and workers to adjust to challenges in the labour market. Programme 4 looked at Labour Policy and Industrial Relations.

The main achievement was the promotion of equity in the labour market, with 435 labour market inspections being carried out. The challenge was that additional companies had been added to the targets. In terms of protection of vulnerable workers, the main achievement was that 129 259 against a target of 90 000 targeted workplaces. In terms of problematic sectors, there was a need to focus on the areas with the highest number of complaints and focus on them.  In terms of enforcement mechanisms two hundred and ninety-five cases had been referred to the Labour Court. Non availability of employers had also been a critical challenge. In terms of protection of vulnerable workers, 66% against a target of 75% had been resolved in the first fourteen days. In terms of strengthening social protection, 34 174 workplaces were audited with 74% being compliant and the remaining 34% failing to comply. The main challenge had been that the targets set had been too high.

Making a consideration of Programme 3, 84.9% of the work on the Employment Services Bill had been completed. In terms of contribution to employment creation, a total of 618 092 work seekers had registered on the ESSA database. In terms of the main achievements, 41% of the work seekers against a target of 50% had been provided with employment counselling. A total of 15 570 work seekers were placed in registered employment opportunities against a target of 19 000. A total of 448 124 work seekers were referred to other services against a target of 120 000. A total of 309 private employment agencies were registered against a target of 500.  A total of 193 migrant work permits had been received, with 86% of them being processed in the first 30 days.

In terms of Programme 4, the main achievement was that the Employment Equity Amendment Act 2013 had come into law on 14 January 2014. The major challenged had been in delays in signing off policy. In terms of collective bargaining, the Labour Relations amendments had been passed. 4 annual labour market reports had also been produced and published. In terms of Research and Policy Planning, there was research being conducted into a 40 hour working week.

Mr Khumalo looked at the ICT challenges and achievements. The President issued a proclamation that the Special Investigation Unit (SIU) would look at the IT contract. They are currently reviewing the documents to consider whether or not the contract had been overcharged. In 2002, a contract had been concluded with Siemens but Siemens had subsequently sold its business to EOH. When the contract ended, it had been extended to facilitate exit and transfer. After consultation with SETA and the National treasury, the contract was extended for6 months.  This was also pending litigation on the matter. 9 staff members working directly on the project were transferred from EOH to the Department. SETA advised that a tender process be opened for the residual IT services. A tender was given to Dimension Data for the following 3 years. Procurement of all IT needs was now done through SETA in order to facilitate better deals.

Department of Labour Report for the Financial Year 2014/15

The Department of Labour had received an unqualified audit from the AGSA on the regularity audit. From an allocation of R 879million, 17 % was left.

Mr Khumalo said having received the annual report the Department had taken all the issues into consideration.


Ms Van Schalkwyk commended the Department on their good audit outcome. She asked a question on the reporting structure. She noted that it was important that the Department had received a 97% success rate in their Labour Appeals. She furthered asked whether the Department received feedback from workers who had secured employment. 3% of the budget however that was not spent amounted to R73,8 million, which was money that could have been used to provide services. 97% of the budget had been used to achieve 75% of the target was also of concern.

Mr Khumalo replied that this was a matter that the department was struggling with.

Ms Mantashe welcomed the ICT report of the Department. She asked the Department to explain what the under spending of the budget entailed and enquired when sufficient social protection could be attained.

Mr Khumalo said EOH had bought the business as a going concern and had taken over all contracts of Siemans, but problems arose such as when they bought the business, things like employee retirement schemes had not been carried over.

Mr Ollis said he did not share the enthusiasm of his colleagues. 82% of notices served were way below target. He put it on record that the Department was doing such a bad job on inspections that the Treasury had cut their budget by 59%. The figures of the Depart did not also add up. A difference in 11 000 was present in the same figure on age 50 of their presentation compared to page 52. He pointed out of the 682 000 job seekers only 52 000 had been placed. He asked a question on the SA Council for the Blind. From a budget of R318million, the Department had only given them R14 million.

Mr Khumalo said in relation to the money relating to the Council for the Blind, he said these organisations had been inherited from the previous dispensation. When their books had been audited, they had failed to account on where they had spent the money which had resulted in the Department cutting their funding.

Mr M Bagraim (DA) said the Department was struggling and had been paced 144th out of 148 countries in a survey. Further that the Department had made little contribution in the strikes that recently transpired.  He had met inspectors who said insufficient funds were being set aside for the process.

Mr Khumalo replied that on the question of rating the Department, he said many factors are taken into considerations which go beyond the issues that the Department on its own is able to control.

On the issue of strikes, the Department did not need to appear in the media to tell people how it was intervening. The Department would negotiate with the relevant parties in such cases and the Department could not be mediator as well as spokesperson.

On the issue of inspectors, he said South Africa had a low ratio of inspectors to people which was lower than the international average with a ratio of 1:131 000 compared to 1:20 000 internationally. He mentioned that inspectors needed to be resourced for the work that they undertook

The Chairperson asked Mr Bagraim to elaborate which were the strikes in question.

Mr America asked a consideration into the number of inspections by the Department, a look into vulnerable workers and non-compliance.

The Chairperson said on the issue of inspectors, the Committee could not rely on hearsay evidence and that such persons should appear before the Committee and testify or furnish Mr Bagraim with written reasons that he can submit to the Committee as evidence.

Mr Bagraim said he would supply a list of all such affected people he had.  He noted that he had spoken to the individuals personally.

The Chairperson indicated that on the presence of such evidence in future, the Department would be compelled to respond to the question.

Ms Loliwe said members needed to stop converting interactions with the Department into their Constituency work. She shared her personal experiences and said she had worked for trade unions and they would look for the Department only as a last remedy and hence they were not to blame for not being involved in some of the matters.

Mr Khumalo said when people have been referred, they had no obligation to come back to the department and report which employer had taken them.  In future they would put an obligation to do so and on failure to do so, they would be removed from the database automatically.

He said considering vulnerable employees, the main problem arose as a result of the failure by employers to comply. Turning to the question of the R 59 million, it only related to the compensation of employees. The Department was currently in the process of specialising and the R 59 million did not refer to ancillary work. The money could only be used for the sole purpose of salaries and the Treasury had said it would return the money underspent in the 2016 financial year.

The Chairperson indicated that there was not enough time to continue with the Departments presentation and they would continue the following time they came before the committee.

The meeting was adjourned. 

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