Budget Review 2016: Department of Labour & Unemployment Insurance Fund Strategic Plan and Annual Performance Plan

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Employment and Labour

06 April 2016
Chairperson: Ms L Yengeni (ANC)
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Meeting Summary

The Department of Labour (DoL) told the Portfolio Committee that its strategy included plans to improve its management practice and strategic support, as 55% of the total DoL’s management performance assessment standards were to reach level 3 and level 4 by March 2017. There was a programme focused on the need to promote equity in the labour market by improving inspection services using the available budget. However, a large budget cut would limit the Department’s resources, which meant lowering targets to a more obtainable and realistic goal. It drew attention to the programme covering the labour policy and industrial relations, which focused on strengthening civil society through a number of funded institutions across the country, as well as protecting vulnerable workers and promoting sound labour relations.

Members asked for clarity about the setting up of an institution that had been mentioned in the budget regarding the National Minimum Wage (NMW), and whether it would be a separate entity. There had been a baseline increase for employees, but it was felt that even though the DoL had made provisions for salary increases, trade unions would try to negotiate a further increase, which may be problematic. The Department had indicated only a marginal increase in funding for inspection services, which was too little compared to the function that inspections served. The law was good, but implementation was required. There had been complaints from the business sector about a delay in the process of granting work permits. It was also felt that the budget allocated to occupational health facilities was quite a small amount.

Other concerns included the limited funding for the Commission for Conciliation, Mediation and Arbitration (CCMA), and what appeared to be an excessive budget for training workshops. The Department’s current vacancy rate and the waiting period for processing documents came under scrutiny. Poor service delivery at labour centres, and delays in processing on general work and corporate visas, also came in for criticism.

The Unemployment Insurance Fund (UIF) addressed the Committee on its strategic and performance plan for the period 2016 to 2021. A challenge highlighted during the presentation was the issue of overpayments. The UIF had had instances where individuals had been unemployed and had started claiming from the fund – but had continued to claim even after being employed. This had led to the need to develop a system for employers in the informal sector to log into the data base and register employees. The Department was expecting to have a 17 000 increase in the number of employers registered by the end of the 2016/2017 period. The system would also improve the tracking procedure where unreliable information was given.

The UIF had increased its allocation on job creation investment from 10% of its funds to 20% in the current financial year, as the aim was to increase the level of employment. The Department indicated a target to create more than 10 000 jobs by the end of the financial year. The UIF was also trying to streamline the training layoffs scheme to respond more quickly to the applications from companies that were in distress, as this would ensure that all agencies in the Department that helped workers in distress would be brought under one roof.

The Fund was asked about the operations of the training layoff scheme. It was asserted that a weakness had been that not enough layoff schemes had been implemented. A problem with the Department was that it worked in collaboration with other entities and if one entity did not complete its job, the entire operation would be on hold. The UIF It acknowledged that it had not focused on any businesses from the townships and the main focus had been on funding the larger businesses. In most cases, small businesses from the townships had not been able to produce the required documents, such as balance sheets, did not meet the requirements, such as preserving a number of jobs, and some were not registered, and so the UIF had not targeted small businesses at all.

Meeting report

Department of Labour budget review
Mr Thobile Lamati, Director General: Department of Labour (DoL), presented the budget review and said the 2016 baseline was R2.847 billion, after a total baseline decrease of R161.8 million. After deducting the payment to the Department of Public Works as well as the mandatory transfer payments, the available budget was R1.586 billion. The DoL spent the bulk of the budget on compensation -- R1.132 billion, or 71.4% of the available budget. Goods and services took up 24.3% and capital payments 4.3%.

During the presentation, four programmes were discussed, each with a strategic plan and an overview of how the budget allocated would be linked to each strategy. The main drivers of the budget were the administrative area, which consisted mainly of compensation to employees. This left the Department with very little operating budget, which was highlighted as challenge. The Department aimed to improve its performance by using a portion of the budget to reduce the vacancy rate to 9.9%, and by ensuring that 100% of compliant invoices were paid within 30 days. It emphasised that there would be 100% reporting of detected irregular, wasteful and unauthorised spending.

The Department planned to improve its management practice and strategic support, as 55% of the total DoL’s management performance assessment standards were to reach level 3 and level 4 by March 2017. The second programme focused on the need to promote equity in the labour market by improving inspection services using the available budget. However, a large budget cut would limit the Department’s resources, which meant lowering targets to a more obtainable realistic goal. The third programme included the role of the Department in Public Employment Services. The final programme covered the labour policy and industrial relations, with a three year overview. This programme focused on strengthening civil society through a number of funded institutions across the country, as well as protecting vulnerable workers and promoting sound labour relations.

Discussion
Mr M Bagraim (DA) began by asking for clarity about the setting up of an institution that had been mentioned in the budget regarding the National Minimum Wage (NMW), and whether it would be a separate entity. There had been a baseline increase for employees, but he felt that even though the DoL had made provisions for a salary increases, trade unions would try to negotiate a further increase, which may be problematic. The Department had indicated only a marginal increase for inspection services, which he believed was too little compared to the function that inspections served. The law was good, but implementation was required. He also mentioned that there had been complaints from the business sector about a delay in the process of granting work permits. He also felt that the budget allocated to occupational health facilities was quite a small amount.

He was concerned that 21 000 inspections had not been enough. It had been indicated that 13 000 businesses had been investigated for the Unemployment Insurance Fund (UIF), but the concern was that this number was also low compared to the number of businesses in Cape Town alone, which far exceeded 13 000. He pointed out that R19 million to fund injured public servants would not be enough, and asked would be done in the event that the number of injuries exceed the amount on the budget. He also asked for clarity regarding the budget value for International trips and bilateral agreements under programme four.

Mr Bagraim pointed out that the budget which the Commission for Conciliation, Mediation and Arbitration (CCMA) -- the “Jewel and Crown” of the Department -- had received was also not quite satisfactory. On the other hand, R3 million for workshops sounded like too much and he asked for clarity on why the Department would be spending so much on them. He pointed out that there might not be a need to budget for sectoral determinations, as this may end up being covered by the National Minimum Wage.

Mr I Ollis (DA) asked about the administrative part of the budget overview. In the previous year, the Department had under-spent -- had this been taken into account in drawing up this year’s budget? The money not spent could have been put to better use elsewhere, such as improving service delivery. He also asked if there was a plan in place to increase the number of public service employees. Currently 2% of those who had registered actually got placed into jobs, and his concern was that the percentage was still extremely low. He felt that using R510 million to place 14 000 people indicated an ineffective use of the budget for its purpose in this area.

He also asked about the strategic implications in dealing with the procedure for placing foreign internationals in jobs according to section 52. His main issue was that the processing of relevant documents had been extremely slow during the prior financial year. Did the Department have a turnaround plan to increase the number of visa applications that were processed within the target time? How was the budget used to make sure that there was an improvement? Public entities’ money transfers had also not taken place on time as various entities, including the Society for the Blind, had put forward a number of complaints regarding this issue. He asked how the budget would be used to make allocations and payments easier for the various entities. He referred to the R3 billion that had been disclosed in the previous year to be transferred to the CCMA over a period of three years, but which had not been indicated in the current budget. He wanted to know whether this amount was still being transferred, and needed clarity on what the amount was meant to be used for. There had been conflicting views about the R3 billion allocated for the NMW, but he wanted to know what had happened to it.

Ms F Loliwe (ANC) asked that the Department reveal the current vacancy rate, as it had been indicated that the aim was to reduce it to 9.9%. She pointed out that the waiting period for processing documents had been 30 days, but she was concerned that the Department had been lowering the targets to meet the requirements. The inspectorate had been a concern, so she recommended that this area be focused on. She urged the Department to reduce the inspector vacancy rate to 0%. She asked whether the 80% budget allocated to Inspectorate represented good value, as the Portfolio Committee needed to be certain that there was proper monitoring taking place.

Ms S van Schalkwyk (ANC) asked how the Department identified the civil society organisations which it supported. Were new organisations being taken into consideration from time to time to ensure that all provinces were covered?

Mr D America (DA) said that during deliberations for the amendments to the Unemployment Insurance Act, it had been suggested that the Department should consider capacitating labour centres, similar to the CCMA help desk, to assist those seeking employment. He asked whether that aspect had been taken into consideration when drawing up the budget for administration. He pointed out that labour centres could be a useful tool, as they could help to provide better service delivery. He asked for clarity on the difference between compliance with ‘employment legislation’ and compliance with ‘labour legislation’ in Chapter 5, pages 17 and 18, of the presentation.

Mr Lamati began by responding to the questions relating to the institution involved with the NMW. The institution that had been in charge of the setting the sectoral wages was the Employment Conditions Commission (ECC). The discussion taking place currently would decide whether the function of the ECC would continue or whether a new institution would be put in place for the NMW. However, regardless of the changes that might take place, the function of the institution would have to be capacitated, and that was the reason for having the line item in the budget. The reflected marginal increase for employees indicated what had already been agreed upon, which had been covered by the increase provided to the Department by National Treasury.

The Department agreed with the Portfolio Committee that the marginal increase provided for inspection services was not enough but due to a number of budget cuts, it had not been easy to provide further a further increase. A letter of appeal had been written to National Treasury to address the matter. The letter had been acknowledged but unfortunately there had been no response -- except that further budget cuts had been made. The Department had indicated that the issues regarding the inspectorate would be raised for the 2017/2018 financial year as well. The Director General pointed out that the limited amount of resources would result in a limited amount of services provided. The 21 000 businesses to be visited were based on the amount of available resources, as the DoL would have liked to increase the number. The goods and services budget was just over R385 million, and the DoL would have to be a lot more realistic in terms of the goals set for achievement in the financial year, as the allocated amount for inspection had been about R102 million. They had taken into consideration complaints and further applications beyond the 21 000 targeted businesses.

The budget for 13 000 inspections would be addressed by the UIF commissioner, Mr Boas Seruwe. The DG said that the R19 million would most likely cover the expenses, as public servants rarely made claims for injuries. The Department had used only R15 million in the previous year and if the need were to arise the DoL would make a petition to National Treasury if the budgeted amount were not enough. A value exceeding R19 million would be made available from the unforeseen circumstances fund.

He said that the CCMA had received a small amount due to the budget cuts by the National Treasury. Upon budget reviews, transfers could be made to other areas if there were surplus amounts from other portfolios.

Regarding the R3 million spent on workshops, the DoL had opted to educate businesses in order to train and inform them about regulations and business practices. This had in fact improved compliance and the Department felt that R3 million was too little, based on the large demand.

The Department had also set aside money for sectoral determinations, because no decisions had been made with regard to the NMW replacing sectoral determinations and so to be safe, a portion of the budget had been set aside.

The strategy to reduce the administration budget in order to increase service delivery, as well as other line items, would include not filling some of the open vacancies, without compromising those that involved work done at labour centres.

The plan was to make sure that money transfers to institutions like the Society for the Blind were done on time. The delays had been caused by the challenge in the previous year, which had revolved around whether the Department would be able to continue funding the institutions. After a discussion held with National Treasury, funding was able to continue. He assured the Committee that the process would be improved this year.

He said that the R3 billion had been a mistake on the Estimates of National Expenditure (ENE) which had been published by National Treasury, which had however been corrected at a later stage. He assured the Members that the Department would not be able have an allocation for the NMW which well exceeded its own available budget.

The reason for low inspector processing rates was due to the procedure that had been put in place. There were two outcomes to an inspection. There could be an incident where upon inspection, the issues would be identified and solved immediately. However, other incidents included businesses that were inspected but could need further investigation according to Section 31 of the Occupational Health and Safety Act. This investigation included a hearing and taking down statements from different parties involved, and this could take longer than 30 days -- or even longer than 60 days -- to finalise. Once that process had been completed, it would be handed to the Chief Inspector and the Director for Public Prosecutions. The Chief Inspector would then decide whether a further hearing would be required. He felt that the 62% processing rate had been reasonable, taking into consideration the limited amount of resources. He said that the work done by the inspectors had improved.

Mr Lamati reminded the Committee about plans to increase the capacity of officials at labour centres for ‘help desks’. The Compensation and UIF funds had committed to making provision for resources to help improve service delivery at the labour centres. He went on to provide clarity to Mr America’s final questions, by highlighting the difference between inspections done on a day-to-day basis involving Labour laws, as well those that fell under employment equity and transformation. The differentiation was made in order to track the progress within the two strategic areas.

Ms Aggy Moiloa, Deputy Director General: Inspection and Enforcement Services, said that at the end of the third quarter the Department had a vacancy rate of 11.9%. This percentage was inclusive of 385 vacancies that were not funded. She said that the DoL was committed to keeping the vacancy rate below 10% as dictated by the Department of Public Service and Administration (DPSA).

The Chairperson asked whether an accurate number could be calculated by separating the funded vacancies from those that were not funded and calculating the total percentage using that number.

Ms Moiloa said that once that calculation was made, the total percentage dropped to 7.7%, which was lower than the 9.9% unfilled vacancy target.

Mr Lamati clarified that the reason why the vacancy rate had been left at 11.9% was because the unfunded posts had not yet been abolished from the staff records, so the appearance of these vacancies made the current value correct at 11.9%.

Mr David Kyle, Acting Chief Financial Officer: DoL, said that there had been drive to decrease the administration budget in order to redirect funding to the core operations of the Department. He said that the office of the Chief Operations Officer, Chief Information Officer and Chief Financial Officer was a centralised function of the administration budget, which took into account all management positions across the country. Property payments were made to the national Department of Public Works, so the invoicing for accommodation, or for capital works projects, across all provinces would be paid out at the national Department in Pretoria. The operational budget was minimal compared to the overall administration.

Mr Virgil Seafield, Deputy Director-General: Labour Policy and Industrial Relations, responded to questions regarding international relations and civil society. He said there were three main organisations that received funding, based on signed multi-year agreements. He said that institutions funded were identified through an application process. The DoL would also choose who to fund based on the ability of the institution to spread the Department’s footprint. He also pointed out that the Department serviced several multi- lateral and bilateral agreements, such as the Lunar Reconnaissance Orbiter (LRO), the G20, and the African Union (AU), and had other Memorandums of Understanding (MOUs) with different countries.

Mr Sam Morotoba, Deputy Director-General: Public Employment Services, said that the Department of Labour was responsible for advising Home Affairs on general work and corporate visas. Advice could not be given to an employer until Home Affairs had made its decision on the outcome of an application, based on police investigations to ensure that the applicant had not been involved in any criminal activity. Only then would a work visa be granted. The Department had worked on improving the process through a dual systems approach. The first was to ensure that South Africans received first preference and that South Africans were not subjected to unfair employment practices. These included making sure foreign workers were not subject to exploitation by local employers. The second process allowed South Africa to outsource skills that were not available in the country, for which visas would be recommended. Systems had been improved and visa applications could be made electronically. He added that the budget was based on historical figures.

The DoL was also hoping to increase the number of self-service labour centres during the 2017/2018 financial year. Transfers to the institutions for the blind had initially been stopped by National Treasury, but since the discussion a three-year extension had been provided to fund the Institutions. The argument had then become that the institutions would no longer continue being the sole receivers of the fund, but would compete with other institutions for funding as well. The transfers made for the current financial year had been up to 97% of the budget, and the remaining 3% had been due to missing documents. The Department was hoping to open up the beneficiary scheme to new organisations that had not initially benefited in the past. The idea was to expand to other ventures as well as other disability institutions to cater for organisations in all parts of the country, and those that had been helped in the past would be assisted to find other ways of funding as well.

Mr Ollis asked what the Department would be doing to shorten the amount of time it took to process work permits and visas. He felt strongly that the DoL was not working efficiently and wanted to know how the budget could be used specifically to correct this matter.

The Chairperson asked that Mr Ollis’s follow-up question be answered in the second round of questions.

Ms Moiloa clarified that the 13 016 inspections were specialised UIF audited inspections. The point of the inspections would be to thoroughly audit the companies’ trends as well as the extent of compliance. There were also lower level inspections conducted to check compliance and whether a business was registered.

Mr Bagraim said that in the DG’s answers, he had mentioned that one of the institutions wanted to play a role in catering for the exclusions of the NMW, but that it would be important to make sure that whether a separate institution was involved or whether the Department would be responsible for this under the sectoral wages, the amount would need to be accounted for. He asked whether it was possible to make businesses pay for the training sessions, just as the CCMA did. He suggested that the job placements would increase if the tender documents insisted that all job placements be done through the Department of Labour.

The Chairperson asked how the DoL would be dealing with under-spending from invoices that were submitted for less than the amount disclosed in the initial budget. She mentioned that the Compensation Fund seemed to have sent invoices that had been less than the budgeted amount and the Government Communication and Information System (GCIS) had not sent invoices at all, which raised a concern about how the estimates were being done.

Mr Lamati said that when setting the budget for the NMW, capacity would need to be built in. The budgeted amount indicated was the amount that had been agreed upon by the social partners, as well as the Department, for the funded institutions. The setting of the NMW was still under discussion, so the figure on the budget had been reflective of the current situation not taking into account the possible changes that may take place once the NMW had been set.

He said that under normal circumstances, the DoL would have preferred that the cost of non- compliance with the law to be the responsibility of the employer. In other countries, when an inspection was made and the company was found not to be complying with the law, the company would have to pay for the inspection. He said that if this kind of procedure was being suggested by the Portfolio Committee, the Department would gladly look into the law before implementing it. He pointed out that this would, however, increase the cost of running a business. This would also mean that only if the employer were found to be complying with the law upon initial inspection, that the inspection would be paid for by the Department. The problem with the training was that smaller businesses could not afford it, and small businesses were the target. Due to the large demand the Department had to fund these.

In response to the Chairperson’s concern, he said that the challenges faced during this financial year had been due to Public Works not submitting invoices on time. The DoL knew the amount that needed to be paid as well as how much rent they had been using, but it depended on invoices to carry the payments through, so late submissions for invoices after the books had been closed had contributed to the large difference between the budget amount, as well as the amount spent.

He also said that three issues that had been raised by the Auditor General (AG) had been corrected, but were not reflected in the management report. The Department had sorted out all the challenges related to the mis-presented statements to AG, and was certain that leading into the next financial year, the problems would not persist. The AG had raised a second issue regarding the performance information, as well as the usefulness of the information presented, which the Department had also dealt with to ensure that all the information presented was reliable. They had introduced a new information technology (IT) system that would manage cases within inspection data. Finally, the AG had mentioned the problem of irregular expenditure, for which the Department had to come up with steps to hold those in charge of expenditure accountable.

He said that the Department’s short-comings were reflected through the budget cuts, which had had a large impact on service delivery. It would try to maximise performance using the limited resources, but different branches had to drastically reduce targets. Although the business model had changed, the financial model had remained the same.

Mr Morotoba agreed that processing had been slow. However the applications had not only been to process work visas, but had also included a large number of asylum seekers and refugees, as well as people who were trying hard to stay in the country even after their refugee or asylum seeker applications had been rejected. Another challenge had been that before granting a corporate visa, investigations had to be conducted which delayed the process as well. There had been cases where addresses did not exist, or employers would not show up for appointments. The process had also been manual. Staff members were also unable to distinguish between the visa applications for which the DoL had been responsible and those which it had not been responsible for. Staff members had ended up accepting cases that had been irrelevant to the Department and had sent letters of approval indicating that the documents were being processed. To intervene, the Department had removed the manual system completely so that employers could submit applications directly to an electronic system, which had been in place since 1 April 2016. This automatically rejected all applications that the Department would not deal with. Proper training of staff members had also been done to make sure that the workers were aware of what kind cases to focus on. Inspections were also known to take long, so the Department had resorted to using previous inspection records, so if the employer was non-compliant, the application would automatically be rejected. The Department of Labour would also be working closing with other departments to ensure proper service delivery.

He commented on the question about tenderers submitting employment requirements through the Department of Labour. He said that this would be based on the application of the policy in Section 2 Chapter 10 of the Employment Services Act. Initially there had been a provision for all employers to report vacancies and employment records. This had been amended due to the uproar it had caused. A compromise had been agreed to by the Portfolio Committee, as well as the Labour Law Department and so bringing up a requirement for a policy for tenderers to register open vacancies may not necessarily bring about the desired outcome.

Mr Kyle said that in the previous year, the Department had indicated expenditure less than the budget. The Department had expected to receive a receipt from Public Works for rentals, but the receipts had not been received and so the expense had not been reflected. The Department had made arrangements to make sure that in the future the invoices would be received on time. Areas of concern had been cleared and the Department was quite confident that there would be a positive outcome when the financial year ended, as payments to Public Works were up to date. There had been quite a number of challenges with some of the agreements, as there had been a three month lag in receiving receipts, so the Department had been three months behind with some payments. The issues were, however, being addressed. He highlighted that the Government Communication and Information System (GCIS) payments had been an area of concern, as the Department was compelled to run some of the programmes with the GCIS and the challenge had been that the receipts had not been received. The Department was trying to avoid having payments carried over to the next financial year allocation.


Unemployment Insurance Fund (UIF)
Mr Boas Seruwe, UIF Commissioner, addressed the Committee on the strategic and performance plan for the period 2016 to 2021. He said the strategic plan was meant to improve financial management. The Department planned to have 85% of the budget used to run the core part of the business. It had improved the technology system to an online application system. The idea was to reduce the processing time from 30 days to two weeks by the year 2021.

A challenge that had been highlighted during the presentation was the issue of overpayments. The UIF had had instances where individuals had been unemployed and started claiming from the UIF, but had then continued to claim even after being employed. This had led to the need to develop a system for employers in the informal sector to log into the data base and register employees. The Department was expecting to have a 17 000 increase in the number of employers registered by the end of the 2016/2017 period. The system would also improve the tracking procedure where unreliable information was given.

The UIF had increased its allocation on job creation investment from 10% of its funds to 20% in the current financial year, as the aim was to increase the level of employment. The Department indicated a target to create more than 10 000 jobs by the end of the financial year. The Commissioner said that the UIF was also trying to streamline the training layoffs scheme to respond quicker to the applications from companies that were in distress, as this would ensure that all agencies in the Department that helped workers in distress would be brought under one roof. He also said that the maternity benefit provided by the UIF had picked up as awareness had been created. The adoption benefit was still the lowest claim.

Discussion
Mr America applauded the UIF as one of the well run and well managed organisations. He believed that it stood as one of the jewels of the Department, and he had been well pleased with its efficiency.  He got the impression that the 30 days’ turnover period had been recurring, but he was curious as to whether it was 30 business days or 30 calendar days, as this had not been made clear. He suggested that the Department consider reducing the turnover period to 21 working days, indicating that within that period the information required would be verified. He went on to ask whether the return on investment (ROI) referred to on page 6 of the presentation had been a part of the entire portfolio and what was it referring to. He asked whether the slow economic growth would have an impact upon reaching the ROI target. He asked for clarity with regard to the percentage of mandated social responsibility investment committed per year, and how it would have an impact on achieving the ROI per year.

Mr Ollis asked about the operations of the training layoff scheme. He mentioned that the UIF was involved, and that the SETAs and the CCMA were involved, as agreed upon in 2008. He said that a weakness had been that not enough layoff schemes had been implemented. He had laid an official complaint about the Highveld Steel case and wanted to know why the money had not gone through to save the company. He said that a problem with the Department was that it worked in connection with other entities and if one entity did not complete its job, the entire operation would be on hold. The UIF had triumphed on the success of the Mercedes Benz issue and with helping to save a number of airlines, but the examples used for these large businesses had been last minute saves. He warned the Department not to use examples where everything had been finalised only at the very last minute, as it could be a reflection of working inefficiently.

He asked why the productivity assay had not intervened, as it had been a multi-departmental failure. Senior management needed to have a procedure in place to track businesses that had been in the system for too long. He was curious about what had taken so long to save Mercedes Benz. He felt that there was a lack in efficiency for large company trade offs, and wanted to know why the money had not gone through in time before Highveld Steel had closed their doors, and why it had taken so long to fund Mercedes Benz during its financial crisis.

His second concern was with regard to the large number of people using the new filing system who could not be tracked using the current system. He asked what the Department would do about the people that could not be traced. He mentioned that during his oversight visit to different labour centres, the computers would be off line for two days and people would not receive any services or have to resort to a paper system, which took even longer to process. He said that 40% of the time (two out of five working days), labour centres were inefficient and could not process anything. He also mentioned an incident where someone had received payment for the first month out of the six months that she had expected payment, and then the payments had stopped. He also asked for an intervention at the Kempton Park office, as many complaints had been received about poor service delivery. He suggested that an sms system be used to notify claimants of the progress of the processed applications.

Mr Bagraim said that trade unions were not interested in training lay-offs, and suggested that training be provided to trade unions. It was essential that the trade unions knew about the training lay-off scheme. He also suggested that people usually went to the labour centres seeking help and were very often turned away without receiving any assistance, so it would be helpful to develop a website similar to that of the CCMA that would be informative for the public, and claimants would be able to track the progress of the application process.

Ms Loliwe asked what mechanisms the UIF had in place to increase advocacy, as most people would only be informed late within the application process that the claimant had not been registered with the UIF. She asked whether those receiving unemployment training were only UIF beneficiaries and if so, whether that would not have a negative impact, considering the fact that many people in the country were unemployed.


Mr Lamati said that 70% to 80% of those who were trained through the Labour Activation Programme were UIF beneficiaries, but the remaining 20% to 30% were beneficiaries drawn from public services outside the UIF.

The DG also responded to the complaint about Highveld Steel. He said that he had approved the request for R84 million which had been made by Highveld Steel. A letter had been received from the CEO to assist in a trading lay-off for 650 employees. Before the DG could send the money through to the company, he had asked for a due diligence report as well as a business rescue plan, as he felt that those were the most important documents required for him as the accounting officer to make a decision. The key determinant had also been his concern for whether jobs would be saved. The company had been reluctant to provide the required information, as the DG said that the information had been received in January. He had been pleased with the documents and agreements had been made to pay out the money. The Department had even offered to reimburse some of the losses Highveld Steel had incurred, which were about R50 million. He pointed out that the business rescue plan had been a good indicator of what had led to Highveld Steel’s collapse. Most of the operating costs had become fixed costs, and the company had had a vertical approach towards the running of the business. The DG believed that the company was doomed and would close, regardless of whether the funding it had been received sooner. He believed that the UIF had not failed the workers. The large investors had also begun to pull out of the business. Some of the challenges that had been faced during the procedure were finding out that Highveld Steel owed money to the UIF and the SA Revenue Service (SARS). One of the requirements for funding included the need to be compliant. When Highveld Steel realised they were in trouble, they had paid R2 million for the UIF to process the application. However, the indication that jobs would be saved had allowed the application to be approved. The DG said that the UIF had even offered to take employees through the labour training programmes if the business were to fail. He also thanked Mr America for recognising the work done by the UIF.

The Chairperson asked the DG to respond to Mr Ollis’s comment about Mercedes Benz.

Mr Lamati said that when a group of people worked together, one was bound to experience problems. A challenge that had been picked up was that there had been different pieces of the puzzle working in functional silos. He believed, however, that the fact the team was able to move rapidly to save Mercedes Benz was testimony to the fact that the scheme worked. The point made was that the scheme worked and that during processing the team would at times slow down, as approval would not be made blind sighted. The DG said that if the UIF was not pleased with the process, applications would be sent back for corrections. A new way to fast track the process had been to include meeting with the applicants sooner and stating what had been required from them. It was important that applications were submitted on time. The gaps between the departments involved had also been dealt with.

Mr Seruwe said the UIF was advertising the scheme, as Mr Bagraim had indicated. By pointing out some of the huge successes, the UIF was not aiming to popularize the Department but instead to inform the public that the training lay-off scheme was available and that it worked. He agreed that the 30-day processing period needed to be reduced and improved, as it had originally come from the Public Finance Management Act (PFMA). The UIF had highlighted the need to speed up the process to as little as two weeks in the future. He said the social responsibility investment did not provide better return, as it had a return of about 5%, and this was lower than what could be obtained from the banks. Return on investment (ROI) was not just CPI + 2.5%, but the 2.5% had been an average figure.

He said that there were two kinds of social responsibility investments, which involved a social return and a financial return. The financial return was the amount that the UIF received when the 5% target had been reached. The social return came from the people who contributed to the UIF. The more people working, the healthier the return, as more contributions were made. The Public Investment Corporation (PIC) would continue to monitor and play the role of approving individual transactions.

The Commissioner pointed out that the issues that involved service delivery would be looked into. The organisation had expanded to supporting twice as many training lay-offs as it had when it began, but the ability of the Department to meet the required capacity had not increased, which had also been a problem. There were different reasons why people did not receive payment and the challenges faced due to service delivery would be looked into. Kempton Park used to be one of the best working labour centres, so the model would be looked into. There were SMS facilities, and the Commissioner would have to figure out why the SMS facility was not working. The UIF would also consult with the CCMA to receive advice about the suggested website in order to improve the current system.

Mr Lamati clarified the challenge around the systems being down for a long period of time. He said that it had mainly been due to the increased volume of applications taking place, as more people became unemployed. The UIF would be working on improving the infrastructure and tackling the IT problems in order to have better service delivery.

Ms T Tongwane (ANC) asked whether people were informed when the payment they received would be the last.

Mr Seruwe said that claimants filled in a continuation form when claiming money every month and so upon approving the last continuation form, the claimant would be informed of the last payment to be received.

Ms Van Schalkwyk asked whether the UIF received frequently asked questions during the course of its campaigns, and suggested this information could be extended to Members of Parliament in order for them to remain well informed.

Mr Lamati acknowledged the suggestion and said that the Department would also try to improve advocacy as well.

The Chairperson asked what happened to people who had received training from the UIF during this financial year. The Chairperson also asked about the percentage of businesses from the township that had received assistance from the training lay-off scheme.

Ms Mpumi Mnconywa, Chief Director: UIF, said that the people who had taken part in the training had been employed by the companies that were involved during the training, while some had been referred to other companies that were looking for new employees. The Mining Qualifications Authority (MQA) had reported that reported that 400 out of the 1 000 trainees had received permanent job positions and the rest had been employed on a contractual part-time basis. Telkom had also been able to refer other trainees to different working opportunities as well. The training had been for two months. However, Telkom had decided to take on 200 trainees and had upgraded these trainees without any further cost to the UIF. Some learners were referred to companies that were part of the Ekurhuleni project to install solar geyser panels, so most trained individuals had been able to find jobs.

The Commissioner said that the UIF had not focused on any businesses from the townships and the main focus had been on funding the larger businesses. In most cases, small businesses from the townships had not been able to produce the required documents, such as balance sheets, did not meet the requirements, such as preserving a number of jobs, and some were not registered, and so the UIF had not targeted small businesses at all. He said that ‘big businesses would need big money’. Fortunately, after doing introspection, the UIF in conjunction with Skills Education Training Authorities (SETAs) would be starting a training programme for smaller businesses to educate owners about business and some of the requirements. The Department would also work in partnership with the Small Enterprise Finance Agency (SEFA), which would deal with small business loans of up to R5 million. The programme would begin in the following financial year.

The Chairperson asked whether businesses in the townships which met all the requirements would be able to access funding from the UIF.

Mr Seruwe said that businesses from the townships that met all the necessary requirements would definitely receive assistance. However, with the new programmes, the businesses in the townships would most likely benefit from being able to take out small loans.

Mr Lamati said that the Department was in the process of signing an MOU or memorandum of agreement (MOA) to commit to the cause of helping micro-enterprises within the community as well.
 
Ms Mnconywa clarified that Mercedes Benz had been the largest participating company during the 2014/ 2015 financial year, and the largest company to request funding prior to that had been BMW. The delay had been due to compliance issues at Mercedes Benz. Mercedes Benz was also linked to other companies that also had not been compliant either.

Consideration and adoption of minutes
Mr Ollis proposed adoption of the Committee’s minutes, and was seconded by Ms Loliwe. The minutes were adopted.
The meeting was adjourned.

 

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