Department of Labour on its 2013/14 Annual Report

NCOP Economic and Business Development

18 November 2014
Chairperson: Mr L Suka (ANC, Eastern Cape)
Share this page:

Meeting Summary

The Department of Labour (DoL) reported on its annual report for 2013/14, providing details of the highlights and challenges of the year under review. It said it was focusing on strengthening social protection by giving greater attention to the fund components of their work -- the Unemployment Insurance Fund (UIF) and Compensation Fund (CF).

The Department had inspected 35 174 companies, against a target of 9 500. It had since amended its targets to be aligned with the resource capacity at hand. On inspection outcomes, 97% of cases referred to the labour court had been ruled in favour of the DoL. On Public Employment Services (PES), regulations had been put in place to contribute towards employment creation. Funds for employment counsellors were insufficient. The DoL had attempted to obtain additional funding to beef up capacity, but had been unsuccessful, meaning that it was likely to continue to under-perform in this area. 15 570 work seekers had been placed in registered employment opportunities, against a target of 19000.

There had been a situation where a ten-year contract with Siemens had been extended by a year. Siemens had then ceded their rights to EOH and left the country, for EOH to complete the remaining contractual year. There had been concern about employees at the end of the contract in reference to section 197 of the Labour Relations Act (LRA). The DoL had managed to absorb 97 staff members into the Department. It had brought the Skills Education Training Authority (SETA) into the procurement process for a new company for Information and Communications Technology ( ICT) services.

The DoL had an received an unqualified audit report with an emphasis of matter related to the 3% budget under-spending. The Auditor General (AG) had pointed out material misstatements in the annual performance report. The AG had also found the report did not ensure that the preferential procurement policy was implemented within the Preferential Procurement Policy Framework Act. Irregular expenditure had also been highlighted.

Members asked what the government was doing about young people being employed for endless periods on a part time basis, but were denied benefits as stipulated by the LRA. They had concerns about international businesses and organisations not employing a satisfactory number of South Africans. They also asked about private employment agencies charging and exploiting desperate workers, with no action being taken. They asked why there had been so much overspending on the municipalities, especially in the Northern Cape. What was the DoL doing to retrain those workers who had lost their jobs, to help them get re-employed? What was the Department doing to address its key goals of creating jobs, promoting equity and industrial peace, and addressing worker exploitation? 

Meeting report

Opening remarks

The Chairperson opened the meeting and welcomed everyone. He then introduced the briefing on the annual report, expressing his desire to hear how the Department intended to combat unemployment and address the issues raised. He had to be out of the meeting by 12pm, so the delegation had 45 minutes to present the report to the Members. He also asked whether there were any apologies from the Labour ministry for the absence of some of the delegation members.

Presentation of 2013/14 Department of Labour annual report

Mr Sam Morotoba, Acting Director-General: DoL, greeted everyone and introduced the delegation, apologising for the absence of the Minister, the Deputy Minister, who was at a mining summit, and the Director-General of the DoL.

He said the DoL had three big offices and nine provincial offices in South Africa. It had about 126 labour centres that they operated, and 76 Thusong centres which the Department visits once a week, including traditional authority areas to provide services. The work of the Department was quite broad. It transfers money to other entities, such as the Commission for Conciliation, Mediation and Arbitration (CCMA) and National Economic Development and Labour Council (NEDLAC), and sheltered employment factories. For the presentation, the DoL had covered only the departmental component of the report -- a separate annual report could also be made available covering the rest of the details.

Mr Morotoba said that the DOL had extended links with other entities which were responsible for certain funds. He moved to programme 1 of the report -- Administration -- which included corporate services. The presentation omitted achievements in the administration area to focus more on the other programmes. Inspections and Enforcement (IES) covered maintenance of standards in the workplace and assisting the government by regulating employment conditions for decent work and ensuring compliance. Public Employment Services (PES) assisted companies and workers to adjust to the changing labour market and regulating private employment agencies.

The DoL had received an unqualified report on their financials. He added that the Department would give a very brief overview of the financials, and concluded by saying that the DoL was working towards a clean audit in terms of finances.

Ms Aggy Moiloa, Chief Operating Officer (COO), covered programme 2 -- Inspection and Enforcement Services (IES). The DoL had achieved a performance of 435 in promoting equity, against target of 340. The challenge was that there were additional companies which had applied. With regard to protection of vulnerable workers, the DoL had carried out 90 000 of the targeted 129 259 inspections.  She also referred to the provincial breakdown of targets which had been met.

She moved on to the problematic sectors which had the highest complaints that triggered inspections. The DoL had managed to give 27 559 notices, against a target of 31 733. 66% of vulnerable workers’ complaints, against a target of 75%, were resolved within 14 days. Capacity was a big challenge and the DoL had a training programme for client service officers to raise capacity. On the Unemployment Insurance Fund (UIF) and Compensation Fund (CF), the DoL was also focusing on strengthening social protection by give more attention to the fund components of their work. It had inspected 35 174 companies, compared to a target of 9 500. The DoL set a high target considering the actual resource capacity (skills) available to conduct occupational health and safety (OHS) work. The DoL had since amended targets to be aligned with the resource capacity at hand.

On inspection outcomes, 97% of cases referred to the labour court had been ruled in favour of the DoL. The 3% of cases was due to defects in compliance orders/not observing the separation of duties. On PES, regulations had been put in place to contribute towards employment creation. However, the Act had not been promulgated as such. On the issue of the campaign aimed at marketing PES at the local level, the DoL had managed to do 801 of these at the local level, and 58 national campaigns for the year.

Over 600 000 work seekers, against a target of 500 000, had been registered at Employment Services of South Africa (ESSA). It had been able to provide counselling for 41% these registered work seekers. The challenge was that the DoL was understaffed for employment counsellors, and finances were also insufficient. It should have employment counsellors in all 126 centres in the country, but they currently had only 96. The DoL had attempted to request additional funding to beef up capacity but had been unsuccessful, meaning that they were likely to continue to under-perform in this area. Against a target of 19 000, 15 570 (82%) work seekers were placed in registered employment opportunities. The skill-level of the average work seeker was very low, which had been taken into account when setting the targets. Employers look for particular skills.

Referring to the provincial breakdown, she said the DoL had managed to refer 98 000 people to employment opportunities. 128 work seekers had been referred to other services, such as unemployment insurance (UI) and labour activation programmes, and also compensation depending on qualifications.

Other services in the presentation referred to unemployment insurance. The DoL managed to register 2 427 employers on ESSA against a target of 1 000. It also managed to register 309 private employment agencies out of a target of 500. On the issue of migrant worker permits, some applications had been incomplete, making them difficult to finalise. The DoL had managed to process 86% of them and had finalised them within 60 days.

The DoL had a Memorandum of Agreement (MOA) with entities within the Department, and transferred money to them. R6.911 million was transferred to Productivity South Africa and other funding went towards sheltered employment factories and Compensation for Occupational Injuries and Diseases Act (COIDA) for government employees. These transactions were governed by MOAs.

Mr E Makue (ANC, Gauteng) interrupted to find out what COIDA meant.

Mr Morotoba responded that COIDA stands for Compensation for Occupational Injuries and Diseases for public servants who got injured or contracted occupation-related diseases in the workplace.

Ms Moiloa proceeded with the presentation, and spoke about the Employment Equity (EE) Amendment Act of 2013 which had been passed into law on 14 January 2014. She said that delays in finalising amendments had been caused by public comments. The annual employment equity report had been developed by March 2014. The DoL had challenges with gaining statistical records for data analysis of EE for the annual report. The IT department was looking into this. 30 income differentials had been assessed to determine race and gender disparities in income.

The Chairperson interrupted and asked for a clearer explanation of the 30 income differentials.

Ms Ntsoaki Mamashela, Acting Deputy Director General: DoL, clarified that this referred to the assessment of 30 companies to check if there was equal pay for work of equal value, and that there was no unfairness or discrimination due to race, gender or disability.

The Chairperson said that this matter was very important, and referred to the upcoming 16 days of activism.

Ms Moiloa continued with the report, saying the hospitality and taxi sectoral determinations had been reviewed and published. New sectoral determinations were being investigated, in particular the funeral undertaking sector. Child labour protection was also being implemented.

On international relations, she said the Memorandum of Understanding (MoU) with Lesotho, China and Namibia had been reviewed and finalised. Algeria was still outstanding, and this issue had been raised through diplomatic channels. The DoL participated in the African Union, the Southern African Development Community (SADC), African Union Labour and the Social Affairs Committee of Ministers. It had participated in the G20 processes, the African Region Labour Administration Centre (ARLAC) and the 102nd International Labour Organisation (ILO) conference.

On collective bargaining, Labour Relations Act (LRA) amendments had been passed by the National Assembly. This affected over 1 million employees. They had processed 146 applications for registration by labour organisations within 90 days, and they continued to monitor the process.

On labour market information systems, there were four annual reports which had been published. The Department had also done fieldwork for a survey to determine client satisfaction with DoL services. Two briefing reports had been submitted to the Minister on a labour force survey (LFS) and Unemployment Insurance (UI) data analysis. Research policy and planning was currently going on at different levels of advancement – for example, the effectiveness of bargaining councils’ exemptions processes. Research had provided feedback on how the Department was doing in terms of progress.

Mr Morotoba said that Information Communication Technology (ICT) had made a lot of headlines, and the DoL had tried to turn this area around because ICT formed the core of the work that the DoL did. It had a situation where a ten-year contract with Siemens had been extended by a year. Siemens had then ceded their rights to EOH and left the country, for EOH to complete the remaining contractual year. There was concern about employees at the end of the contract, with regard to section 197 of the Labour Relations Act (LRA). The DoL had managed to absorb 97 staff members into the Department. It had brought the Skills Education Training Authority (SETA) into the procurement process of a new company for ICT services. SETA had helped the DoL to secure a new ICT company, which would be on for the next three years. It had established a proper governance structure and finalised licence agreements. There had been challenges in resolving issues relating to EOH staff becoming DoL staff. One of the matters that had made headlines was whether the EOH had managed to deliver adequately according to the contract, and whether the DoL had derived value for money, hence the proclamation by government to investigate certain aspects of the contract had been announced. It was found that EOH had not met certain deliverables and was now being made to fix all of these without charging the DoL, even though the contract had expired. The DoL had made sure that the National Treasury, SETA, the state law advisor and the Special Investigating Unit (SIU) were part of the process to ensure that EOH and Siemens delivered to the Department. The Chief Information Officer (CIO) post was being filled and the necessary security clearances were being done.

Mr Bheki Maduna, Chief Financial Officer (CFO): DoL, said that the total allocation towards administration, inspection and enforcement services, public employment services, labour policy and industrial relations was R2.445 billion, of which R2.371 billion had been spent. The amount not spent was R73.8 million. On the compensation of employees, the variance was R10.857 million. For goods and services, the variance was R62.757 comprising payments earmarked to pay for buildings (leases) and services of DoL.

The Chairperson interrupted to comment that the CFO was summarizing the financial report too much, and asked for more detail on the transfers and subsidies sector spending, especially on municipalities and the centres for the blind.

Mr Maduna said that these were transfers to municipalities for services, such as the water and lights that the DoL offices around the country used. The DoL subsidised the salaries of placement officers who were employed at organisations such as the South African National Council for the Blind, which was included in the expenditure section.

Mr Morotoba clarified the values allocated to the blind and disability funds in the report. The amount that these organisations say they needed were dependent upon the information they gave on how many people the centres or councils said they would employ. Their information was subject to an auditing process. The actual money then transferred would be in line with the number of people actually employed.

Mr Maduna proceeded and gave a summary of the audit report. The DoL had received an unqualified audit report with an emphasis of matter on the 3% budget under-spending. The Auditor General (AG) had pointed out material misstatements in the annual performance report submitted for auditing. The other issue was the material finding raised on the usefulness and reliability of the reported performance information. The AG had also pointed out a bid that had been approved should have been advertised for a short period. The report said the DoL had not ensured that the preferential procurement policy had implemented in line with the Preferential Procurement Policy Framework Act (PPPFA). The last issue referred to irregular expenditure, which the AG had highlighted.

The Chairperson questioned the last line in the presentation, which was on expenditure management. He said there should be consequences for failing to take effective steps to prevent irregular expenditure. He then opened the floor for Members to ask questions and give comments, asking them to be brief and to the point.


Mr Makue referred to the presentation section about inspection and enforcement services (IES) and said that the Committee felt uncomfortable about the casualisation of labour. What was the government doing about young people who were being employed for endless periods on a part time basis, but were denied benefits as stipulated by the Labour Relations Act (LRA)? Was there anything that could be done about international businesses and organisations not employing a satisfactory number of South Africans? On private employment agencies charging and exploiting desperate workers, he said that no action had been taken. which was unacceptable. What were the present developments in terms of maternal leave for professional women who were given only one month’s leave?

Ms M Digkale (ANC, Limpopo) welcomed the apologies from the Ministers, but asked that they prioritise the meetings in future and attend next time. She congratulated the DoL on the unqualified audit report and said the Members looked forward to a clean audit. She referred back to the presentation, under the contribution to employment creation section, saying that Limpopo was not doing well. She wanted to know how the youth, the disabled, women and men that are employed, were distributed. She referred to the ICT challenges of outstanding deliverables by EOH, and asked if there had been an intervention in this matter. She was unhappy with the 3% shortfall in inspection outcomes. She preferred that 100% cases be ruled in favour of the Department. All in all she was satisfied with the way the Department conducted its work.

Mr J Londt (DA, Western Cape) added on to the maternity leave question, and asked about the paternity leave provision for employees who may be in same sex (male) relationships. He talked about the strike damage. He said striking was a right which must be protected, but must not damage the economy to an extent that the DoL could not control. He asked if the DoL had thought of ensuring that secret balloting was carried out before strikes took place. It was very important to provide ICT interventions as soon as possible. With regards to the vacant ICT post, he asked what the Department was proactively doing to ensure that the position was filled.

Mr W Faber (DA, Northern Cape) referred to the protection of vulnerable workers section in presentation. He asked why the Northern Cape percentage of people served was so low (38%). He also referred to expenditure information, and asked why there had been so much overspending on the municipalities, especially for the Northern Cape. He asked what the DoL was doing to retrain those workers who had lost their jobs, to help them get re-employed.

Ms E van Lingen (DA, Eastern Cape) said that more detail needed to be provided on the presentation. She asked about the R62 million that Public Works had not delivered on. She asked in which provinces exactly this was a problem and what the amounts were. She also asked why the municipalities were overpaid. She was unhappy with the explanation given about the underpayment to the centres for the disabled. Why were these institutions employing fewer people? What was the difference between registered employment opportunities and registered opportunities? She asked how the DoL was really effecting progress in employment. To what extent were they creating opportunities? Were they making progress? She asked which public employers were non-compliant. Had the court cases been concluded, and what were the outcomes? On what basis were individual permit applications in the Western Cape rejected, and what were the reasons? She asked why the registration of employment agencies was below target. Were the targets set too low for policing, as they were the only targets that seem to have been exceeded? Protection of the vulnerable was too far behind target. The funeral undertaking sector worried her, as it took money away from the vulnerable. She asked to see the report on the funeral undertaking and the reinsurance process.

Mr B Nthebe (ANC, North West) said that the DoL could do more to promote equity. It needed to set the bar higher to address the vulnerability of workers. The presentation painted a rosy picture which was far from reality. One of the main responsibilities of the DoL was to ensure industrial peace – a sound labour relations environment. He gave an example of the industrial sector where people could not access employment because the role players -- labour organisations -- were not fulfilling their roles. He asked why the DoL was not raising such issues when the law gave them the power to address them. The sustainability of employment was just as important as the creation of employment. He mentioned the shortage of inspectors, and said the shortage of manpower was real and the DoL needed to appreciate this reality and consider how to address it going forward. The mining industry had been built on the back of mining workers. Even in restaurants and the hospitality industry, workers were being exploited and had no benefits.

The Chairperson showed appreciation for Mr Nthebe’s words. He then welcomed Mr Eric Nyekemba, parliamentary liaison officer from the labour ministry office, who had just arrived at the meeting. He said the questions that Mr Nthebe had asked were urgent, and needed answers. He asked whether workers in garage stations were part of the hospitality industry, as workers in this sector were also exploited.

Dr Y Vawda (EFF, Northern Cape) commented that Mr Nthebe spoke like a real fighter. When it came to employment and job creation, education, training, skills development and capacity building were fundamental. He asked what the DoL was doing to raise capacity to ensure that inspections were carried out. A specific type of training was required for Occupational Health and Safety (OHS) inspections. What was the DoL doing to increase capacity there? With regard to compensation of employers, why was R10 million not paid out, and what was being done to address this? He also suggested that more capacity building was needed to place workers in disability centres. He said that two new universities were being established in South Africa, and they needed to go for faculties that supported DoL outcomes and that had job-oriented courses. The DoL needed to engage the Department of Higher Education to ensure that faculties would have job-oriented courses.

Mr Makue added that Mpumalanga was focusing on this issue, and in this case it was the agricultural sector.

Dr Vawda said more attention must be given to the sciences, information technology, engineering, architecture and health professions.

The Chairperson thanked Dr Vawda. He said the matters of policy development and training were critical for job creation and there were role players in the private sector too. Unemployment and inequality were huge challenges for the country. He asked to what extent the Jobs Fund and UIF alleviated the challenges the country faced. The breakdown of sector information by province was important to the National Council of Provinces (NCOP). More could still be debated and discussed on labour. He commended the delegation, saying that they were doing well in spite of the challenges, but there was always room for improvement. He then handed over to the DoL delegation to respond to the questions and comments. He asked for a brief response from them, as some of the feedback from the Members had been in the form of comments. A lot more still needed to be said regarding finances and also the ICT contract between the DoL and EOH.

Department’s response

Mr Morotoba said youth employment programmes such as PES, with training and counselling, address unemployment. Before 2009, the DoL was also responsible for skills development, and was working with the Department of Higher Education and Training (DHET) to fill this skills development gap. Ensuring international organisations employed South Africans depended on the immigration policies of the country. There were protectionist policies so that citizens had first priority to opportunities that became available. South Africa had passed regulations to deal with this. The DoL, Home Affairs and StatsSA were unable to provide records on the number of migrant workers, because there were no records. The DoL was also expected to make appointments with some employers due to high crime rates, and migrant workers weretold to hide or run away when inspectors came. This would affect the response of employers on how many migrant and non-registered workers they had employed.

Section 198 of the amendment to the LRA addressed the problem of employee exploitation. South Africa had among the most flexible labour laws in the world, which was why one found people who had been employed for 30 years, but without benefits. The Employment Services Act and the LRA go a long way in addressing unemployment. The subsidy from the Jobs Fund displaces older workers. When the subsidy was withdrawn, the youth ended up retrenched. The DoL was currently engaging with trade unions and Treasury to tighten up the scheme, perhaps by tieing the subsidy to an apprenticeship or learnership.

With regard to outstanding deliverables on EOH, the DoL had performed a health check on all systems EOH had delivered. EOH was fixing those problems, even though the contract had expired.

On labour market industrial peace, this was the core of the work that the DoL does. The minimum wage was necessary, due to the poverty and inequality which had led to the violent strikes by the poor. The DoL had agreed on a process to address the minimum wage. The process agreed to was a win-win situation for all parties concerned. With regard to timelines around capacity, Dimension Data had already transferred the 97 staff. On vacant posts, the DoL just needed a Chief Information Officer, which they would have by the end of this financial year.

The Chairperson said that they were running out of time and the delegation had to speed up and be more specific with their answers.

Mr Morotoba said the DoL was engaging the Department of Higher Education to ensure training institutions delivered skills plans to meet the labour market industry and individual needs.

The UIF was being amended and input was welcome, due to many proposals. The difficulty regarding the employment of women was that the UIF had a cut-off point. Women earning above a threshold did not contribute towards UIF and thus could not benefit. There were difficulties dealing with amending the UIF so that every self employed person could contribute to UIF. There were also issues around self-employed women. The DoL would also align the UI Act for adoption and foster care situations, to allow for paternal leave. He also said the leave benefit was for four months, and UI was also based on credit.

Ms Mamashela said the DoL had shortened the period for the enforcement of employment mechanisms, to compel employers to comply. The Amendment Act which came into effect on 1 August 2014 had given more power to the Commission for Conciliation, Mediation and Arbitration to arbitrate and issue awards so that the poor could gain access to justice. On sexual harassment, anyone could go to the CCMA for arbitration.

The DoL was on the right track to ensure equity. The Act includes specific provisions to prohibit inequalities in pay based on gender, race, religion, or disability to ensure parity. There was a lot that needed to be done, together with the private sector, to promote equity. The report on funeral undertaking was still under consideration by the Employment Conditions Commission, but it could made available to the members.

Mr Virgil Seafield, Chief Director: IES, said that flexibility of labour legislation was needed to ensure the capacity of OHS inspectors. They were trying to develop the capacity of OHS inspectors though a specialisation project. South Africa should have one inspector for every 10 000 of its economically active population. The country needs 2 000 inspectors and currently had 1 300.

With regard to the 3% unsuccessful cases, the DoL encouraged inspectors to refer cases to court. They had established statutory services’ capacity to deal with such cases. The constitution applied to migrant labourers, and they were as protected as ordinary South Africans. On the very low 38% of targeted workers in the Northern Cape, there were a number of factors that may contribute to the low rate. The nature of the case may take longer, and may escalate. The targets were not set low either, and inspections were proactive. For the cases of exceeding targets, the DoL could not tell extra clients just to go away -- it had to do the inspections. The focus was less on the JSE-listed companies and more on broader substantive compliance across the country. The problematic sectors were the OHS inspections in the country. There are only about 138 qualified OHS inspectors in the country.

Mr Maduna, CFO, said he did not have enough information to comment on the R62 million under-spending with regard to leases by Public Works.

The Chairperson said the Members would like to have this information by Friday, as it was very critical.

On the municipality overspend, Mr Maduna said the DoL had under-budgeted, but had sufficient funds to cover the expense. The DoL was earmarking the R10 million to pay Occupation Specific Dispensation (OSD) careers counsellors.

Mr Morotoba explained that they could not place a detailed breakdown of the report by province in the presentation, as it would not fit on the slides and Treasury had said it would make the presentation too bulky. He assured the Members that he would make the information available. Even though the deaf and disability centres had been underpaid, the DoL had taken them on board to educate the employees. The DoL also intended to allow more centres to benefit, in addition to the current organisations. They could not mention in detail the loans DoL had contributed towards projects for employment creation. The DoL had contributed more than R34 billion towards infrastructure projects for employment.

Ms Esther Tloane, Acting DDG of Public Employment Services, said foreign employment applications were rejected due to non compliance and if skills offered by foreign workers were already available in the country. Private employment agencies had seen a decline in the number of registrations since the amendment of the LRA.

The Chairperson said the presentation had been merely an executive summary of a real document, and more detail was needed. The DoL was a pivotal department. There were still questions on the DoL’s statement of comprehensive incomes and the issue of sheltered employment factories. He thanked Mr Morotoba and his colleagues for their honesty and transparency. He said it was also important for the Minister and Deputy Minister to be present at the meetings, which were scheduled well in advance.

The meeting was adjourned.

Share this page: