Compensation Fund and Nedlac 2016/17 Annual Report

NCOP Economic and Business Development

07 November 2017
Chairperson: Mr M Rayi (ANC, Eastern Cape)
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Meeting Summary

Annual Reports 2016/17

The Committee expressed disappointment with the fact that documents were only received the day before the meeting. Documents should be provided at least one week in advance.

The Compensation Fund presented its Annual Performance Report 2016/17.
The overall performance for the Compensation Fund for Annual Performance Plan 2016/17 was 50% of Annual Performance planned targets, compared to 41% in 2015/16.

Programme 1, Administration: 2016/17 planned targets were eight in number, of which only two had been achieved. Performance was thus at 25%.

Programme 2: Operations: 2016/17 planned targets were five in number of which three had been achieved. Performance was thus at 60%.

Programme 3: Provincial Operations: 2016/17 planned targets were five in number of which four had been achieved. Performance was thus at 80%.

The average, taking into consideration the performances of all the Programmes, was 50% overall.

Some challenges of the Compensation Fund were highlighted. The Fund’s annual audit plan had not been approved by its audit committee by March 2017 but had however only been approved towards the end of Quarter 1 of 2017/18. The Fund had also been unable to meet its annual target of having an investment portfolio return of 8.28% with actual returns only being 7.17%. The Fund had taken action to revise its investment strategy. The Fund additionally was unable to achieve its planned target of maintaining its vacancy rate at 10.3%. It was difficult to attract required specialised skills but it undertook to develop an action plan.

On the financial performance of the CF for 2016/17 total revenue amounted to R13.4bn and expenditure sat at around R6.6bn. There was thus a surplus of around R6.6bn.

The Committee was not pleased with the performance of the Compensation Fund. The performance only sat at 50%. Members observed the Fund to have serious problems. Was the Fund in good hands? Members felt the management of the Fund to be weak. Three disclaimers in three years was unacceptable. There seemed to be no case management in place. Members were concerned that the Compensation Fund was managing funds from workers’ contributions. The whole idea of having the Fund was to assist workers when they were in distress.
Members were concerned that the Fund had not addressed the 78 findings of the AGSA. This failure opened up the Fund to fraud and corruption. If the Compensation Fund was looking at the root causes of the findings, as they stated they were, what were the root causes and when were issues going to be resolved? On the findings of the AGSA the Compensation Fund had alluded to a Memorandum of Understanding that it had with the Inspectorate of the Department of Labour. How could the Memorandum of Understanding be of any use if the Inspectorate themselves lacked capacity? It was all good and well that the Fund was taking remedial actions on where they had fallen short, but if the Committee was to hold the Compensation Fund accountable the remedial actions needed to have timeframes attached to them. Concern was raised that it seemed as if there was no consequence management at the Fund. What actions had the Fund taken against employees that had done wrong?
The Annual Report spoke about fruitless and wasteful expenditure amounting to over R400m due to wrong doing and that there were over the past few years 34 cases under investigation. However, could there under human resources be an indication of persons having been fired due to this? If criminal charges had been laid against persons, Members asked for the list of cases with their corresponding case numbers. What was the current status of cases? What the monetary value of monies lost? Lost funds had to be followed and recouped. The Fund needed policy to guide it. The Committee required of the CF to adhere to processes that were in place. A total of 163 cases had been condoned but no update had been given to the Committee.
The Compensation Fund was asked why most of the work-related injuries were in the retail sector. Members also asked why the number of injuries at Shoprite/Checkers was almost double that of its nearest rival Pick n Pay. Had the Fund investigated why the figures were so high at Shoprite/Checkers?
Given that investment income targets had not been met, the Fund had embarked on an investment strategy, which the Committee asked to see. The Fund was asked in what positions it had vacancies. Members also asked when the electronic management system of the Fund would be in place.
Members had received complaints about pension contributions that had been made but not paid out. The Fund was asked how it could pay out performance awards to employees to the value of R5m when the organisation’s performance only sat at 50%.
The Committee asked the Fund to provide its audit plan as well as its risk and audit policy. Quarterly reports from 1 April 2017 to date should also be provided to the Committee. The Fund was asked what the total amount of unclaimed funds of beneficiaries was; how many beneficiaries were there; and what was the Fund doing to trace them.
Members felt it important for the Compensation Fund to appear before the Committee again so that issues raised could be addressed. Members proposed that the Fund be given until March 2018 to update the Committee on issues raised by Members. The update could be in written form as the Committee might not have the opportunity to meet with the Fund any time soon.

The National Economic Development and Labour Council presented its 2016/17 Annual Report. Performance sat at 80%. Of a total of 51 targets, 41 had been achieved.
Some major achievements for the year under review was that the Council had obtained an unqualified audit opinion; convened the Future of Work workshop in partnership with the International Labour Organisation; the National Minimum Wage Agreement was signed by social partners; and the Council had established a high-level task team on Comprehensive Social Security.
Some challenges experienced were that it was unable to meet its quarterly target to finalise the National Economic and Labour Council Report on the Financial Sector Regulations Bill, which was tabled on 13 May 2015. Government had at a task team meeting requested to engage internally on the Bill before submitting a revised version. Government, however only reported back to the task team in Quarter 1 of 2016/17. Another challenge was human resource shortages within the Council, which was exacerbated by resignations of senior members in the organisation.
In as much as the Council received an unqualified audit opinion, it came with findings from the AGSA. The Council developed an action plan and it was being implemented. On the finances of the Council, total income amounted to around R31.3m. Actual expenditure sat at around R34.6m. The difference was irregular expenditure of over R3m.

Members observed that it seemed as if the National Economic and Labour Council was doing well and appreciated the fact that it had obtained an unqualified audit report. However, the AGSA had raised issues of compliance about procurement processes being followed in an irregular manner. The question was whether it could be that suppliers that were not on the Council’s database had been given work. The Council was asked whether due diligence had been done. Members felt that some National Economic and Labour Council officials must have done this sort of thing deliberately. Members pointed out that when procurement was done there was a checklist of things that needed to be followed. Uppermost on the checklist was that there should be a need for something to be procured and that there should be a budget for it. The problem was that the Council procured even when there was no budget for it. Members queried an amount of R1.8m. The Council was asked whether it had followed the funds and had recovered them, and stressed that if there were questionable transactions then processes needed to be followed. The Council was asked how it intended to resolve the R1.8m matter. Action should be taken either by criminal or civil means. Members understood the challenges that the Council faced over delays on legislation. Members suggested that perhaps in the future the Council should start anticipating things when it came to legislation. The Council’s social partners should contribute to the discourse.

Members asked on the length of time that it took to deal with bills, whether there was policy in place which stipulated that the process should be completed within a certain period. The issue with delays on bills was that it often leads to over expenditure.
The Council was asked to provide its action plan to the Committee. Detail on positions filled within the organisation should also be provided. Members asked what the role of the Council in promoting social dialogue in provinces was. The Council was asked to shed light over section 77 of the Labour Relations Act matter. Members wished to see progress and said that the next time that the National Economic and Labour Council appeared before the Committee that issues raised should have been addressed.  

Meeting report

The Department of Labour (DoL) was represented by Ms Marsha Bronkhorst, Chief Operations Officer (COO,) and Mr Virgil Seafield, Deputy Director General: Labour Policy and Industrial Relations. Ms Bronkhorst informed the Committee that she was standing in for the Director General of the DoL, Mr Thobile Lamati, who was attending a meeting of the International Labour Organisation (ILO).

The Chairperson pointed out that when departments or entities appeared before the Committee it was preferred that chairpersons of the entity’s board and the entity’s Chief Executive Officer (CEO) be present at the meeting.

Briefing by the Compensation Fund (CF) on its Annual Report 2016/17

The delegation from the CF comprised of Mr Vuyo Mafata, Commissioner; Ms Mpai Moropa, Senior Manager: Medical Services; Mr Joseph Ledwaba, Acting Chief Director: Corporate Services; and Ms Lulama Magubane Senior Manager: Medical Services. Mr Mafata, Mr Ledwaba and Ms Moropa shared the briefing. The overall performance for the CF for 2016/17 was 50% compared to 41% in 2015/16.

Programme 1: Administration

The Annual Performance Plan 2016/17 planned targets were eight in number of which only two had been achieved. Performance was thus at 25%. The CF had managed to surpass its annual target of having 75% of projects on the risk based audit plan executed annually by 31 March 2017 with actual performance sitting at 78%. The CF had an annual target of dealing with the 78 findings by the Office of the Auditor General (AGSA) in its audit report of 31 March 2015 by 31 March 2017. This was not achieved as only 12 findings had been cleared by 31 March 2017. The CF had decided rather than to address the findings to look at the root causes of the findings.

Programme 2: Operations

The Annual Performance Plan 2016/17 planned targets were five in number of which three had been achieved. Performance was thus at 60%. The CF had managed to meet its annual target of having 100% of approved benefits paid within five working days annually. The annual target of having an electronic case management system implemented by March 2017 had not been achieved as bidding processes had not yet been completed. There had been delays in project implementation. The project would be implemented by the end of December 2017.

Programme 3: Provincial Operations

The Annual Performance Plan 2016/17 planned targets were five in number of which four had been achieved. Performance was thus at 80%. The planned annual target of having 85% of registered claims adjudicated in the current financial year was surpassed with actual performance sitting at 94%. The target of having 85% of registered compensation claims adjudicated within 60 working days had also been surpassed with actual achievement sitting at 90%. The annual target of having 85% of received compensation benefits claims finalised in the current financial year had not been achieved with performance sitting at only 73%.

Some challenges of the CF were highlighted. The CF’s annual audit plan had not been approved by its audit committee by March 2017 but had however only been approved towards the end of Quarter 1 of 2017/18. The CF had also been unable to meet its annual target of having an investment portfolio return of 8.28% with actual returns only being 7.17%. The CF had taken action to revise its investment strategy. The CF additionally was unable to achieve its planned target of maintaining its vacancy rate at 10.3%. It was difficult to attract required specialised skills but the CF undertook to develop an action plan.

The Committee was provided with a provincial breakdown of claims registered and processed for the years 2014/15 to 2016/17. Provincial figures were also provided on registered compensation claims adjudicated within 60 working days and on medical claims finalised within 60 working days of receiving invoice. Statistical information was also provided to the Committee on inter alia injuries registered per province, what the top 20 injuries were and what sectors injuries most occurred in.

On the financial performance of the CF for 2016/17 total revenue amounted to R13.4bn and expenditure sat at around R6.6bn. There was thus a surplus of around R6.6bn.

Discussion

The Chairperson observed that when departments and entities performed well then they spoke about the AGSA’s audit report. He urged Members to even ask questions that pertained directly to the Annual Report and matters that were not covered in the presentation document.

Mr E Makue (ANC, Gauteng) was not pleased with what he saw in the briefing, especially the financial element. It was after all funds from workers contributions that the CF was not managing responsibly. Slide 11 pointed out that the CF had not been able to meet its target of addressing the 78 findings of the AGSA. The CF instead of trying to address them decided to go a different route by looking at their root causes. The CF was asked what the roots causes were and by when the issues would be resolved. The Committee was tasked with holding the CF accountable and hence needed timeframes to be attached to remedial actions that the CF took.
Slide 16 showed that for 2016/17 for the Gauteng Province there were 64 805 claims that were registered whilst only 58 408 had been adjudicated. There were thus close to 6000 people whose claims had not been adjudicated. He found it unacceptable. He could not understand why the largest number of injury claims occurred in the retail sector. It was common knowledge that the retail sector employed a great deal of casual workers. What types of work related injuries took place in the retail sector? The CF was asked what it was doing to assist workers in the sector.

Mr Mafata responded that the AGSA’s major issues were around disclaimers on revenue management and dealing with relevant claims. The CF had a risk based model and had 102 classes of assessment. It was an issue which the AGSA had raised with the CF since forever. The problem was that employers registered in incorrect classes. The AGSA thus saw that revenue had well been collected but that registrations were in incorrect classes. It was an administrative issue.
Another issue raised by the AGSA was on the correctness of the number of employees registered. The AGSA often asked the CF how it knew that the numbers of employees registered were correct. He assured members that there was a three-year plan in place to deal with issues. On the revenue side, the CF had developed an electronic filing system of registrations. The CF was removing the risk of collusions between employers and employees of the CF. The project was at an advanced stage and was to go live on 1 December 2017. On the completeness of revenue, the first phase was on levels of validation with the types of the South African Revenue Service (SARS) and the Unemployment Insurance Fund (UIF).

The number of claims was an administrative issue. The CF was engaged in discussions with the National Economic Development and Labour Council (NEDLAC) to revise the number of classes of employers from 102 to 6. This would reduce the potential for fraud. On the claims side of things, the CF dealt with 80% of claims within 60 days. On why certain claims had not been adjudicated even though they were registered, as was the case with Gauteng Province where the shortfall figure sat at over 6000, one of the main reasons was that information was outstanding on claims. Information was needed from different sources i.e. doctors, medical aids and the employer etc. There were sometimes delays in obtaining information. On the matter of the retail sector having many claims, the employer had to register the claim when an employee was injured. There was a great deal of injuries in the retail sector. There was a great deal of back injuries. The CF had a Memorandum of Understanding (MOU) with the Inspector General of the Department of Labour (DoL). The CF provided them with statistics on the numbers of injuries in various sectors so that they could take steps to ensure that sectors became safer. The CF worked closely with the Inspectors and Enforcement Services Inspectorate of the DoL.

Mr L Magwebu (DA, Eastern Cape) found it totally unacceptable that the CF’s performance for 2016/17 was only 50%. The CF seemed to be having serious problems. Was the CF in good hands? Slide 11 spoke about investment income targets not having been achieved. The remedial action taken was to have an investment strategy. He asked that the Committee be provided with the investment strategy. He also found it unacceptable that the CF was unable to address the 78 findings of the AGSA. This failure opened up the CF to fraud and corruption. The Committee needed timelines when the outstanding findings would be addressed. He asked why the Eastern Cape’s performance was the lowest from all provinces at 76%. What was the problem?

Mr Mafata said that 50% performance was not good enough even for the CF. He pointed out that two to three years ago performance was even worse. The intention was to get the core business environment of the CF right. The performance of the CF was work in progress and headway was being made. The CF would in the future be where it should be. The investment strategy would be provided to the Committee. The CF was also a pension fund. The CF had invested in nominal government bonds so when markets took a dive, investments were negatively affected. The CF had to recover and invested in equities such as shares on the Johannesburg Stock Exchange (JSE).

On internal controls the CF had improved capacity in financial and supply chain management. There was no longer fruitless and irregular expenditure as in previous years. The CF was dealing with historical cases to try to clear them off the CF’s books. The CF was also trying to deal with revenue and claims management. The CF gave itself three years within which to sort out the AGSA’s issues. On the Eastern Cape’s performance of 76% he explained that some provinces took a while longer to adjust to the decentralised manner in which the services of the CF were offered. Having medical personnel in place was important for claims to be dealt with. Part of the decentralisation was to have the CF headed by a doctor in each province. In some provinces it took longer to get the required skills. The Eastern Cape Province was one of those and so too was the Mpumalanga Province.

Mr W Faber (DA, Northern Cape) asked whether it was correct on slide 16 that the Northern Cape Province in 2014/15 registered 76 312 claims. The figure was huge compared to Gauteng Province that only had 4 569 claims. The CF was asked to check if the figure was correct. He also asked why the number of injuries at Shoprite/Checkers was the highest at 3 672. Its closest rival for highest number of injuries was Pick n Pay at 1 456. The Shoprite/Checkers figure was still more than double that of Pick n Pay. Was it normal for it to be so high? The CF was asked whether it had investigated why the figure was so high.

Mr Mafata confirmed that the 76 312 registered claims for the Northern Cape Province was correct. However, on the actual number of injuries registered in the Northern Cape Province the figure was 1 174 as shown on slide 28. He explained that Shoprite/Checkers was one of the biggest retail outlets in SA perhaps this was the reason why it had so many work-related injuries.

Ms Moropa added that there was increased reporting of injuries so this could also be why the figures were so high.

Ms Bronkhorst noted the comments made about the AGSA’s audit report. The Committee could be provided with additional information. Detail on issues like the Shoprite/Checkers issue could be provided to the Committee.

Mr M Mhlanga (ANC, Mpumalanga) referred to slide 12 which spoke to the vacancy rate of the CF. He asked whether the status of the CF’s organogram had been acknowledged by the CF. He asked in what positions were there vacancies in the CF. The CF was asked when it was going to have its electronic management system in place.

Mr Mafata stated that the list of vacancies in the CF as at 31 March 2017 could be provided to the Committee. Two vacancies at Senior Management Services (SMS) level had been filled. Most of the vacancies were at junior level. Seven CF provincial heads had been appointed; two still had to be done.

The CF was being restructured and hence the vacancy rate would be higher. The CF had created three business units.

Mr B Nthebe (ANC, North West) felt that the CF had to appear before the Committee again in order for issues which Members had to be dealt with. The CF seemed to have an inability to elevate customers services, there was a human resources collapse and there were issues around financial management. The Committee’s expectation was for the CF to perform at 100%. There had to be compliance with legislation. The CF had disclaimers with findings for three consecutive years. There was no consequence management. If employees were caught doing wrong, what had the CF had done about it? There needed to be consequences. The CF needed policy to guide it. The Committee required of the CF to adhere to processes that were in place. The whole idea of the CF was to assist employees that were in distress. In the North West there was mining, agriculture etc and he asked the CF what it was doing to elevate other industries.

Mr Mafata stated that there was a great deal of action taken where staff committed misconduct. Steps had been taken. The AGSA had stated that the CF did not take action against staff members. A great deal of performance management issues would be addressed. The merits of each case were looked at. Some staff had been dismissed. There was a risk management report in place to deal with these types of issues. The CF had taken the long-term view to deal with the root causes of the disclaimers. The revised assessment model was with the NEDLAC. The amendment of legislation took time. Issues could not all be dealt with in the short term. On the CF compromising its service delivery it tried to get the organisation where it ought to be. Hence the CF managed to register 155 000 claims. The number would further improve.

Mr Magwebu observed the management of the CF to be weak. Three disclaimers in three years were unacceptable. There was no case management system in place to track cases. It would have been hugely useful. Case management was important and the Committee needed timelines on its implementation. On the adverse findings of the AGSA the CF had alluded to an MOU that it had with the Inspectorate of the Department of Labour (DoL). How could this be of assistance to the CF when the DoL itself lacked capacity on inspectors? The Inspectorate was overstretched themselves. The MOU would be ineffective as DoL inspector capacity was lacking. He felt that the three-year turnaround plan was far too long. He suggested that 18 months should be sufficient.

Mr Mafata said that the CF’s Executive Committee had signed off on the case management system that day. The case management system had a process in legislation that allowed that if the client was unhappy about a decision the decision could so to say be taken on appeal. The CF had done this manually via tribunal hearings. The CF had an online claims system. Claims management was thus done electronically.

Mr Seafield acknowledged that the DoL had few Occupational Health Services (OHS) Inspectors. There was work that needed to be done and was being done. The information that the CF made available guided the work of the OHS Inspectors.

Mr Makue said that he had heard that there were many people in the steel industry that had benefitted from surplus funds. Complaints had been received about pension contributions that had been made but not being paid out. This related to workers of the Ciskei Transport Company. He proposed that the CF be given until March 2018 to provide the Committee with an update on issues that members had raised. The update could be provided in written form as the Committee might not have the opportunity to meet with the CF again.

Mr Seafield responded that the Ciskei Transport Company matter was an old matter. If there was the possibility of financial fraud around pension and provident funds then the matter needed to be referred to the Financial Services Board (FSB) for investigation. This was perhaps what Members needed to do. It all depended on who was responsible. Was it the pension company or the administrators of the pension fund? It was nevertheless a competency for the FSB.

The Chairperson was disappointed that the Committee had only received the presentation the day before. The Committee should have received the documents at least one week before the briefing. He asked that when presentations were sent to the Portfolio Committee on Economic Development that it also be sent to the Committee.
He was concerned that the CF had paid out R5m in performance awards even though its performance only sat at 50%. He supported the suggestion made that information should be provided to the Committee as it might not see the CF again soon. He pointed out that the Committee also needed reports for the two quarters 1 April 2017 to date as well as the investment strategy that had been mentioned during the briefing. He asked that if the CF had not adopted its annual audit plan when it should have how the CF monitored its projects.

The audit plan should be provided to the Committee. The Annual Report had spoken about fruitless and wasteful expenditure amounting to R436m and that there were 34 cases under investigation over the past few years relating to it. Yet under human resources of the CF members had not observed any persons having been fired. What had happened to the persons involved? There was also irregular expenditure to the amount of R1bn that had not been accounted for. There were also 163 cases that had been condoned but the Committee was not provided with an update. What was the total amount of unclaimed funds of beneficiaries? He asked how many beneficiaries were involved. The CF was asked whether it made an effort to trace the beneficiaries.

Ms Bronkhorst responded that the quarterly reports would be provided to the Committee. The second quarter report was only due by 30 November 2017. After that deadline the quarterly reports would be provided. She could not understand why the presentation had only been sent to the Committee the day before as it had been finalised three to four weeks ago. She agreed to send presentations to the Committee when it was sent to the Portfolio Committee on Economic Development.

Mr Mafata, on the managing of irregular and fruitless expenditure cases, explained that some of them dated back ten years and others between six to seven years. The CF tried to go through the case register and tried to find relevant documentation. For a long time, the cases were left in the case register and had not been managed. The CF intended to finalise the process by the end of the current financial year. The case register needed to be clean as some of the cases were old. There were only ten cases which accounted for the irregular expenditure compared to the rest of the cases on the register. The CF was improving controls and strengthening supply chain management.

On fruitless expenditure the R400m was on a 2015/16 case. The outcome of an arbitration matter was that the CF had to make the payment. There were no services related to the amount paid out. The matter was only recently concluded. The arbitrator had not at the time made a ruling on the payment of Value Added Tax (VAT). A recent ruling had required the CF to pay an additional R15m in VAT. The annual audit plan had been approved by the CF’s audit committee in the first quarter of the new financial year. It had not been approved by March 2017. The CF planned to submit its next annual audit plan earlier to the audit committee. He felt that an amount of R5m for performance awards was a small amount if one took into consideration that the CF had a payroll of R500m. There were elements of good performance within the CF and they were rewarded. The intention was not to punish officials that were doing excellent work.
On unclaimed funds he pointed out that sometimes the bank accounts of recipients were not active. There were large numbers of claims that remained unprocessed. The CF had used print media and community radio stations to inform people to come forward regarding their claims. Names of recipients had also been published in government gazettes. Tracing companies had also been used.

The Chairperson was not satisfied that there was consequence management at the CF. The Committee also needed details on fruitless and wasteful expenditure. Members also should be given greater insight into the risk register. If there were criminal charges laid the Committee needed to be provided with the case numbers of the cases.

Mr Magwebu added that the Committee should be provided with the full list of cases where there was wasteful and fruitless expenditure. What was the current status of cases? How was the South African Police Services (SAPS) involved? Even if the matters were old the CF needed to follow the money. He asked what the total monetary value of the monies lost were.

Mr Nthebe asked that the Committee be provided with the CF’s risk and audit policy. He wished to check whether lost funds had been followed and recouped. There needed to be consequence management.

The Chairperson asked that the information requested be provided by the end of the week where possible.

Briefing by the National Economic Development and Labour Council (NEDLAC) on its Annual Report 2016/17

The delegation comprised of Mr Madoda Vilakazi, Executive Director; Mr Mfanufikile Daza, Chief Financial Officer (CFO); and Ms Nobuntu Sibisi, Head: Operations Programme. Mr Vilakazi undertook the briefing.

The NEDLAC on its 2016/17Annual Performance Plan (APP) sat at performance of 80%. There was a total of 51 targets, of which 41 had been achieved. The NEDLAC had dealt with ten pieces of legislation and most of them had been concluded within three months. There had also been ten special sessions on policy issues and five research projects had been concluded. The NEDLAC had received nine section 77 Labour Relations Act applications, of which five had been concluded and four were in progress.

Some major achievements for the year under review was that the NEDLAC had obtained an unqualified audit opinion; convened the Future of Work workshop in partnership with the ILO; the National Minimum Wage Agreement was signed by social partners; and the NEDLAC had established a high-level task team on Comprehensive Social Security.

Some challenges experienced by the NEDLAC were that it was unable to meet its quarterly target to finalise the NEDLAC Report on the Financial Sector Regulations Bill which was tabled on 13 May 2015. Government had at a task team meeting requested to engage internally on the Bill before submitting a revised version. Government however only reported back to the task team in Quarter 1 of 2016/17. Another challenge was human resource shortages within the NEDLAC which was exacerbated by resignations of senior members in the organisation. In as much as the NEDLAC received an unqualified audit opinion it came with findings from the AGSA. The NEDLAC developed an action plan and it was being implemented. On the finances of the NEDLAC total income amounted to around R31.3m. Actual expenditure sat at around R34.6m. The difference was irregular expenditure of over R3m.

Discussion

Mr Magwebu said that it seemed as if the NEDLAC was doing well. He noted that the AGSA had however raised issues of compliance about procurement processes being followed in an irregular manner. Could it be that suppliers that were not on the NEDLAC’s database had been given work? He asked whether due diligence had been done. He felt that there must have been NEDLAC officials that had done this sort of thing deliberately. Slide 22 pointed out a series of over-expenditures. There were supply chain management violations. When procurement was done there was a checklist of things that needed to be followed. Uppermost on the checklist was that there should be a need for something to be procured and that there should be a budget for it. The NEDLAC procured even when there was no budget for it. He referred to an amount of R1.8m in irregular expenditure. Did the NEDLAC follow the money and recover it? If there was a questionable transaction then processes needed to be followed. He asked how the NEDLAC intended to resolve the matter. Action should be taken either by civil or criminal means.

Mr Vilakazi explained that in terms of National Treasury regulations suppliers had to be registered on the Central Supplier Database (CSD). All of the NEDLAC’s suppliers were on the databases but some were not registered on the CSD. This had however been corrected. The AGSA had said that the NEDLAC needed to appoint a service provider and had to run tender processes. He pointed out that a forensic investigation was taking place on the R1.8m issue. A decision was taken to take the matter further to get the funds back. A case had been opened with the SAPS. The NEDLAC was having discussions with the NPA. The NEDLAC was waiting for the matter to be finalised. The NEDLAC could not afford a civil claim. NEDLAC had discontinued the issuing of credit cards to its executives. The amount of R1.8m was credit card debt. Approvals had been tightened.

Mr Nthebe said he wished to see progress. The next time the NEDLAC appeared before the Committee he wished to see issues raised having been addressed. He understood the difficulty that the NEDLAC experienced with processes on legislation taking long. Perhaps the NEDLAC had to in the future start anticipating things when it came to legislation. He also understood that the NEDLAC dealt with social partners. The social partners should however contribute to the discourse. The process used to be that the NEDLAC used to give funds to the constituency who paid service providers. National Treasury took a decision that it was best if the NEDLAC dealt directly with service providers.

Mr Vilakazi stated that pre-empting and anticipating expenditures were sometimes not possible. In most instances where there were budget overruns the NEDLAC tried to adjust where it could.

Mr Seafield stated that the DoL was concerned about budget over runs. There was no commodity so there was no reason for there to be over runs. National Treasury had been approached for funding but the request was denied. Other sources of funding would be considered.

The Chairperson, on the length of time that the NEDLAC took to deal with bills, asked whether there was policy in place which stipulated that the process should be done within a certain period. If the process on bills took forever it could lead to over expenditure. Were there timeframes?
Achieving an unqualified audit report was good. The Committee needed insight into the action plan of the NEDLAC. Detail on positions filled in the NEDLAC should also be provided. He pointed out that the NEDLAC had R1.5m in fruitless expenditure and R3.6m in irregular expenditure. The NEDLAC was asked why the issue with the National Prosecuting Authority (NPA) was taking so long. What was the role of the NEDLAC in promoting social dialogue in provinces?
On section 77 of the Labour Relations Act, which spoke about protest action to promote or defend the socio-economic interests of workers, the NEDLAC was asked to shed light over section 77 matter.

Mr Vilakazi, on social dialogue promotion, said that the NEDLAC was not directly involved with provinces. The NEDLAC had representatives from all provinces that sat in provinces. Information was being disseminated. On applications by provinces it was not only the Western Cape Province. The Confederation of South African Trade Unions (COSATU) had brought applications in the Free State Province. It seems as though applications were being brought by national unions and federations.

He noted that on section 77 the period was about to be concluded. There were timelines in place but timelines were not specified to conclude the matter. Sometimes agreement could not be reached. When the NEDLAC saw that it was going to exceed timelines on bills then application was made to the Minister of Labour for extensions. He agreed to send the action plan to the Committee the next day.

Ms Bronkhorst, in conclusion, said that all documents requested would be sent to the Committee. The concerns of Members were noted. Most of the issues raised had been addressed

The meeting was adjourned.

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