Department of Labour on its 2014/15 Annual Report

Meeting report

Department of Labour
The Department of Labour briefed the Committee on its Annual Report 2014/15. The delegation comprised of amongst others Mr Sam Morotoba Acting Director General, Malixole Ntleki, Director: Director General’s Office; Mr Virgil Seafield, Deputy Director General: Labour Policy and Industrial Relations, Mr Vuyo Mafata, Acting Compensation Commissioner; Mr Bheki Maduna, Chief Financial Officer; Mr Shadrack Mkhonto, Chief Operations Officer; Ms Fikiswa Mncanca, Acting Chief Director; Mr Makhosonke Buthelezi, Director: Communication and Marketing; and Ms Mmathapelo Mataboge, Parliamentary Liaison Officer.

Mr Morotoba undertook the briefing. The Strategic Outcome Orientated Goals 1-5 of the DoL was highlighted. The Committee was provided with a brief overview of the DoL’s Programmes i.e. Administration, Inspections and Enforcement, Public Employment Services and lastly Labour Policy and Industrial Relations. The DoL also listed its entities i.e. Compensation Fund (CF), Unemployment Insurance Fund (UIF), Commission for Conciliation, Mediation and Arbitration (CCMA), National Economic Development and Labour Council (NEDLAC), Productivity South Africa (PSA) and Protected Employment Enterprises currently trading as Sheltered Employment Factories (SEF).

The Committee was given insight into the colour-coded legends that were currently used by the Auditor General of SA (AGSA) in conducting audits and looking at performance. This would assist Members when perusing the Annual Report 2014/15. A green legend meant that a performance indicator was on track and reflected complete implementation and that a target had been achieved (100% and + complete). A red legend on the other hand meant that a performance indicator was behind schedule and that the target had not been achieved (0-99%complete). So even if performance was at 99% it was recorded as incomplete and target not achieved. The Committee was provided with performance figures of the DoL making a comparison between the four quarters in the financial year 2014/15. Members were also given performance figures on each of the Programmes of the DoL. The average annual performance of the DoL across its Programmes was that overall it achieved 42% of its targets. The Committee was given a comprehensive breakdown as per Programme of the DoL’s achievements, challenges/ reasons for non-performance and what proposed interventions were taken to address challenges. In the interest of time non-performance was highlighted more so.

Programme 1: Corporate Services - 39 out of 63 (63%) fraud cases received or detected were finalised by the year end against a target of 92%. The reason for the non-achievement was challenges regarding human resources including the expertise and effort offered by the employees. The intervention to rectify matters was ongoing training of provincial investigators.

Programme 2: Inspection and Enforcement Services - A total of 1364 designated employers were inspected for compliance with employment equity legislation against a target of 1837. Non-achievement was due to the challenge of non-availability of employers resulting in the rescheduling of appointments for inspections and resource constraints. The DoL’s proposed intervention was closer monitoring of labour centres to ensure adherence to action plans.

Programme 3: Public Employment Services - A total of 618 570 (95% of target) work seekers were registered against a target of 650 000. The reason for non-achievement was due to a change in the target during November 2014 and the removal of old and incomplete records from the database. A proposed intervention by the DoL was to continuously ensure that the baseline was used when setting targets.

Programme 4: Labour Policy and Industrial Relations - There was a total of 176 exemptions on the Basic Conditions of Employment Act (BCEA). Of the 176, 148 were processed within 60 days and 28 were not competent. Non-achievement was due to applications not complying with legislative requirements. To rectify matters the DoL developed a checklist for legislative requirements and to distribute it along with application forms.
 
The briefing continued with the Committee being provided with the DoL’s expenditure information for 2014/15. Final appropriation for 2014/15 was just over R2.5bn. Actual expenditure for 2014/15 was just over R2.4bn. Under-expenditure by the DoL was approximately R126m. Members were also provided with expenditure information as per economic classification but more importantly expenditure information as per province.

The DoL ultimately received an unqualified audit opinion with no qualifications. There was an emphasis of matter regarding material under spending of the budget/vote by approximately R126m or 5% of its budget. The DoL had therefore spent 95% of its budget. Other issues on predetermined objectives were that material misstatements in the annual performance report were submitted for auditing. A material finding was raised on the usefulness and reliability of the reported performance information. The major challenge faced by the DoL during the 2014/15 financial year was shrinking financial resources, which impacted upon human resources as vacant posts could not be filled. This had dire consequences for service delivery as inspector posts, employment services practitioner posts and client services offices were hardest hit by limited funding. High targets set at the onset of the financial year could not be met as human resources became depleted and were not replaced for the rest of the financial year. The filling of critical posts in 2015/16 would alleviate the performance challenges. Targets had been revised in line with the capacity of the DoL to implement. 

Discussion
Ms E van Lingen (DA, Eastern Cape) was concerned that even though the DoL had spent 95% of its budget it had only met 42% of its targets. Was value for money attained? Using shortage of staff as an excuse was not good enough. As an owner of a business in the Eastern Cape she received a visit from the DoL every six months. Where an employer made contributions towards the Unemployment Insurance Fund and the Compensation Fund for the benefit of an employee, why did the DoL not provide certificates as proof that such employee had been registered.

Mr Morotoba explained that the performance of the DoL was affected by the change in the Medium Term Strategic Framework (MTSF) and changes in its own Annual Performance Plan. The change in legends also had an impact. The change of legends issue was an ongoing debate by the AGSA and the Presidency. The 42% achievement of targets should be judged by taking the change in legends into consideration. Even if a target was achieved of 99.9% anything short of 100% achievement was considered not achieved. So even if the DoL had targets that it had achieved 70%-80% then it was considered not achieved by the AGSA.

Mr Mafata stated that for the Unemployment Insurance Fund and the Compensation Fund employers were required to register employees. There was no need for certificates to be given as employees could simply visit one of the DoL’s centres or call its toll free call centre to find out if they were registered. If the employer had not registered an employee then a complaint could be lodged. 

Mr B Nthebe (ANC, North West) said he was trying to understand the logic of the DoL’s argument that budgetary constraints and shortages in human resources had causes targets not to be met. He asked why targets could not be met with existing staff. Departments should in any case plan according to their own capacity. The honesty of the DoL was appreciated but something drastic was needed in order to bring about a turnaround. He referred to page 24 of the presentation document where ongoing training of provincial investigators was a proposed intervention by the DoL. The problem with ongoing training was that it was a moving target. He noted that the DoL had the responsibility of maintaining industrial peace. He pointed out that the North West Province seemed to receive the second lowest allocation. Rural provinces like the North West needed greater funding in order to do what they were supposed to. Given the constraints that the DoL was facing like a lack of funds he asked what the DoL intended to do differently.

Mr Morotoba, on a turnaround strategy, said that on the 2015/16 Annual Performance Plan Specific, Measurable, Attainable, Relevant and Trackable (SMART) indicators were used. The DoL’s performance agreements held managers accountable. The DoL had shifted responsibility on performance from its Chief Operations Office to that of branches themselves. Current processes had been changed. Allocations made to provinces were made using a formula. Historical figures were also taken into consideration when the DoL made allocations to provinces. Population sizes and poverty level in provinces were taken into consideration as well. Allocations were not rigid. On maintaining industrial peace he noted that a large portion of the DoL’s budget went towards its entities. The biggest transfers were to the Commission for Conciliation, Mediation and Arbitration (CCMA) and the National Economic Development and Labour Council (NEDLAC). The Annual Report of the DoL did not speak to the performance of its entities. The AGSA also audited the performance of the DoL’s entities.

Mr Seafield, on the capacity of the DoL, said it was best to have the technical expertise that was required for a specific task. Capacitated staff was needed to perform intricate inspections. The DoL looked at how best it could capacitate its staff. On whether there was adequately placed staff in provinces like the North West, it boiled down to finances. National Treasury had cut the budget of the DoL by approximately R42m. The targets set could not be met because staff could not be appointed. Another reason why targets could not be met was simply because some DoL staff had not done their jobs. The DoL could only plan according to what it had at its disposal. The DoL did look at specialised staff that it needed i.e. inspectors. The DoL’s Inspectorate was now structured better. The DoL used to collect data manually. It now had an information management system in place that had just come on line. There would therefore be information based planning.

Ms Z Ncitha (ANC, Eastern Cape) asked what the reasons were for the Limpopo Province’s underperformance. What actions were the DoL taking to remedy the situation? On the payment of service providers within 30 days, the DoL had said that service providers not invoicing them timeaously caused part of the delay.

Mr Morotoba said that where there was none performance by provinces, the DoL usually brought provincial office staff along to parliament to explain. If the DoL had been give enough time it would have brought along provincial staff. On steps taken by the DoL on dealing with underperformance he said that the issue was debated extensively. The DoL’s internal audit committee had raised the matter of consequential management. The DoL tried to deal with issues on a quarterly basis.

Mr Maduna  explained that the DoL’s financials were decentralised. As from the 1 April 2015 the Chief Procurement Officer of National Treasury would operate with full force. With the assistance of National Treasury all shortcomings would be sorted. Procurement would also be done centrally as there would be a procurement database. The intention was for the DoL to improve on procurement and not to regress.   

The Acting Chairperson said Members had raised issues that were important to the Committee as a whole.

Ms van Lingen responded that there was no time for employees to go the DoL to confirm registrations. The DoL could simply provide a certificate as proof that an employee was registered.

The Acting Chairperson noted that the matter raised by Ms van Lingen was important but not an issue pertinent to the DoL’s Annual Report that the Committee was considering. He hoped that the DoL’s response to the matter would take things forward. 

Mr Mkhonto reacted that the matter of a certificate was perhaps something that the DoL should consider to review and address. It was important for employees to know whether they had been covered by the UIF and the Compensation for Occupational Injuries and Diseases Act (COIDA). It would be taken under consideration and incorporated into the strategies of the DoL.

The Acting Chairperson asked Mr Mkhonto to provide a timeframe when things would be done.

Mr Mkhonto responded that on the UIF things could be done immediately as perhaps only regulatory changes were required. He unfortunately could not provide timelines. On the Compensation Fund, legislation needed to be amended. The COIDA was due for an amendment. 

Mr Mafata said that if Ms van Lingen wished to have a letter immediately. The UIF had a letter that they sent to employees. He asked Ms van Lingen to forward the employee’s details to the DoL.

Ms Dikgale said that the DoL had in its briefing made a commitment to fill critical posts. On promotion of equity greater emphasis should be placed on women. She pointed out that the DoL’s delegation consisted mainly of males, with only two female officials present. If the removal of old records from the DoL’s database was a challenge what timeframes had been set to deal with the issue. On page 49 she pointed out that four collective agreements that had taken longer than 60 days were identified as a challenge but yet under proposed interventions to address the issue were none taken.

Mr Morotoba noted the Committee’s comments on women. The DoL had two Deputy Director Generals at senior management level. The Minister had instructed the DoL to address the issue of women. The filling of posts at provincial level would be done. The records that the DoL had been shells, they were incomplete. The cleansing of shells had taken place and shells had been removed.  

Mr Seafield, on the four collective agreements where no intervention was planned by the Do, explained that was due to an anomaly in law. The issue needed a legislative amendment. There were structural issues that needed to be rectified in law.

Mr Nthebe stated that compliance with the 30-day payment of service providers was considered of such importance to Parliament that the National Council of Provinces was to debate the issue. If indeed the DoL was using SMART indicators it should do planning in line with its capacity. It was good that managers would be held accountable. Under performing provinces also needed to be tackled by the DoL. There was no need to bring the DoL’s provincial officials to Parliament. The Committee was only interested in what the DoL had done to bring provinces to where they should be. He emphasised that consequence management was needed. The priorities of government needed to be driven. Rural development should also be stimulated. The problem was that urban provinces were given more funds than rural provinces. The DoL needed to provide the Committee with tangible answers.

Mr Morotoba, on allocations made to provinces, said the DoL did not disregard poverty levels. The reason why urban provinces like Gauteng received greater funds was because there were more labour centres. Gauteng had 26 labour centres. The DoL had to take many factors into consideration. He clarified that what he had said earlier were things that the DoL was already doing. The 2015/16 financial year was already underway.

The Acting Chairperson said consequence management need not be viewed as punitive. It was all good and well to say that things were to improve in 2015/16. The Committee needed to know what actually was going to be done. He asked why the MTSF had not affected other departments as it had affected the DoL. The payment of service providers within 30 days was only a benchmark that was set. There was nothing stopping the DoL from paying its service providers within 15 or 20 days. He was concerned that the DoL had only achieved 42% of its targets. The downturn in the global economic climate had affected SA negatively. Lack of staff was not an excuse as there were scores of people looking for employment. When Parliament put pressure on the DoL, the DoL should in turn put pressure on its agencies and its provincial offices. The Committee engaged directly with entities of government departments.

Mr Morotoba said that the AGSA audited its entities as well. The DoL was aware of the performance of its entities. The Annual Report before the Committee only spoke about the allocation to entities. The DoL could not speak to the performance of its entities. The DoL strove towards obtaining a clean audit. On performance information, information needed to be kept from provincial level to head office. There had to be records of what the DoL did. From April 2015 if anything could not be verified then there would be no records since the information could not be taken into consideration.

The Acting Chairperson said that the Committee appreciated the hard work that some officials of the DoL were doing.

Committee Minutes
Committee Minutes dated the 27 October 2015 were adopted unamended.

The meeting was adjourned.