Supported Employment Enterprises performance: Department of Labour progress report

NCOP Economic and Business Development

12 September 2017
Chairperson: Mr M Rayi (ANC, Eastern Cape)
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Meeting Summary

The Department of Labour briefed the Committee on the Supported Employment Enterprise (SEE) Entity’s performance from 2015 to date as well as performance outlook for 2017/18.

There were 966 disabled persons employed at factories across seven provinces. There was a gradual improvement in annual performance from 2014/15 to 2016/17. In 2014/15, 22% of targets were achieved. This improved to 30% in 2015/16 and to 57% in 2016/17. The briefing continued with insight into the SEE Entity’s Annual Performance Report 2016/17. With an annual target set to have production norms and standards approved and training conducted there was a 50% deviation from the planned target. Performance norms and standards were not fully implemented. Amongst the remedial actions taken on norms and standards was to collaborate with Productivity SA to review SEE manufacturing processes and to develop South African Bureau of Standards certified norms and standards. The next step was to implement approved SEE norms and standards throughout factories. The annual target for 2016/17 was to increase gross profit to 41%. Actual performance was a gross loss of 149% which was a 128% deviation from the planned target. Remedial actions to be taken were implementation of SABS certified norms and standards to ensure efficient and cost effective production processes. Revenue would be boosted through capacitating the Business Development Directorate by filling vacant posts as well as to develop and implement a cost reflective price list for factories. All the targets on financial management and governance were achieved. The Committee was provided with insight into the income statement and balance sheet of the SEE for 2016/17. Quarter 1 performance information for 2017/18 was also provided. 2017/18 financial performance as at 31 July 2017 was that revenue was below budget due to delays in production. Operating expenses were below budget mainly due to unfilled funded positions.

The SEE Entity was asked why it intended to purchase new equipment when it had only been operating since 2015. Some members were critical of the presentation and felt that it was merely feedback on strategic plan objectives. Members were concerned that the presentation figures did not accurately speak to the severity of the problem when it came to persons with disabilities. Members suggested that the Department of Labour do a more in depth study of what the current situation was. The Committee needed to be informed on the extent of the problem and what challenges there were to create sustainable and decent employment for persons with disabilities. Trade unions had with members raised the matter that the Department of Labour had to beef up its registration of trade unions. What was the Department of Labour doing in this regard? Some trade unions within the Confederation of South African Trade Unions (COSATU) had felt that the Department of Labour needed to be stricter on trade union registrations. Trade unions after all had to protect the rights of workers. Members also raised concern that Statistics SA data on unemployed persons did not include persons from Small, Medium and Micro Enterprises and entrepreneurs. Members felt it to be a matter that needed to be addressed given global economic development. The Department of Labour was asked whether it was doing anything meaningful on casual workers. It was a huge problem and had even been raised at the National Economic Development and Labour Council.Casual workers were usually under paid. Members appreciated the efforts of the SEE but were concerned about its financials. Given the SEE Entity’s financial state the concern was that it might need a financial bailout as South African Airways (SAA) had needed. The SEE Entity needed to have financial discipline or else it would collapse. The financials, keeping sentiments aside was asking the question whether what was being done was a worthwhile exercise. The Department of Labour was asked to provide the Committee with time lines on the remedial actions that was being taken to deal with the gross losses. Members asked what types of jobs were created for disabled persons. Were they permanent or temporary jobs? Members felt that awareness campaigns on the SEE Entity needed to be intensified as persons at grassroots level was not aware of it and the work that it was doing. The SEE Entity was asked whether its marketing efforts were confined to SAA and to Tsogo Sun. The Department of Labour was asked how far it was on the establishment of the factories in the Mpumalanga and Limpopo Provinces. 

Outstanding Committee Minutes was adopted. 

Meeting report

Opening comments

Mr Thobile Lamati, Director General, Department of Labour (DoL), pointed out that there were factories providing employment to disabled persons in seven of South Africa’s nine provinces. The two provinces which did not have factories were Mpumalanga and Limpopo. Plans were in place to establish factories in those provinces as disabled persons in those areas should not be inconvenienced to seek work at the factories located in the other seven provinces. The total number of disabled persons employed by the factories was 966.

The delegation from the Department included Mr Silumko Nondwango, Chief Executive Officer (CEO): SEE; Mr Spheni Ngcongo, Chief Financial Officer (CFO): SEE; Ms Marsha Bronkhorst, Chief Operations Officer (COO), DoL and Mr Samuel Morotoba, Deputy Director General: Public Employment Services, DoL.

Briefing by Department of Labour on Supported Employment Enterprise (SEE) Entity’s Performance

Mr Nondwango, duly assisted by Mr Ngconco, undertook the briefing. There were 966 disabled persons employed at factories across seven provinces. There was a gradual improvement in annual performance from 2014/15 to 2016/17. In 2014/15, 22% of targets were achieved. This improved to 30% in 2015/16 and to 57% in 2016/17.

The briefing continued with insight into the SEE Entity’s Annual Performance Report 2016/17. With an annual target set to have production norms and standards approved and training conducted there was a 50% deviation from the planned target. Performance norms and standards were not fully implemented. Amongst the remedial actions taken on norms and standards was to collaborate with Productivity SA to review SEE manufacturing processes and to develop South African Bureau of Standards (SABS) certified norms and standards. The next step was to implement approved SEE norms and standards throughout factories. The annual target for 2016/17 was to increase gross profit to 41%. Actual performance was a gross loss of 149% which was a 128% deviation from the planned target. Remedial actions to be taken were implementation of SABS certified norms and standards to ensure efficient and cost effective production processes. Revenue would be boosted through capacitating the Business Development Directorate by filling vacant posts as well as to develop and implement a cost reflective price list for factories.

In 2016/17, eight marketing campaigns were planned. Actual performance was actually way above the target with eighteen marketing campaigns taking place. The target was 125% overachieved. Other positives was that on financial management and governance, planned targets for 2016/17 were to have 50% of identified audit findings in the 2015/16 audit action plan resolved. Additionally, to have a number of strategic risks monitored and reported quarterly as well as to have 95% procurement done in line with approved supply chain management policy by the end of March 2017. All the targets on financial management and governance were achieved. With the aim of strengthening the institutional capacity of the SEE Entity, the annual target was to have 80% of the Work Skills Plan implemented by the end of March 2017. The target was not achieved with only 32 officials undergoing training which was 2% of the entire organisation. There was thus a 98% deviation from the planned target. Remedial action taken was to have the SEE Entity training committee established and to have consolidation of training requirements for all directorates within the entity. In addition the plan was to fill the vacant approved ASD Human Resource training and development post. The Committee was provided with insight into the income statement and balance sheet of the SEE Entity for 2016/17.

Quarter 1 performance information for 2017/18 was also provided. On the provision of work opportunities for persons with disabilities the Quarter 1 target was 25. The actual number achieved was 47 work opportunities. The Quarter 1 target was also met on having a marketing strategy developed and approved. However the Quarter 1 target of having one print media campaign was not achieved. The Quarter 1 target of having 25 special schools visited was also not met, only four schools were visited. 2017/18 financial performance as at 31 July 2017 was that revenue was below budget due to delays in production. Operating expenses were below budget mainly due to unfilled funded positions.

Discussion

Mr W Faber (DA, Northern Cape) noted that the SEE Entity had equipment to the value of R4.6m which was considered outdated and was planning to buy new machines to the value of R24m. However, he could not understand how the equipment could be outdated when the entity was only operating since 2015. How could the equipment be outdated?

Mr Nondwangu, on why new equipment was being invested in, explained that the factories had been established in 1943. It was time that equipment needed to be upgraded. The current government had to do its level best to absorb as many disabled persons into the factories.

Mr E Makue (ANC, Gauteng) noted that the Committee had just returned from oversight to the Free State Province. What members had observed was that many of the non profit organisations that were providing employment to disabled persons were unfortunately closing down. The presentation figures did not speak to the severity of the problem. He suggested that the Department of Labour do a more in depth study of what the current situation was. He stated that Mr L Nzimande, an ANC member from the National Council of Provinces (NCOP), was raising the issue as a question in Parliament. Was SA as a country addressing the matter of disabled persons appropriately as it should? Were efforts being made to restore the dignity of disabled persons by creating opportunities for employment? The Department of Labour should present to the Committee the extent of the problem and also what the challenges were to create sustainable and decent employment. He had also observed that there were challenges relating to trade unions. Trade unions said that the Department had to beef up its registration of trade unions. What was the Department doing concerning this? He pointed out that some trade unions within COSATU) said that the Department had to be stricter on the registration of trade unions. Trade unions after all had to protect the rights of workers. Data from Statistcs SA (StatsSA) on the number of unemployed persons did not include persons from Small Medium and Micro Enterprises (SMMEs) and entrepreneurs. It was a matter that needed to be addressed given global economic development. He further asked the Department if it was doing anything meaningful for workers who were employed as casuals. It was considered a huge problem and was raised at the National Economic Development and Labour Council (NEDLAC). These casual workers were usually under paid.

Mr Lamati explained that the presentation was an attempt to compile a presentation in response to what the Committee had requested. The reporting format was what was prescribed. He agreed that the Department needed to paint a picture of what the situation was and what was being done about it. He noted that the Public Services Employment Programme had linkages with disabled persons. The Department did provide funding for various agencies like the Agency for the Blind. Hence there was work being done beyond what the SEE was doing. As a country SA needed to do a great deal of work. The SEE’s purpose was the social returns for the programmes. He conceded that not enough profit was being generated. What would happen if the factories closed down? He answered that it would destroy the disabled employees due to loss of income and also the loss of dignity that the jobs provided to them. He said that many of the disabled employees at factories, even when they got sick, wished to go to work.  They placed such value to having a purpose in going to work. The idea was for every province to have the factories where disabled persons could be employed. There was sufficient legislative framework in place but unfortunately inroads were not being made. The Department of Labour was being more stringent on unions. The biggest challenge was that unions were required to provide assistance to its members at shop floor level. Unions should be operating as business entities. Unions were after all employers in their own right whilst still having to look out for the interests of its members who were employees. When the business side of unions did not do well then there was a spill-over effect on the normal work of unions. The Registrar of Trade Unions had placed a number of unions under administration or some were earmarked to be deregistered. There was regular interaction between the Department and trade unions. With the amendment bill on labour relations the Registrar of Trade Unions was empowered to issue legal instruments like a compliance order. If this was included in law then in some way there could be intermediate instruments that could come in if there was non-compliance by unions.  On the StatsSA data issue, he said that the Department supplemented data from StatsSA. Labour bulletins were published so that more meat was given to data that StatsSA put out. The labour bulletins would be made available to members. In addition, the Department of Labour also had an Industrial Action Report. The Department interacted regularly with SMMEs. The Department of Small Business helped with discussions that the Department of Labour had with SMMEs.  On casual workers, he noted that both the Labour Relations Act and employment equity legislation provided legal coverage for employees sourced from labour brokers. There were even court cases where the National Union of Mineworkers of SA (NUMSA) had obtained judgements against labour brokers. Another option was that employees could approach the Commission for Conciliation, Mediation and Arbitration (CCMA) directly. Employment equity legislation provided that even if a service was procured through a labour broker it did not mean that the worker should get less pay. Such employees if aggrieved could approach the Department of Labour.    

Mr Nondwango, on whether enough was being done for people with disabilities, said that the factories used to have the capacity to employ 3000 disabled persons. The efforts of the SEE were only a drop in the ocean. The SEE intended to grow so that the dignity of disabled persons could be restored. New factories would be constructed in the Limpopo and Mpumalanga Provinces.

Mr L Magwebu (DA, Eastern Cape) felt that the SEE was a good endeavour to assist the vulnerable. He was however concerned that the SEE might need a bail out like South African Airways (SAA). The challenges needed to be nipped in the bud. The SEE needed to have financial discipline. He hoped that the SEE would not collapse. He referred to slide 9 which had spoken about interventions to deal with gross losses in the previous financial year. He asked when the two director posts were to be filled. The Committee needed time-lines. He referred to slide 20 which spoke to work opportunities for disabled persons and actual performance for Quarter 1 being 47 work opportunities. What types of jobs were these? He pointed out that on slide 22 the target on the number of special schools visited and to be made aware of the existence of the SEE was not achieved. Awareness campaigns had to be intensified and should not only be confined to schools. There was an SEE factory in East London in the Eastern Cape but people were not aware of it. Many disabled persons were also illiterate and could not access information. He reiterated concerns about the financial performance of the SEE Entity.

Mr Lamati, on the concern over the finances of the SEE, said that the Department of Labour would not allow the entity to collapse. The SEE had an important role to play. Disabled persons too had the right to be employed. The Department of Labour worked closely with the SEE. There was no pressure on the SEE to make a profit yet the Department would be satisfied if it could just break even. Whatever was being done there needed to be a pricelist in terms of the goods that they manufactured. It had to be remembered that these factories did not operate like a normal factory. There were days when disabled persons felt sick and could not work. These were the types of issues that had to be taken into consideration. He explained that the job opportunities referred to were 47 permanent jobs. Whatever jobs were created were permanent jobs. He agreed that awareness was of utmost importance. Discussions took place and it was agreed that by the end of the financial year the 25 special schools should be visited.

Mr Nondwango pointed out that there were two factories in the Eastern Cape. At the East London factory referred to open days were held. Collaboration with non government organisations also took place. The issue was about upgrading the infrastructure that had existed in the previous Bantustans. The necessary skills and opportunities had to be provided. The old factories had to be revitalised. The Deputy Directors’ posts would be filled in due course. Within the next month or so the appointments would be done.

Mr M Chabangu (EFF, Free State) on slide 11 pointed out that the annual target of having 80% of the Work Skills Plan implemented by the end of March 2017 was not met. There was a 98% deviation from the planned target. The explanation for the variance was that no training committee had been appointed in the SEE Entity which made it difficult to appoint training service providers and to implement the Work Skills Plan. He asked what the reason for the deviation was. The good news from the Department of Labour was that the training committee had subsequently been appointed.

Mr Nondwango explained that after the training committee was established training would be done. There were sections of employees who fell under the Public Service Act and those who fell under the Basic Conditions of Employment Act. He suggested that members visit the factories to see things for themselves.

Dr Y Vawda (EFF; Mpumalanga) asked how far the Department of Labour was on the establishment of factories in Mpumalanga and Limpopo.  The manner in which a country cared for its weak spoke to what extent its society was civilised. He was critical of the presentation and felt that it was merely feedback on strategic plan objectives. The financials, keeping sentiments aside was asking the question whether what was being done was a worthwhile exercise. It would seem as if people at the top were not committed to the cause.

Mr Lamati stated that a report would be provided to the Committee detailing that there was value for money on money that was spent. On setting up factories in Limpopo and Mpumalanga, engagement was taking place with political principals. There had been engagement with officials. Different departments like the Department of Health needed to be engaged. Disabled persons in those Provinces had to be provided with employment. The Department of Labour was on track. By the end of 2017/18 the factories in those Provinces would be established.

Mr Nondwangu stated that the commercial aspect of the factories needed to be looked at. There was a product that was manufactured and had to be sold to government departments. However the social imperative was to absorb people with disabilities into the workforce. The SEE needed to strike this balance. Internal challenges were being addressed. The dignity of disabled persons had to be restored.

The Chairperson observed that some of the targets were not achieved. He further asked the Department to elaborate on the transitional arrangements that were mentioned. Did the transitional arrangements apply to the 2014/15, 2015/16 and 2016/17 financial years? Lastly, he asked why the SEE’s marketing focus was only on SAA and Tsogo Sun.

Mr Lamati, on transitional arrangements, said that the Public Employment Services Act came into effect in 2016. It made provision for the establishment of the Supported Employment Enterprise as a government component. The SEE had a Chief Executive Officer who reported directly to the Minister of Labour. The Department of Labour had realised that the SEE was not yet ready to exist as a government component. The Department of Labour would essentially still hold the SEE’s hand in a matter of speaking. All efforts were being made to ensure that the SEE was run as a business. The Department of Labour had even asked National Treasury to exempt the SEE from certain requirements. The Department of Labour also asked that National Treasury treat the SEE’s factories as normal factories when it came to issues like procurement. The Department of Labour felt that there was a need to relook at certain provisions of the Public Employment Service Act. He noted a lack of delegation in certain areas did affect the performance of the SEE Entity. The Department of Labour had also asked that National Treasury when the SEE secured a contract from government that it be allowed to get 50% payment upfront.

Mr Nondwangu explained that marketing was not limited to SAA and Tsogo Sun. There were a range of marketing initiatives. There were open days and radio initiatives. With SAA and Tsogo Sun efforts were being made to penetrate the private sector.

The Chairperson stated that members would have an additional opportunity to interact with the SEE Entity when the Department of Labour presented its Annual Report.

Mr Faber proposed that the Committee’s next interaction with the SEE be done via video conferencing.

Committee Minutes

Minutes dated 20 June 2017 was adopted unamended.

The meeting was adjourned

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