Nedlac, Productivity SA, Nedlac, Commission for Conciliation, Mediation and Arbitration, on their Quarter 1 and 2 2016 Reports

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Labour

15 February 2017
Chairperson: Ms F Loliwe (ANC) (Acting Chairperson)
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Meeting Summary

Productivity SA (ProdSA), the Commission for Conciliation, Mediation and Arbitration (CCMA), and National Economic Development and Labour Council (Nedlac) presented their 2016/17 quarter 1 and quarter 2 performance reports to the Committee.

ProdSA noted under-performance in both quarters, with particularly poor performance in Q1 against the targets of supporting enterprises in economic distress, to save jobs. This was ascribed to funding not being made available from the Unemployment Insurance Fund (UIF) until July. It had simply moved on to working on Q2 targets without attempting to recover, and had instead opted to transfer to a reduced number of companies, using R24 million on 33 companies. The achievement rate against this target was 75% in quarter 2. Challenges were also seen in relation to objective 4, which was  to facilitate and evaluate productivity improvement and competitiveness in workplaces. Overall, only 50% performance was achieved against targets in the first two quarters. Human Resources only achieved overall 55% of its targets in these two years. Overall, ProdSA achieved 70% of targets in the first six months of the year. Whilst this was an improvement on the previous year, it showed that ProdSA still struggled to meet targets in the two most critical areas of support to enterprises facing retrenchments and saving of jobs. It had tried to meet with the UIF to establish governing structures and hoped to improve its performance over the next quarters. Members commented that the role of ProdSA was vital and asked if it was measuring its performance in the context of sectors showing the greatest losses. They were not convinced that it would be able to deliver, commenting that if lack of funding was the problem in Q1 that did not explain why in Q3, with funding, it was still not achieving. They questioned ProdSA at some length as to how and when it would intervene, and asked if these interventions were effective by the time companies were dropping below break even points. The presenters sought to explain the limited circumstances when it could assist, but Members asserted that more ways had to be found to stop companies getting so far down the line. Some, however, suggested that large companies may wish to claim business rescue fraudulently and wondered if ProdSA had sufficient expertise to detect that. They wanted far more details on relationships with the CCMA and with Department of Trade and Industry (dti), asked whether it was working to assist the small businesses, and whether its business rescue programme was not overlapping with others. Members felt that there was not consistency in the figures being presented.

National Economic Development and Labour Council (Nedlac) operate under three core functions/programmes namely Administration, Core-Operations and Constituency Capacity Building. In these, its performance was, respectively, 89%, 91% and 100% in Q1, but less well in Q2, with 76% overall achievement. One of the main reasons was that Nedlac had not received an unqualified audit opinion and had not been able to attend to back-office storage of information. Nedlac sources of funding included a grant of R30.3 million, interest on investments at R420 000, sundry income from fees at R132 000. The budget allocations were broken down by programme and by sector, and it was noted that Nedlac now had a priority of trying to deal with the qualifications from the AGSA for the future years. Nedlac believed it could tackle the challenges by the end of the year. There had been some forensic investigations ongoing on a possible forensic case and there were questions around the extent of its engagement with small enterprises. The Committee asked for an audit projection but Nedlac claimed it was too difficult to assess this. There was a particular concern with regards to the low spending rates across the programmes, especially programme 3 which showed only 29% spending. Members complained that although comprehensive social insurance had been on the cards for many years, Nedlac was still referring to this in the planning stage. Nedlac explained that this was due to lack of certainty on the way that COSATU would move, and other Members suggested that this was a particularly difficult model to operate.

The CCMA highlighted that there were 18 targets but it achieved 12, not specifically due to non-performance but rather to conscious decisions to pursue other options or to come back to issues. Revenue had been fairly stead ad CCMA was bringing in money from letting out its venues. The financial figures were presented and it was explained that whilst CCMA alone did not really have any mandate to deal with retrenched employees, full figures were obtained, and visual depictions against growth rates generally were given. CCMA was also conducting its independent research into why businesses were failing, although it was explained that CCMA had no direct role in helping them to get on their feet. It was drawing reports that it hoped to present to the Committee. Several times, the CCMA indicated that further information was available, and it was requested by the Chairperson that a number of written answers and reports be supplied They were concerned that this presentation did not seem to follow National Treasure precepts very well, without comparisons being shown. They suggested to it that new research into the topic of violence during strikes could be enhanced by a look at research carried out by other bodies in the 2012 year. Other topics discussed included the outsourcing of work, steps taken to increase awareness and its footprint into the more remote areas.  

Meeting report

Election of Acting Chairperson and opening remarks

Ms F Loliwe (ANC) was elected as Acting Chairperson.

Mr I Ollis (DA) requested that the Committee invite the Minister to the Committee more regularly as she had only attended once since 2014.

The proposal was accepted.

Productivity South Africa (ProdSA) Quarter 1 and 2 of 2016/17 Performance Reports
Mr Thobile Lamati, Director General, Department of Labour, introduced the presentation and his colleagues from the Department of Labour (DoL or the Department) and entities.

Mr Mothunye Mothiba, Chief Executive Officer, Productivity South Africa, indicated that the entity (ProdSA) would also share the performance report for quarter 3  (Q3) in order to show that it had put a lot of effort into increasing performance after poor Q1 and Q2 performance.

ProdSA was focusing on six strategic objectives. 40 annual performance indicators were set for the 2016/17 financial year. In Q1, ProdSA achieved 20 of its 28 indicators and in Q2 achieve 23 out of 33. It thus achieved 61% of targets in Q1, and 71% in Q2.

ProdSA had particular challenges around Objective 1: supporting initiatives aimed at preventing job losses. Overall it achieved 60% in the two quarters, but with 0% in Q1 and 75% achievements in Q2 . Strategic objective 4: to facilitate and evaluate productivity improvement and competitiveness in workplaces, was also problematic, with a 57% success in Q1 and 43% in Q4 and overall 50%. HR management was also a challenge, with 40% achievement in Q1 and 75% in Q2, and an aggregate of 55%.

He summarised that according to the Annual Report for 2015/16, overall performance was at 43%, so that by comparison over the two years ProdSA had improved. However, the areas in which it was struggling were critical for the labour market; support to enterprises that were facing retrenchment could save jobs as well and workplaces needed continuous improvement to have enterprises be competitive and be able to sustain operations.

Projecting forward to Q3 at the end December 2016, it could be seen that support initiatives aimed at preventing job losses was still critical, as was addressing workplace challenges, with around 67% performance. ProdSA probably under-targeted, and in Q3 some resources were moved to other areas.

Mr Mothiba repeated that support to enterprises in economic distress, to try to save jobs, had been poor, with 0% achievement in Q1. This was because the funding that it would receive from the Unemployment Insurance Fund (UIF) was only received in July, but it had started working on this in Q2. It had taken R24 million and transferred to the few companies that it was able to assist. The targets for companies to be assisted was altered to 33, so that at least ProdSA could assist some companies.

Targets of 70 entrepreneurs to join the workplace challenge programme were not delivered with the new partnership with the Department of Trade and Industry (dti), with only 90% achievement against targets. However, by the end of the financial year it had actually achieved the target. Targets for monitoring and evaluation had been delayed but were closed off in Q3. Value chain competitiveness was delayed due to challenges of capacity in that area. The Small, Medium and Micro Enterprise (SMME) targets were not completely achieved, due to the postponement of planned training by strategic partners. ProdSA was hoping for support from the Department of Small Business Development (DSBD), but was still at planning stages in Q1 and 2.

Remedial actions to improve performance included a series of meetings with the UIF. Finally, they agreed to establish governing structures that helped manage their relationship.

Mr Mothiba highlighted that a lot of information came from the Commission for Conciliation, Mediation and Arbitration (CCMA) regarding companies who applied under section 189. The partnership established with the CCMA enabled the signing of a Memorandum of Agreement. In the past, ProdSA had not received leads on companies that were going through distress, but this new partnership resulted in needy companies being referred to ProdSA. ProdSA sat on the evaluation committee to consider if companies were candidates for retrenchment. If the committee agreed that the problems were linked to operational efficiency, they would be referred for assistance.

The impact analysis of ProdSA lay in areas of productivity organisational solutions, workplace challenges and turnaround solutions. ProdSA work related to service delivery Outcome 4: Ensuring decent employment through inclusive growth. Energy must be focused on improving workers’ education and skills, as well as reducing workplace conflict through interventions and protecting vulnerable workers through the turnaround solutions, in order for ProdSA to be an instrument of intervention into active labour market programmes.

ProdSA was also focusing on three sectors of manufacturing, mining and the agriculture and agro-processing. ProdSA identified these as key areas that would make a difference in 2019. Interventions took place at three levels, namely: enterprises (usually emerging enterprises) that were at break-even point (BEP); stable companies where there was continuous improvement;  and companies below BEP who were in economic distress. Information was then put out from programmes.

Examples were displayed (see attached presentation) on productivity organisational solutions.  ProdSA had been able to assist in Gauteng (manufacturing sector), Limpopo (manufacturing and mining sector), Mpumalanga (forestry), Kwa-Zulu Natal (manufacturing sector), Western Cape (manufacturing sector) and Free State (agricultural sector). Other graphs were shown, breaking down those assisted by age groups, to track exactly what difference it was making to lives, and by gender, to influence transformation.

The Workplace Challenge Programme figures were also set out: overall 619 companies were involved, with 49 138 employees. In its Turnaround Solutions Programme, ProdSA has a partnership with the UIF and was able to assist 18 companies with 2 334 employees. CCMA figures in the 2015/16 financial year indicated that over 36 companies retrenched their staff, but ProdSA had been able to assist 6 976 employees, and saved 6 000 jobs. However, jobs lost in this period were 36 483. ProdSA and UIF concluded that more had to be done. In  the 2016/17 financial year, ProdSA received R24.4 million, instead of the R97.8 million it hoped for, so that its impact would be even more insignificant in this year.

He explained that ProdSA receives funding from three sources, which were:

  • money appropriated by Parliament: R47.9 million, of which R23.9 million was used by Q2 (deviation of R7.9 million)
  • UIF grant: actually received R24.4 million, but only R7.9 million spent. ProdSA overall received grants worth R10 million elsewhere which was spent
  • Other income – from consultancy work and the like: R136 000.

In total it had received R73 million and the deviation on spending was R24 million. It would be possible for ProdSA to pick up deficits in spending by the end of the financial year.

Discussion:
Mr Ollis (DA) noted that he was a strong supporter of ProdSA, and believed it had an essential function in South Africa  due to its economy, which had frequent job losses. It was clear that ProdSA was one of the few entities that could do something specific and practical that could save jobs. The Committee was aware of the problem of getting funds in Q1, as demonstrated in the presentation and its previous engagements. If it was correct that the lack of funding prevented any support initiatives aimed at preventing job losses in Q1, resulting in zero achievement, then he was concerned that the problem still had not been solved by Q3. He asked for an explanation for zero achievement, and said there was not consistency on the figures provided for the 33 companies helped with funding

He understood that ProdSA had a problem with funding, but a catch-up programme was now needed to address the problem. Everyone would have to work faster, quicker and more efficiently in Q3 and Q4. He encouraged ProdSA to speak to the Committee if it needed assistance on funding. An escalation programme was needed to reach more companies. The latest quarterly survey on jobs showed losses in construction and mining, and slight increase in other sectors, with overall performance of only a 0.2% improvement. There were still numerous companies in distress and retrenchments, so there was a need for ProdSA's intervention.

Mr Ollis noted that the turnaround solutions affected only 18 companies and 2 334 people employed and commented that this was low compared to the previous two years. Clearly, much more needed to be done for employment. He thought that ProdSA must provide further clarity on employment statistics and indicate how this differed from figures that had been released by Labour Market Survey, saying that the economy had lost 36 483 jobs in 2015/16. ProdSA had a history of saving a lot of jobs. The Committee would thus have expected saving of far more than 6 976 jobs. Perhaps more had to be done to increase the number of companies being interacted with, and the number of jobs being saved. Despite the very small increase of 0.2% increase in actual jobs, he was still concerned about the numbers of interventions dropping, particularly given the history of job losses over many quarters, suggesting the need for more to be done.

Ms T Tongwane (ANC) asked where ProdSA would get the additional funding in order to fill the vacant position of the Chief Economist.

Ms H van Schalkwyk (DA) noted the forecast of a deficit but asked what action plans were then put in place to try and prevent that from happening. She also asked that previous audit outcomes be taken into account; as the financial year end drew closer, there was a need for assurance on the action plans to address the previous year’s financial year’s internal and external audit outcomes. In Q3, did ProdSA look at what situation might prevail in the next quarter? Measures had been implemented for the chairpersons of the audit committees, but she wondered if this translated into positive feedback.

Mr B Mkongi (ANC) was not sure what ProdSA’s programme of saving jobs entailed, and asked for clarity. ProdSA spoke both of saving jobs, and saving companies in distress an he wondered then about its relationship with dti, and particularly with the Business Rescue programme, so he was worried about possible duplication. He also asked whether companies who were not aligned with the country's national goals would also be saved? Broad Based Black Economic Empowerment (BBBEE), governance of those companies and the involvement of the workers in the management of those companies, as well as investment in South Africa were all important points, and he suggested that decisions on saving should look also into this type of compliance.

Mr Mkongi asked what the role was also of the CCMA relationship, structured or not, in the Workplace Challenges programme. He would not like to see CCMA receive complaints at the tail end, from a dispute that started long ago.

He asked what the ProdSA’s entrepreneurial programme was about?

Mr Mkongi also expressed concern that dti was doing the job, running and funding the programme in support of SMMEs. He asked if available funding was devolved so that ProdSA could do the job or whether there was duplication with the work done by dti – if so, then why should this not simply return to the dti, to avoid a situation where ProdSA had a small budget with too many tasks and was not able to achieve its goals. ProdSA should establish strategic programmes which would allow it to be more efficient and effective as an organisation. He pointed out that ProdSA had not explained, in detail, the deviations that had been undertaken, what exactly they were, whether they were discussed with the office of the Auditor-General (AG), and whether these were agreed. 

The Acting Chairperson asked why ProdSA said it had not achieved in developing relevant productivity competence; there had been some over-performance which should be recognised. The core business stages of interventions needed some clarity, and she asked for explanation of the continuing lines and moving lines on the graph.

Mr Mothiba spoke firstly to the description of non-achievement, when there was an expectation that more should have been done. The report was compiled on the basis that if the target was ten, but only nine were achieved, the achievement was not reached, and therefore nil achievement was shown. However, the more detailed slides per programme did show that despite the overall “not achieved” there had actually been work done on the programme. There had in fact been quite a bit of achievement; for instance on slide 10 which set out the programme of support initiatives and preventing jobs losses.

Mr Ollis complained that his hard copy did not include no slide numbers, only page numbers.

Mr Mothiba tried to refer Members to the slides on Programme 1. In Q1, the target for number of future forums established was zero. Achievement, however, was eight. In Q2, the target for saving jobs in companies facing economic distress as 3 000 jobs, but 952 were saved. In relation to the Turnaround Solution programme, negative figures were given for number of work plans developed, number of work plans implemented, productivity champions trained and the number of jobs saved, and this resulted in a “zero achievement” tagging, despite the work done.

Mr Ollis again interjected that he was unable to find this information in the slides.

Mr Mothiba continued that the final assessment for Q3 was zero because there were a lot of negatives, despite work done.

Mr Mothiba explained that ProdSA intended to intervene in 160 companies, but when it received the allocation of R24 million instead of R97 million, it decided to intervene in far less companies. In Q1 and 2, the ProdSA was working with 18 companies. The rest of the work, for the remaining 15, would be done in Q3 and Q4. There was a catch-up programme. The team dealing with productivity operations solutions had received less focus, having reached its targets, and more focus was placed on the turnaround solutions programme, where there was more capacity to do that work. Mr Mothiba was confident that by the end of the financial year ProdSA would have done 33 companies.

ProdSA had established a governing structure linked to the UIF and the results could be seen. The level of accountability had also improved in the turnaround solution programme. Four months of work had been lost in Q1, so there were two months to intervene following that. Again, he was confident that improvements would be seen.

Mr Mothiba noted that the slide on the summative analysis contained statistics from CCMA, gleaned for the purposes of section 189A considerations. CCMA adjudicated over companies, and 36 did shed jobs. However, ProdSA, even though it was aware of this, was only able to help 6.9 companies. It was having ongoing discussions with UIF on this point. If large numbers of workers were being retrenched, and there were programmes to ensure that ProdSA sat on committees, or could get details from CCMA, especially on whether this was a result of operational deficiencies, then programmes could be devised to deal with the problem. Now that the data was available, the response rate of ProdSA should be higher.

In response to Ms Tongwane, he said that ProdSA’s Chief Economist had been on medical leave, but because this was a critical area in terms of productivity statistics, ProdSA had, once she was boarded, decided to freeze some of the vacancies that were available, to then be able to target strategic areas for intervention.

Mr Mothiba assured Ms van Schalkwyk that there were action plans. Firstly, it would focus on the UIF and dti account, specifically doing more work on dti in Q3. By the end of the financial year it should have been able to recover costs on the UIF account. In 2015/16, ProdSA did have issues with audit outcomes, particularly with compliance with the Public Finance Management Act (PFMA). Previously, ProdSA did not have a supply chain management policy, but it had since then been developed. ProdSA recognised the weaknesses in the finance division and had intervened. The  CFO and the Manager of  Finance resigned, but that area was now being strengthened. Internal auditors were brought in, to focus on getting compliant with the PFMA and Preferential Procurement Policy Framework Act (PPPFA). He was confident that non-compliance to prescripts and principles would be corrected, as well as the fruitless and wasteful expenditure. Disciplinary measures would follow any abuse or waste of state resources. These should lessen the external audit challenges.

In relation to saving jobs and acting for companies in economic distress, Mr Mothiba said ProdSA would firstly make a financial assessment and an operational efficiency assessment. ProdSA's work was actually directed to looking at the manufacturing plant and its processes, in order to militate against high costs, poor quality and time consumed, in order to ensure that good products would reach the market timeously. By focusing on manufacturing, it hoped to help enterprises streamline their processes, thereby reducing wastage and increasing the speed of production. The business management side would be handled by the Sector Education and Training Authority (SETA). If ProdSA intervened in a company and found a management challenge, it would notify SETA. Certain criteria were used to determine whether a company had efficient operations, and if it became aware that the company was losing market shares because of late delivery or wastage, or was going to lose jobs, it could intervene. It would be more likely to assist a company that would be losing greater numbers of jobs.

He then addressed the ProdSA relationship with the CCMA. He stressed the need to distinguish between the Workplace Programme and the Labour Relations Act. The Workplace Programme aimed to get management and workers talking about productivity issues, so that workers could contribute to improving productivity on the ground. Where ProdSA had intervened, there had been improvements in collaboration between workers and management, leading to better turnover and cost management, which allowed the companies to be more competitive and even then to create more jobs. Mr Mothiba was confident that, even without sufficient financial resources, ProdSA’s interventions were showing results.

He noted that the dti programmes were focused on continuous improvement. ProdSA would, with the funding of R8 million, intervene in companies that were stable but needed to improve and have some intervention. Addressing workplace challenges would improve performance. ProdSA was utilising the Japanese “Kaizen Model” that looked at streamlining all operations. It would not assist companies that had challenges with market share, but would assist those who should be performing better. ProdSA and dti were in discussion on how to assist companies with exports to improve also on their productivity.

Mr Mothiba clarified that the Auditor-General would attend the audit and risk committee meetings of ProdSA and reports would be provided to National Treasury. He highlighted an error in the slide relating to deviations from targets. ProdSA had achieved around 90% of targets in Q1 on Productivity Organisational Solutions programme, but was marked as under-achievement, although it could have meant the target was too ambitious. However the resources not used here were moved to the Turnaround Solutions programme.

The Chairperson asked Mr Mothiba to explain the graph, especially the white line marked “ICU” and the upward trend.

Mr Mothiba noted that if a company moved from the top of the curve, this indicated that operational efficiency of its finances was declining, meaning it was moving into distress. ProdSA did not want to see companies below the break-even point (BEP) line, because they would already be retrenching. “ICU” was a company in distress and ProdSA hoped to intervene before performance dropped below the line, to put companies with workplace challenges into care. Companies should be assisted to rise to the top of the peak firstly; secondly, those who were originally doing well but were now doing poorly could be assisted; those below the line would be difficult to turn around.

The Chairperson noted that some Members did not find the responses clear. She asked that ProdSA should reflect trends, and this one made it seem that ProdSA was explaining its operations.

Mr Lamati explained that this graph showed the stages when ProdSA would intervene in the business cycle. In ICU stage, ProdSA might be able to intervene and move the company to improving and becoming productive again. However, there were some instances where, despite interventions, the levels at which it had operated, and its challenges, meant that it could not be saved. This might be due to the core structure of the company, its processing, integration problems and cost structures. This graph did not show the outcomes of the ProdSA interventions, but the stages where it might intervene in companies with economic distress.

Mr Mkongi asked a follow-up question and concern about the graph. At the ‘x’ axis the graph spoke about BEP, which had been explained as the point where the company could either break even or not. ProdSA had spoken about the need to intervene before the company fell below BEP. He asked when exactly it would intervene and how a company already below BEP and into ICU could be saved. He asked what the triangle meant, and if at that point everyone would be retrenched and the company closed.

Mr Ollis highlighted factual errors and asked the DoL to ensure that these were spotted before bringing presentations to Parliament, and he asked that slides, not pages, be numbered in future. When Mr Mothiba spoke to Q3, he referred to items not in the presentation to explain zeros and that was of little help to the Committee. Mr Ollis still had no clear understanding why, in Q3, all nine targets were missed; he understood the lack of funding in Q1, but that did not explain the little improvement by Q3.

Mr D America (DA) wanted to speak to this presentation and the Annual Report 2015/16, which spoke of targets for the financial year. Firstly, revenue for Outcome 4 was around R7 million less, because last year the ProdSA had budgeted for total revenue stream of R183.6 million, although the UIF and DoL and dti allocations were as anticipated. He then asked what had happened from its activities, particularly in terms of turnaround. Much was contained in the Annual Report that was not carried over into this report.

Mr America noted that the presentation said how important it was to prevent companies falling into ICU status. ProdSA had intended to save 10 000 jobs, then lowered to 6 500, and finally only 2 541 were saved. There was no reporting on the numbers of companies nurtured, future forums established,  work plans developed, closed out reports, and impact assessments. Mention was made in various documents of training 100, then 110 productivity champions. He asked why targets had changed mid-way through financial years. He commented that only six people were said to be trained, with no reports on numbers of graduates trained, skills developed, facilitators trained in the Productivity Organisational Solutions programme. A fair assessment of everything happening was needed, not some information withheld.

The Chairperson agreed that the Committee did need to receive information, but said there could not be an assumption that what had been presented was not an honest reflection of the work.

Mr T Rawula (EFF) followed up from Mr Mkongi, asking when a company would apply for intervention by ProdSA, what then would happen, how it would assist, if conditions were imposed. He asked what expertise ProdSA had. There were some big companies that would deliberately restructure to small entities to escape liability and might later attribute that to economic distress, and he wondered if ProdSA had expertise to pick this up. At some point a case study would be needed. The Committee was being constantly told of job losses and it was hard to believe that ProdSA had made an impact in saving jobs.

Mr Rawula drew attention to outcome 4, and suggested that perhaps there was too much conflicting training; he therefore asked if ProdSA training was different to SETA's training, and from all other entities, or was duplication. The summative analysis spoke about 42 240 jobs that had been saved, but he asked in which sectors; the context was important because of the different shedding statistics in different statistics. He also felt that case studies were needed to illustrate who the “vulnerable workers” were in the Turnaround Solutions programme.

Mr Lamati noted that the Committee had asked for a lot of information not included in the presentation and ProdSA would need time to get it. ProdSA had all the information but there were time constraints and some had not been packaged in the right way to present it.

The Chairperson proposed that ProdSA should furnish the Committee with written submissions. 

Mr America said that would be fine but reminded the Chairperson that the same problems were experienced with the annual performance plans, when the slides were incomplete and lacking detail. He repeated that there was no explanation for the drop in numbers of jobs.

The Chairperson said the Committee understood the complaints about finances but this should not compromise the quality of information produced. 

Ms Van Schalkwyk asked that all entities should produce user-friendly documentation, particularly on the finances.

Nedlac Quarter 1 and 2 of 2016 performance
Mr Nobuntu Sibisi, Head: Programme Operations, National Economic Development and Labour Council (Nedlac), said the strategic objectives of Nedlac include effective governance and strategic leadership; provision of efficient and reliable back office support services; improved risk management and financial oversight; improved facilities management; office administration systems to be enhanced and monitored; strengthening organisational culture and performance; effective engagement on draft policy and legislation within the framework of the Nedlac Act and the Constitution

Nedlac operates under three core programmes: Administration, Core-Operations and Constituency Capacity Building. In Q1, the following achievements were noted:

  • in Administration, 9 indicators and 8 were fully achieved (89% achievement)
  • in Core-operations 34 indicators, 10 targets of which 9 were achieved (91%)
  • for Constituency Capacity Building, 3 targets set, 3 achieved.
  • Overall achievement 91%.

There were four section 77 matters tabled this year, of which three were finalised in Q1 and one was ongoing.

Performance in Q2 was not as sound and was as follows:

  • In Administration, 14 targets, 10 achieved. The intention to get an unqualified audit opinion was not achieved. Back-office storage could not be done because of high cost.
  • In Core Operations, there were 21 targets, 16 were achieved (76% overall achievement). Some pieces of legislation were debated at Nedlac but unfortunately Nedlac could not get consensus among partners in order to finalise that legislation. There were debates around religious holidays but the decision to get a socio-economic assessment meant a delay of two months.
  • In Constituency Capacity Building, Nedlac met all targets
  • Overall performance for Q2 was 76%.


Three section 77 applications were tabled and two were concluded, with one carried forward.

The section of financial expenditure noted that Nedlac's funding sources include the grant from Department of Labour, of R30.3 million, interest earned from the call account of R420 000, and sundry income, mostly from sale of old and unused assets, of R132 000. Its total budget was R30.8 million. The largest share, at R21 million, is for the administration programme, with Programme 2 getting R5.9 million and Programme 3 getting R3.9 million. The economic classification was also set out (see attached presentation).

The actual expenditure was compared to the actual budget with highlights noted in each of the programmes. Overall Programme 1 had spent 48% of its R21 million budget by the end of Q2. In Programme 2, R2.6 million spending amounted to 45% of budget. In Programme 3, R1.1 million amounted to 29% of budget.

He noted that one of the major challenges was the qualified audit opinion in 2015/16. An action plan had been devised to address the findings of the Auditor-General, and was being implemented. By the end of the year it was hoped that it would correct and close off all the findings. It was currently also dealing with challenges around resignation of staff and delays in the approval of staff benefits, which extended to staff in the finance department.

Mr Sibisi summarised the slides on impact. In the first two Quarters of 2016, various engagements had been held by chambers of Nedlac to address challenges facing the country. These included discussions with the  Minister of Finance here Nedlac provided input that was later incorporated into the Medium-Term Budget Policy Statement. A session on financial inclusion was held with FinMark Trust. The Nedlac comments were usually incorporated in FinScope, a research paper that FinMark produces and distributes to various institutions and public at large. There was also a session with the Davis Tax Committee. There were engagements on the National Minimum Wage and Labour Relations amendments.

Priorities identified at the beginning of the financial year were to finalise the Labour Relations Indaba engagement process. Nedlac was confident that this should be done by the end of the financial year, moving on next to  policy formulation and enactment of legislation. It aimed to expedite the Audit Action Plan/ It hoped to enhance corporate governance through compliance with the Nedlac Act, Constitution, Protocols and other applicable government regulations. The Secretariat capacity would be boosted and staff retention improved by building capacity of Nedlac to do monitoring and evaluation

Discussion
Mr Bagraim appreciated the report, but asked Nedlac about its actual impact. Various agreements had been made at Nedlac, in the run up to the Labour Relations Amendment Act, but the agreements reached at Nedlac were turned on their head in Parliament . He asked if Nedlac thought it was thus making any impact in reality, although it was spending a lot of time and money on attempting to reach agreements. Many things other than the minimum wage had been discussed  but somehow the public knew little about them. These included discussion about the trade unions having secret ballots before going on strike; changes to the strike legislation; compulsory mediation and possible litigation before going on strike. Even more worrying was the fact that the Committee knew nothing about these discussions.

Mr Ollis said he has previously asked Nedlac to give the Committee an update and feedback on a forensic audit case. Small business organisations were requesting to get representation at Nedlac, and he asked to what extent they would currently interact with the SMMEs. If they were doing this at the community Chamber, he wanted to know what organisations were representing the small businesses.

Ms van Schalkwyk asked for a report on the results from the Action Plan to address the 2015 audit report, and how this might translate into better audit outcomes. She commented on the particular concern about low spending across all programmes, particularly Programme 3 with 29% spending. Nedlac continued to complain about limited funding yet was not managing to spend what it had.

Mr Sibisi said that Nedlac was not purely a talk shop and he believed that what was discussed at Nedlac was in fact implemented in Parliament or government. In relation to the discussions on the National Minimum Wage and Labour Market reforms, COSATU was the only outstanding federation that had not signed, and Nedlac was optimistic that it would be signing. COSATU had not said that it needed any fresh mandate, merely that it wanted to report back to its governance structures. Nedlac was expecting finality within the next two weeks. He said that it was an oversight on the part of Nedlac that the agreement had not been forwarded to Parliament, and he would see to it that it was sent. That agreement covered most of the points raised. For instance, on the question of a strike ballot, it had been agreed that all unions would engage in a strike ballot. The only thing remaining was the formal amendment of the law to effect those changes. It was hoped that the Department would get buy-in from all stakeholders, especially COSATU, which was still outstanding at this point.

Nedlac had written to SA Police Services (SAPS) as well as the National Prosecuting Authority (NPA) to get feedback and a progress report, and had a lawyer working on the matter. They promised to give a written report on 23 February 2017.

In relation to the small businesses, Mr Sibisi understood that they wanted to be represented, but there were protocols around how any constituency could get involved. The business sector, to which such small businesses belonged, was represented by Business Unity South Africa (BUSA) and Black Business Council (BBC). BBC also represented a lot of other organisations – including, for example, Nav Corp who represented small business. If any business wanted representation outside that, they would have to follow the process of applying to Nedlac, so that the application could be tabled to the constituency.

He updated the Committee on the qualified audit and action plan. Nedlac was due to have an interim audit done by Auditor-General South Africa (AGSA) on 20 February 2017 and was hopeful this would give it a clearer picture of where it currently stood.  The major remaining issue in terms of the audit was the finalisation of Information and Communications Technology (ICT) policies, which had been formulated and presented to a number of structures such as the ICT committee at Nedlac. Some would be presented to the executive committee, the final decision-making structure at Nedlac, on 24 February 2017. That should satisfy that requirement. One remaining matter was the external or back up needed by Nedlac. The cost of obtaining this through SITA was too high at over R650 000. Nedlac was exploring other avenues, in discussion with the AGSA, National Treasury and the DoL. It hoped that by the end of this financial year at least one off-site back up would be done, as this was one of the matters commented on by the AGSA each year.

He noted that the spending in Programme 3 had now been corrected. In the governance structures Manco and Exco it had been agreed that the community constituency had been overspending and had to hold back but it was hoped that it would have managed to spend fully by year end, having scaled up some programmes, and having one large expenditure item – the Labour School, in January. This was a three-day workshop for participants from the three chambers in Nedlac.

Mr Lamati added that the DoL would be briefing the Committee on 24 February 2017, on the National Minimum Wage process.

Mr Bagraim said it was interesting that the DoL already had the schedule for this meeting,

Mr Bagraim said it was interesting that the Department had the schedule for the meeting on 24 February, although the Committee was not aware of this engagement, and he asked that the programme be sent across urgently.

Mr Bagraim then followed up on the answers given by Nedlac. He assumed that copies of the agreement would be sent to the Committee, and he was pleased to hear that the Department thought that agreements with Nedlac would be honoured; parties had not done so last time. He hoped that COSATU would not resile from discussions so far and make representations to anyone else behind Nedlac's back. He suggested a careful watch be kept on that, and asked that Nedlac alert the Committee Secretary if anything did or did not happen. He wished Nedlac luck in getting the agreement signed.

Mr Mkongi was concerned about the mention of comprehensive social security reform, which was very much work in progress, dating back even to the Third Parliament. He asked why it never seemed to get off the ground
 
Mr Lamati replied that there was movement and government had tabled proposals at Nedlac. Nedlac took the decision that a Technical Committee must be established to process government’s proposals, and work was under way, as Mr Sibisi had said, to get it finalised.

Mr Mkongi said that Mr Lamati was not, with respect, answering his question. Government was the problem; three Parliaments in turn had been discussing this and yet nothing had happened.

Mr Sibisi said that, without going into the history, it was well known that this had been an idea dating back some nine years. On 25 November 2016, government presented a position paper to Nedlac. This set out roles. A technical task team had been established, and it would start to meet from next week. Hopefully the matter should now proceed without delays.

The Chairperson commented that even though the present incumbents had been with Nedlac for two years, answers were still expected.

Commission for Conciliation, Mediation and Arbitration (CCMA) Quarter 1 and 2 of 2016 performance
Mr Cameron Morajane, Director, CCMA, gave a brief summary of performance. In Q1, there were 18 targets and 12 were achieved. However, he said that targets not achieved in the Q1 and Q2 “had nothing to do with non-performance and he could outlined the reasons. CCMA was supposed to charge fees and try to generate revenue to assist the fiscus. In Q1 the CCMA accumulated R1.6 million through payment of prescribed fees under section 188A, which was reflected as income generated.

Slide 5 (see attached presentation) set out the investment summary. He highlighted bullet point 3, saying that cash and cash equivalents closed at R250 million, which was equivalent to 3.8 months cash turnover. That meant that the organisation was financially healthy. The liquidity ratio was expected to be at 1:1 for assets and liabilities. CCMA was happy to say that it had 2.8 assets : 1 liabilities.

He then highlighted the point about jobs in the Q1 dashboard, noting the questions asked earlier about the job saving function and the relationship between ProdSA and the CCMA.

Mr Morajane also noted the concern raised by Mr Ollis about the figures. He explained that the figure, in brackets, of 39% (see attached slides) related to cases that were actually referred to the CCMA. Jobs saved were assessed looking at the matters before the CCMA. It did not represent the whole market. Small-scale dismissals might add up to a substantial amount in the marketplace but the CCMA could only work on what it had before it.

He also referred to the earlier questions around business rescue and business relationships. He noted that ProdSA, CCMA and UIF would be putting in joint efforts towards the consolidation of data, so that the cumulative effects of jobs saved in Q1 must be shown in relation to every process, to give a broad picture. If ProdSA produced its own figures, and so did the CCMA, it could be quite disorganised and some jobs may not appear on the radar. In the CCMA processes, business rescue did not feature, because of the nature of the CCMA work which was proscribed in section 189.  This section set out when the CCMA could intervene. It was at a stage before the final decision to dismiss had been taken. The idea of job saving could not happen after the damage had already been done. CCMA's relationship with ProdSA was important, when the business was facing issues with its production or operation. When / if this happened, the Chief Executive Officer of ProdSA could be contacted and would be told that this was a company that could be saved. ProdSA could deal with saving of companies, which meant that retrenchment then did not have to happen. The overall picture of how the organisations worked together was important.

Any payments made after that stage, to try to save a company, involved the UIF, who could re-train employees, if they were being retrenched because they were not familiar with new technology being introduced, to allow them then to acquire the new skills to keep their jobs. As part of the process there was a guarantee required that if the employees were re-trained within a certain time, the company should re-employ. That really enhanced the meaning of job interventions. However, this could only happen if there were sufficient and effective partnerships between those in the overall job-save process. Everyone had to put in effort. Any saving of jobs would then have a wider impact because it meant that there was less unemployment, less poverty or mitigation of the effects of a job loss if a new job was likely to be found. He summarised that whilst business rescue (of a company) was not the function of the CCMA, it could have an indirect benefit by its partnerships with those who did attend to business rescue, to make an overall impact in saving jobs.

He noted that in Q2,  13 targets were achieved, out of the 19 targets that were planned (68% achievement). He highlighted Slide 9, second last and last bullets when explaining the financial position in Q2. He had already noted the revenue generation, of R1.6 million, from fees. It currently stood at R2.5 million. Total expenditure was 0.1% less than the quarterly budget by the end of Q2.

Mr Morajane could confirm that the financial position was again healthy. One of the income generation streams was the investment of the funds surplus to requirements at particular points. The returns that the CCMA expected from these investments were listed on slide 10. He also wanted to highlight the cash and cash equivalents of R247 million, equivalent to 3.6 months cash turnover ratio. CCMA was again, in this quarter, exceeding the expected 1:1 asset to liability liquidity ratio, because it was at 3.8 :1.

He explained slide 11, bullet point 1, by saying that the roll-over amount cited there happened because some of the projects were outside the control of the CCMA, so that it could not implement in that period. This included the procurement process.

He noted that from time to time a dashboard was provided, such as the one on slide 12, to give an overall picture of all the activities and its current status. He noted the questions posed earlier about violent strikes. CCMA was using its own researchers to look into why violent strikes happened, and hopefully some recommendations could then come out of that research. It was quite a daunting task, but the CCMA was assisted by stakeholders and partners.

The target for settlements was at 70%, but the CCMA achieved 76%. In relation to saving of jobs, he emphasised that the target for saving jobs was set at 20% in the 2017/18 plan.  Because it was found that more than this were being saved, the target was adjusted upwards, from April 2017, to 35%. Capacity building and outreach was happening.

An important point was that the CCMA established a monitoring and evaluation system with regard to performance and service delivery, which tracked how it was achieving against its aims. This was particularly useful to track where it was on dealing with the audit findings. He cited slide 14, bullet point 3, and noted that the CCMA had been asked specifically to bring the audit executive and Audit Committee Chairperson as part of the delegation, to assure the Committee that the performance information given here today was correct. All performance information was being audited by the CCMA's internal auditors. He therefore said that where the CCMA had not achieved, this was a specific plan for non-performance for various reasons.

He noted that from slide 15 onwards, more detail was included on each single target and how these related back to government outcomes. Whatever the CCMA did, and whatever it wanted to achieve would have to be linked back to government outcomes and plans. For example, the jobs saved were 39%, but this amounted to 21 000 jobs, which was then translated into the improvements in the unemployment rate. The conclusion of the CCMA to each of these statistical comparisons was also given.

Mr Morajane mentioned that one of the key challenges confronting the CCMA was the growth in the numbers of cases referred to the CCMA; at the moment there was a growth rate of 5% year on year. The CCMA was trying, by way of a separate operational plan, to investigate this. The statistics were able to indicate where the mainstream of referrals was from – for instance, retail or mining sector. However, the question was why. Most referrals came from the mining sector. Hopefully by next year a report would be available with some conclusions.

He noted that the issue of large scale retrenchments continue to place significant strain on organisational capacity. Resources had to be applied, especially by specialised commissioners, to deal with this specialist field, so the CCMA needed to increase its capacity both in numbers and in specific expertise. CCMA was also planning to  increase the number of female commissioners, which was presently at a low figure. The CCMA was confident that it would be able to do this, with effect from 1 April 2017.

Another issue was that it should be able to offer its services more widely as it was presently not particularly accessible to those in remoter areas. CCMA ought to be able to offer services to all, not only in areas where it held offices. Mr Morajane said that one of the important projects was the use of the labour centres of the Department of Labour. It was hoping to get trucks to move around rural areas, and to spread so that it was not only represented in urban but also township and rural areas. This was an innovation it was trying to achieve, within the limits of its resources at present.

The final challenge was serious; CCMA needed to improve its governance as one of its five main priorities. Certain compliance provisions had been put in place, although there was not a fully-fledged unit. CCMA needed to be very strong on governance, compliance and risk, so that it set a good example when it had to handle potential disputes around non-compliance.

Discussion
Mr Ollis thanked CCMA for the presentation, which sounded impressive, and for its great effort. He himself had come across a case that he would like to refer to the CCMA. He sounded his concern that this presentation did not mention that there were some instances where, in the financial statements, National Treasury regulations were not being followed. Although there did not appear to be financial problems with the larger numbers, he was concerned that there was no comparison between budget and expenditure, which meant that the Committee could not see if the CCMA was, for instance, over-spending on one line item such as cars and under-spending on others like office equipment. In future, he expected the CCMA to follow he National Treasury templates for reporting.

He was pleased to hear of the study into violent strikes. However, he asked if the CCMA had access to the COSATU study done in 2012, asking COSATU members for their views on strikes. 37 districts were surveyed, and at that time, around 51% of all members interviewed believed that violence was necessary during a strike or a protest march in order to achieve the aims of the strike. That was a perception problem, and clearly CCMA had to attach due weight to, and further investigate that point.

He noted that office rentals had been cited as problematic since the previous year and he asked that  CCMA should update the Committee, telling Members whether the problems had been fixed, and if any people had been fired or reinstated following the enquiry. He asked if the CCMA had any other rental problems.

He asked that Morajane elaborate on his statement that the CCMA’s own governance processes might need to be improved.

The Chairperson added to Mr Ollis’ comment about the violent strikes, and suggested that CCMA should also read the resolution of COSATU Congress on the issue, where the views of the General Secretary were tested.

Mr America echoed the sentiment expressed by Mr Ollis, but commented that although the presentation was well done, it was in fact quite thin on detail. He noted the broad strokes for the various strategic outcomes, but said that there was much more to them which he thought should have been included. It was difficult to look at an Annual Performance Plan and assess exactly where the CCMA was in the process. He had no doubt that the information was authentic and correct but he agreed that more attention should be paid to fully complying with the National Treasury requirements and cross-referencing the APP.

Mr Rawula recalled that during a previous interaction between the Committee and CCMA, concerns were raised about the Northern Cape, including the outsourcing of cleaning services. He asked for feedback on these, mentioning that one office had been advertising for a cleaner in Johannesburg, and he hoped this was a spin-off from the discussions. He wanted more comment on the mobile offices. He also expressed concern about enforcement of arbitrations, especially by applicants who could afford sheriffs, and wondered what the CCMA was doing in that regard.

Mr Rawula referred to the slides on capacity building, and said it was understood that CCMA was using those universities, as it had outsourced capacity building, and so he wanted to know the benefits, particularly for commissioner training, both for the universities, and gained by the participants. He asked whether a commission structure had been agreed since the university was using CCMA materials. He wondered too if commissioners trained internally with the CCMA had any sort of links so that they could gain a recognised NQF qualification, or if Recognition of Prior Learning (RPL) was being used to recognise and build on the undoubted experience of the existing commissioners.

He was pleased to see the trend of re-instatement and re-employment, but commented that there still seemed to be more of a focus on monetary compensation, and he would prefer to see the former emphasised.

Ms van Schalkwyk agreed that it would be ideal for the CCMA to follow the National Treasury templates for reporting, particularly for expenditure, and added that she would have liked to see more detailed reports on the different programmes to give the Committee a good idea of the variances in spending and to gain more insight. She had previously complained about the forms not being in a broader range of  languages,  particularly for people in Northern Cape. In Q1, forms had been translated into Afrikaans and isiZulu but more had to be done.

Ms van Schalkwyk commented that a figure of 39% was given for jobs saved in both quarters. She wondered if this was correct. She noted that CCMA had run some good programmes to help people understand the law better, and to know their rights, which included outreach services and awareness campaigns. Hopefully that would bear fruit in the rural communities. She also noted that it had been mentioned, for Q1 and Q2, that there were investigations into complaints about commissioners, and she asked for some detail and the figures involved.

Mr Mkongi added to Ms Van Schalkwyk's comment on the 39% figure. Outcome 4 showed that the CCMA saved 39% of jobs of employees facing retrenchments, out of the cases referred to the CCMA. This translated into 21 000 jobs saved. At the end of 30 November 2016, the national unemployment rate stood at 27.1%, so it was calculated that jobs saved had assisted in keeping the unemployment rate down to the extent of 0.1%. He asked if this was really addressing unemployment.

He noted that the language used to explain the presentation was very important. He wanted an explanation of what cumulative and material meant. He thought material capital was the transfer from government, and cumulative capital was the amount paid by people to use the CCMA services. The Committee had to be able to explain these concepts to those in the Members' constituencies. He added that the CCMA should have specified whether “days” meant “working days”, and the same comment applied to the targets for days to deal with groups of cases being investigated.

Mr Morajane replied that presentations would follow NT guidelines. He thanked the Committee for the advice on studies on violent strikes; CCMA would look at the reports suggested by Mr Ollis and the Chairperson. The lease matter was heading for litigation, but CCMA had engaged with the landlord and it was agreed that there would not be anything done about the lease that was included in the forensic findings, and it had been settled.   CCMA had had  resignations, terminations and warnings as well. Two cases left had just been concluded.

He noted that it was difficult to assess how much detail to include, but all information being requested was already available and could be provided to the Committee. He commented that there was already a document that shows the strategic objectives, how much was budgeted and how much the cost was. A year on year comparison could also be made to illustrate CCMA's progress and status.

He confirmed that most of CCMA’s cleaners, especially at head office, were no longer outsourced but were full employees of the CCMA. They had benefitted from staff increases and there was positive feedback. When doing a cost comparison, the CCMA looks at whether it would be able to afford to keep all the cleaners or whether outsourced contracts were more cost-effective, and whether it had the budget. The same arrangements were made for  interpreters who were originally part-time, but were now all employees of the CCMA. However, it had not envisaged that the bargaining councils were using the same interpreters, and the CCMA had needed then to meet with the councils and asked if those interpreters not working full time for the councils could take on additional work.

CCMA would ideally like to build offices everywhere to meet the need, but financial contraints meant that it could not do so.  The Electoral Commission of South Africa (IEC) had trucks that it only used for elections every five years, and the CCMA was intending to see if it could get access in the meantime. This idea was part of the programme for 2017/18. A team has been asked to do a feasibility study to see how practical it was for the CCMA to be able to do so.

He confirmed that the enforcements of awards were included, but CCMA was using the Basic Conditions of Employment threshold, so that those earning below R24 000 must be assisted, it being assumed that they could not afford legal fees. They had rights to execute this, as well as to go to the sheriffs and ask if they could have a R10 000 deposit. The CCMA cautioned that  those above the threshold, who enjoyed the same benefits, should not deprive those whom the programme tried to assist. Often employees were not able to provide actual payslips.

He explained that the university project was purely limited to the commissioners. Currently a dual programme was being run because at the time the programme started it was intended that the CCMA should explore and see if it was viable. However, it was recognised that training of commissioners was vital and CCMA had come up with an agreement that the process needs to be reviewed to show where the CCMA benefits lay. If CCMA was reaping benefits, then  it must be asked how CCMA could fix any challenges or shortcomings in that university project.

The NQF level issue was outlined in the pack given to Members. Internal findings were that  commissioners who were trained by CCMA would go and work elsewhere, claiming to have done internal training and achieved high marks – but without any NQF specification. This was the point with all training programmes  now. CCMA was  registering its intellectual property rights, and to avoid the situation where some companies would  take the programme, re-brand under their own names and put no effort in, yet reap the benefits. 

He agreed that in terms of reinstatement and re-employment, statistics could be given. The recent UCT case said that the primary function of the Labour Relations Act was to achieve job security, which did not translate only to compensation. That case suggested that  every employee dismissed must seek reinstatement or make re appointments  in the Act in section 183 says that if the circumstances were that a person could not return to work, the reasons must be noted and the fact that there was an attempt. Part of the problem was that some employees were not very sophisticated, and would see a lump sum as helping them although in truth it was not sufficient. It was a question of ensuring that  effort should be made, where substantive evidence was found, that the dismissal was unfair and that reinstatement could be made..

CCMA would give the Committee a full costing so that it could see the main issues. The CCMA was making progress on the referral forms, but the language problems were not limited to this alone but also to the wards.  The question was why the forms should be in English, if all parties spoke another language. Parties must also guard against losing the essence in translation,and if the language requirement was changed, it  should be able still to cover not only processes, but also the actual disputes. For a start, people should be able to express and defend themselves in their own language, particularly when it came to people claiming dismissal. Compromise would be needed but he believed that this could be achieved.

He noted that in respect of complaints, the CCMA had a full report as provided to the governance committee, noting every complaint against every commissioner. CCMA raised the complaint with the relevant manager of the region and also with the commissioner involved, and would then monitor it right the way through the process to a full report, tabled to the governance and social committee. A .complaints unit was established purely to get complaints about commissioners. The CCMA made sure that its responses meet the minimum standard of 48 hours, so that was working quite effectively. The full report on that could be provided; this was done every quarter, so that the governance committees would know how far CCMA was going.

Mr Morajane confirmed that the figures were correct, and that 39% applied in both quarters. He emphasised that this was calculated as 39% of cases referred to the CCMA, not to total unemployment overall. He agreed that CCMA did make a small impact on the overall unemployment rates, currently 0.1%. He noted that in Q1 this translated to15 000 jobs saved in South Africa by CCMA, with 0.1% unable to be saved. In Q2 the figure was 67 000 jobs, again a small contributor to lessening overall unemployment rates. He agreed that technical information could still be drafted in more simple language, and CCMA was constantly trying to improve on this, including when drafting contracts. He confirmed that “day” meant a calendar day, as defined in the Act. 

Adoption of minutes
The Committee adopted the minutes of 7 December 2016 with amendments.

The meeting was adjourned.

 

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