Department of Labour, CCMA, UIF, Nedlac, Productivity South Africa + Compensation Fund Quarter 1 performance

Meeting report

Opening Remarks

The Chairperson started by welcoming the members and all other entities present. She outlined the main purpose of the day, that is, to look at the Quarter Performance Report 1 of the Department of Labour (DoL) and its entities as well as consideration of the Draft Minutes of 11 October 2017. She outlined the sequence of the meeting as follows: Agenda, Briefing, Deliberations and Considerations.

From the DoL, a letter of apology was received from the office of the Director General (DG) Mr Thobile Lamati who was occupied in a meeting in East London. The Deputy Director General (DDG), Ms Aggy Moiloa (Inspection and Enforcement Services) was to lead the presentation. The request by Mr M Bagraim (DA) to leave early was also granted by the Chairperson.

The agenda was proposed by Ms S van Schalkwyk (ANC) and seconded by Mr Bagraim.

Department of Labour First Quarter 2017/18 Performance Report

Ms Marsha Bronkhorst, Chief Operating Officer (COO), DoL, explained that 52% of the strategic objectives had been achieved in the First Quarter. Regarding employment equity, 224 (62%) of the target of 362 employers were subjected to DG reviews in Quarter 1. Employers found to be non-compliant were issued with recommendations. In the past financial year, only the Western Cape had achieved the target and, in the First Quarter, only Eastern Cape, Free State and Western Cape had achieved the target. The target for 2017/18 Quarter 1 was 1118 employers, and 868 employers were inspected, which constitutes 78%, 594 complied and 274 non-compliant employers were issued notices. 56 of the non-compliant employers were referred to court for prosecution. The remainder of the notices issued are still within the timeframes.

In the last financial year in Q1, 75% of targeted workplaces were inspected. There was no improvement in Gauteng Province, Northern Cape and North West as underperformance was also noted in the last financial year.  99% of the 33 868 targeted workplaces were inspected in Quarter 1, of which 87% complied at the initial inspection stage. 372 out of 4197 non-compliant employers were referred for prosecution. There was no improvement in compliance in Kwa-Zulu Natal, Limpopo Province, Mpumalanga Province and Western Cape since the last financial year. Gauteng Province had shown a significant decline. The target for procedural and payroll audits for Q1 was fully achieved. 2170 of those employers inspected were found to be compliant towards the Fund and 1618 employers were non-compliant, only 18 were prosecuted. Of the 224 designated employers reviewed, the Manufacturing Sector was the most reviewed with 52 reviews, followed by the Agricultural Sector with 44 reviews. The Sector with the least reviews is Electricity, Gas & Water with only 1 review in Q1. Of the 224 non-compliant designated employers, only 204 were served with DG Recommendations. The outstanding 20 who failed to comply with the request were from Mpumalanga. In terms of the DG Review, employers are given 60 days to comply with the DG Recommendations.  Therefore, in Q1 no cases had been referred to court. Cases that were referred in Q1 had arisen from the inspections of Q4 2016/17.

In terms of work seekers, categorised according to age groups, 55% (128 432) of registered work seekers are young people aged 16-35 years. The remaining 45% (102 705) are adults aged 36 years and above. The figures reflect the reality of the SA labour market that is characterised by high youth unemployment rate. In April 2017, 39% of young people aged 15-34 years were unemployed, according to Stats SA. Gauteng, KwaZulu-Natal and Eastern Cape have the most registered work seekers, a total of 118 986, that is, a 52% share of total work seekers registered. Northern Cape, Free State and Mpumalanga provinces have the least work seekers registered; 7 075, 14 713 and 15 847, respectively. The gender split shows that 52% of work seekers registered are males as compared to 46% females and 2% did not indicate gender. In terms of disability, 0.6% of work seekers registered on Employment Services of South Africa (ESSA) have different forms of disabilities; 562 are blind, 354 are physically disabled and 167 have a chronic condition.

In terms of parity issues, 61% of work seekers registered are Africans, 8% are Coloureds, 3% Whites and only 1% Indians. The remaining 27% were not specified according to equity group. The findings by the DoL shows that 5% of registered work seekers have qualifications equivalent to NQF level 4 (Matric) and above while 94% of work seekers do not have any qualification, or information was not adequately captured or provided. The latest figures by Statistics SA also reveal similar figures of unemployed population, 7% of unemployed population have attained tertiary qualifications.

The DoL expressed an urgent need for programmers to assist with critical updates and changes to the IT system which had been delayed for more than a year due to challenges, such as a lack of programmers. There was also a need to prioritise data cleaning, given that the status of work seekers changes over time and the database needs to be kept up to date. Another challenge was that they are too few pathways to absorb the large volumes of registered work seekers. In respect of opportunities in accordance with economic sectors, only 26% of the opportunities registered on ESSA were classified according to economic sector. The following sectors registered most of opportunities on ESSA: Agriculture (2 816), Forestry (1 185), Safety and Security (670), Services (446), Construction (432) and manufacturing (397). Health and Welfare registered 330 opportunities, and the Public Service sectors registered 311 opportunities.  A total of 20117 opportunities were not classified by sector and are therefore not included in the graph.  55% of opportunities registered are for formal jobs, 16% for projects, and 14% for learnerships. The remaining 15% consist of opportunities for Strategic Integrated Projects (SIPs), Internships and Apprenticeship.  73% of the opportunities are for contract employment and 17% for temporary positions, while only 8% of the work opportunities are for permanent positions. Although most work opportunities were registered by the Agriculture and Forestry sectors, the placement rate stands at only 3% and 0%, respectively. Challenges include skills mismatch and a lack of required experience. Interventions recommended included integration between the Public Employment Service and the Labour Activation Plan; the establishment of employment schemes for the low-level work seekers funded by the Unemployment Insurance Fund and the Compensation Fund. 

19% of registered work seekers received employment counselling, 76% of whom were young people aged 16-35 years. The DoL recommended the need for more counsellors to cope with the large volume of unemployed work seekers. It was also observed that the structure was short of 32 counsellors if each Labour Centre were to be served by one counsellor. The counsellors were overstretched and had to resort to group counselling due to lack of resources. The Speex assessment test had been suspended due to need for updates to comply with the requirements of the Health Professions Council of South Africa. There were no suitable venues for electronic testing and confidentiality.

In relation to placements, 4 955 opportunities were filled by registered work seekers, of which 69% were in formal jobs; 16% in projects, 5% in SIPs and 5% in Internships.  68% of the work seekers placed were young people aged 16-35 years. 55% of those placed were females against 45% males, with most female placements in Limpopo province. The number of work seekers registered is far higher than the opportunities registered and placements secured.  The opportunity rate against work seekers registered is 12%, while the placement rate against work seekers registered is only 2%.

Many challenges were identified in terms of International Cross Border Labour Migration (ICBLM), including companies not willing to test local labour market for availability of suitable labour, non-compliance with labour legislation, demand for unreasonable period of experience and foreign language as a prerequisite. Other challenges included insufficient or no implementation of skills transfer plans, misleading advertisements, fraudulent documentation supplied by syndicates and applications to renew visas for people already in the country, as well as applications with special preference to foreign candidates. As a solution, a number of interventions were recommended. The interventions include, amongst others, advocacy sessions with relevant stakeholders, enforcement of the 60/40 quota by DoL and Department of Home Affairs inspectors, identification of sectors in which local citizens do not wish to work, development of a National Labour Migration Policy and draft regulations. Information technology system challenges were also identified, as a result of which, only manual applications were processed in the Western Cape as applicants struggled with online processes or submitted incorrect documents. Officials were unable to upload documents; or made errors in Workspace. Overall, the Quarter 1 performance report revealed over-performance in that area.
 

Discussion

The Chairperson asked whether the Committee Members which to start with questions or to pose questions only after all presentation.

Ms L Mjobo (ANC) agreed but Mr M Bagraim (DA) and Ms S van Schalkwyk (ANC) criticised the move stating that it would disrupt the coherence of the discussion.

Mr Bagraim said that there is no difference in labour markets. There are no jobs, and poultry is creating very few jobs. He said the total expenditure of 21% in the financial report of 2017/2018 was horrific. He wanted further clarification on that. He asked why, if 60% to 70% of South African youth are unemployed, the Department was only able to place an approximate of 3 400 people. He recommended that the bottom line was the need to spend more time on capacitating various sectors to create more job opportunities. He also posed the question of why 1% of the disabled were at work against the 3% recommended by the ministry.

Mr D America (DA) asked why there is a huge underspending in the compensation of employees. He also sought clarification on why the budget in the 1st Quarter revealed underspending. He also questioned why there was underperformance in the provinces of Northern Cape and Western Cape. The core of the question was why the underperformances were characterised by underachievement of services. He also requested clarification on the efficacy of labour legislation in South Africa. On work permits, he recommended the need for pro-active measures by the South African government.

Ms van Schalkwyk said that she was not happy with the overall performance which stands at 53% for the period under review. She agreed with Mr Bagraim that total expenditure of 21% in the financial report of 2017/2018 was horrific in relation to the poor performance. In line with the performance per province, she sought clarifications and explanation on why the Northern Cape and Gauteng were at 33% and 25% respectively. She also asked what they were doing in terms of re-strategising the current measures which are proving to be fruitless and not working. She also sought the cause of the underperformance in Gauteng and Northern Cape. She said that there is need to monitor implementation of the recommendations. She also asked what the Department of Labour was doing to ensure that it is being taken seriously. She asked what the Department was doing with regard to the high rate of unskilled or low-skilled employment seekers.

The Chairperson said that there was the same poor performance in both rural and urban areas. She asked what explanation could be given, taking into consideration the fact that urban areas are expected to perform better than the rural areas. She queried the late submission of corporate reports by Corporate Services and the CFO. She agreed with other Members that they needed to know the causes of underperformances. People with disabilities are always overlooked and there had to be an improvement in that area. Why were inspectors on leave when the Department of Labour was not able to meet the targets?

Mr Bheki Maduna, CFO, DoL, said that the only way to understand the vacancy rates was to take a closer look at expenditure vis-à-vis performance.

Mr Sam Morotoba, Deputy Director-General: Public Employment Services, DoL, stated that most of the people had dropped out of school were therefore unemployable. As a result, he said the Department of Labour was working with social development to address the underlying causes. He also said that the unemployment rate is also due to low skills or lack of skills in the employment seekers.

Mr Silumko Nondwangu, Supported Employment Enterprise, DoL, said there was an improvement and overachievement of the number of special skills in the next report.

Ms Moiloa informed the Committee that underperformance in the Gauteng Province and the Northern Cape was due to non-compliance. She also said leave management left a lot to be desired. She admitted that work permits were reactive but, beyond that, the Department looked at the contextual variables in each case.

National Economic Development and Labour Council (Nedlac) Quarter 1 2017/18 Performance Report

The presentation was made by Madoda Vilakazi, Executive Director at Nedlac and the CFO, Mfanufikile Daza.  Under Programme 1, the expenditure at the end of Quarter 1 was at 24% which was 1% less than the expected quarterly average of 25%, but was not significant. Under Programme 2, the expenditure was 29%. The 4% variance was due to the costs of National Minimum Wage activities. Under Programme 3, the expenditure was at 11%, which was 14% less than the norm. The variance of 14% was due to the fact most of the activities under constituencies would be undertaken during Quarters 2, 3 and 4. The expenditure for the Community Constituency was expected to increase as from Quarter 2. The expenditure for Labour and Business Constituencies was also expected to increase significantly from Quarter 3.

Challenges faced were diverse. These included the resignation of the Communications Coordinator at the end of the last financial year, leading to the failure to achieve the target on the number of website updates in terms of the Annual Performance Plan. Other challenges included a sharp shortage of human resources as well as fiscal malnutrition. As remedial actions to these challenges, the position of Communications Coordinator had been filled and in a bid to counter the shortage of human resources, staff benefits, such as medical aid and a pension fund, were established to improve staff retention rates. To address budgetary constraints, efforts were underway to ensure additional funding to address the issue of underfunded projects undertaken by Nedlac.

In a bid to enhance professionalism in the management of finance, organisational priorities for 2017/2018 include enhancing risk management systems and compliance; seeking additional funding to address the issue of underfunded projects, as well as ensuring the effective implementation of the Audit Action Plan 2016/2017. Nedlac was building research capacity in line with the International Labour Organisation recommendations.  Nedlac was working on enhancing communication and outreach programmes by forming strategic partnerships with other communicators, and healthy relationships with the media. The National Minimum Wage (NMW) would remain one of the key deliverables for Nedlac. Nedlac wanted to ensure that the work flowing from the NMW would live beyond the implementation date of May 2018. Comprehensive Social Security (CSS) would form a pivotal part of Nedlac’s work, ensuring that South Africans who are currently outside the security net are also covered. Nedlac realized the importance of continuous engagement with the National Health Insurance (NHI) and the need to continue with the consideration of Section 77 Notices in line with the Nedlac Protocol and Code of Good Practice.

Against that backdrop, Nedlac remained committed to advance social dialogue and promote participation of social partners towards addressing socio-economic challenges affecting South Africa. All efforts would be made during the course of the current financial year to ensure that the set performance targets were achieved and Nedlac would continue to strive for an unqualified audit for the current financial year.

Discussion

Ms van Schwalkwyk said that over the past three years, there had been problems with regard to communication. In light of the Quarterly performance report, per strategic objective appraisal, she asked what the challenges were that had resulted in the achievement of 17% and 50%.

Unemployment Insurance Fund (UIF) First Quarter Performance Report

Mr Teboho Maruping, Commissioner, UIF, noted that in terms of the audit observation of the Annual Performance Plan 2017/18, there were 12 performance indicators and targets. Five performance targets were achieved and seven performance targets were not achieved. It was further noted that in-depth analysis of corrective measures on non-achieved targets had not been conducted. As a result of non-compliance by employers and the volatile economic market, the UIF urged the government to create an atmosphere that is conducive for business activities and which attracted foreign investments which would, in turn, create more jobs.

Audit findings in the performance information for Quarter 1 included the fact that evidence provided in support of performance achievements was not in line with the Technical Indicator Descriptions; directorates were not compliant to organisational performance reporting timelines; there was insufficient evidence provided for the reasons for variance, and corrective measures for non-achieved targets were inadequate. Against that backdrop, the management had been urged to take immediate action.

In terms of the re-arrangement on strategic outcome goals in the Strategic Plan 2017/18 – 2021/22 and the Annual Performance Plan 2017/18, the information on the Strategic Plan and the Annual Performance Plan had to be aligned. Revenue collection from employers had to be improved. Changes would be communicated to the Executive Authority and strategic documents would be updated going forward. The annual target for approval or rejection of valid claims had not been achieved during the 2016/17 financial year. The average level of performance was 88%. The annual target for 2017/18 should have considered the level of performance prior to the planning period as the set performance targets were not achievable.

Monitoring and Evaluation officials would conduct awareness sessions to directorates on the development of performance indicators and targets. Systems would be enhanced to ensure that claims are processed and finalised timeously. Performance indicators and targets included in the strategic plan and annual performance were in accordance with the requirements of the framework for managing programme performance information. Monitoring and Evaluation officials would compile a report detailing non-compliant directorates, evaluation results on the evidence submitted by directorates, disagreements and escalations. The report would be discussed at executive committee meetings. That report would assist Monitoring and Evaluation officials to make their voice heard in the UIF. Monitoring and Evaluation officials would provide an opinion on the performance reports from directorates as to whether the information was valid, relevant, reliable, complete and accurate. 

Discussion

The Chairperson noted that the computers in the UIF were always down and, as a result, affected the processing of claims. She asked what plans the UIF had in place to address that situation.

Compensation Fund 2017/18 First Quarter Performance Report

Mr Vuyo Mafata, Commissioner, Compensation Fund, listed the indicators achieved, which included the implementation of the approved annual risk-based audit plan; approved benefits paid within 5 working days; response to received pre-authorisation requests within 10 working days; claims adjudicated within 60 working days of receipt; and medical invoices finalised within 60 working days of receipt. Indicators not achieved included the annual assessment of active registered employers and the number of requests received for prosthesis and assistive devices adjudicated within 15 working days.

In terms of statistics on indicators achieved, 22% cumulative projects on the risk-based audit plan had been implemented by 30 June 2017 against the First Quarter target of 15%. A total of R779 025 138 had been paid within 5 working days for approved benefits. 91% of pre-authorisation requests approved benefits were responded to within 10 working days against the target of 85%. 95% of claims were adjudicated within 60 working days against the target of 85%. 88% of medical invoices were finalised within 60 working days. The target had been 85%. In terms of indicators not achieved, 38% instead of 40% of active registered employers were assessed by 30 June 2017. 26% of requests received for Prosthesis and assistive devices were adjudicated within 15 working days. The target was 85%.

In respect of strategies to address poor and/or underperformance, there was need to visit employers’ premises to finalise the Return of Earnings (ROE’s). The Commission would issue a final reminder for submissions of outstanding ROE’s through a media campaign. Employers not eligible for estimation to Inspection and Enforcement Services (IES) would be followed up, and the Rehabilitation Strategy, Policy and Standard Operating Procedures had to be finalised.

Discussion

Mr America asked for clarity on the year-on-year comparative Quarter 1 Performance, i.e. 2015/16 to 2017/18, with 2015/16 at 17%, 2016/17 at 13% and 2017/18 at 7% of planned indicators. He said the graphs were misleading.

The Chairperson asked what Mr America meant by misleading. He said that perhaps they were confusing, rather than misleading. The Chairperson was worried as to why Gauteng and the Northern Cape were in the lead in the compensation and unemployment funds. When it came to money, the provinces were leading but when it came to performance in other areas, the provinces were performing dismally. The Chairperson said there was need of a follow up on that money to avoid overspending issues.

In response, the Commissioner said that, in respect of the statistics which appeared to be causing confusion, the Commission was trying to identify in which provinces they needed to do more advocacy, so the graph was a comparative analysis of provinces to see which one needed more attention.

The Chairperson thanked Members and gave Members of the Department of Labour an option to leave since adoption and consideration of the Draft Minutes of 11 October 2017 did not concern them.

Adoption of Minutes of 11 October 2017

The Chairperson sought consensus for the adoption of the Minutes before wrapping up the session.

The Minutes were adopted without a prolonged discussion.

The meeting was adjourned.