National Minimum Wage Regulations; Compensation Fund; CCMA; Productivity SA Annual Reports

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Employment and Labour

12 September 2018
Chairperson: Mr B Mashile (ANC)
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Meeting Summary

The Portfolio Committee on Labour met to engage with the Department of Labour (DoL) on the National Minimum Wage (NMW) Regulations and also the 2017/18 annual performance reports of the CCMA, Productivity SA and Compensation Fund.

The Department reported that Clause 15 of the NMW Bill empowers the Minister, on application by any relevant employer, to grant exemptions from the national minimum wage, and provides that the applications must be made in the prescribed form and manner. Clause 16 empowers the Minister to make regulations in the form and manner in which exemptions must be made in terms of clause 15, including the procedure for applying for an exemption;  information to be submitted with an exemption application; obligations on employers to consult with employees or trade unions concerning an exemption application; criteria that must be applied when evaluating exemption applications; period within which an application must be made; and period within which a decision on an exemption must be made. Clause 16 also gives the Minister the power to make regulations on any matter required or necessary to be prescribed. It sets out a standard publication and comment procedure in respect of interested parties. In terms of the Draft Regulations - An application must be lodged through the National Minimum Wage Exemption system online by providing all the information required by the system. An exemption may be granted if the delegated authority is satisfied that: the employer cannot afford to pay the minimum wage; every representative trade union/workers has been meaningfully consulted and the company must provide the bargaining council, union or affected workers a copy of the application. The programme on the online portal would confirm if the information reflected was true, complete and accurate by comparing with SARS records. The programme then adjudicates on affordability and determines if the exemption would be granted, refused or referred for an audit. Affordability tests are based on the company’s profitability, liquidity and solvency position. Also, test conducts audit triggers based on determined percentages and the company is either recommended for a financial audit or random audit. Exemptions can be withdrawn if the employer provided false information, did not comply with the notice, the financial position of the employer had improved and there are justifiable grounds for withdrawing. The relevant parties will be consulted before withdrawal.

Members expressed concern that the Department had not considered the issues raised by stakeholders on the NMW regulations during public participation. They sought clarity about the efficiency of the online portal, the intricacies of the system and why it might not be suitable for use by SMMEs’. The Committee asked for assurances that exemptions would be granted to companies according to Section 15. The Department was asked to clarify if it had linked its system to SARS income tax system and confirm how it verifies a company’s annual financial statement. The Committee asked the Department to clarify if there was a process in place to appeal refusals, opportunities to update information and backups systems for downtimes. They advised the Department to initiate penalties to ensure companies did not take chances. and re-work the regulations to prevent instances where decisions were taken at the discretion of officials.

Productivity SA said out of its 28 programmes in 2017/18 it had an overall performance of 64%. There is a marked improvement in governance and regulatory compliance. Productivity SA consistently obtained an unqualified audit opinion, with diminishing matters of emphasis.

Productivity SA gave a breakdown of performance per programme, looking at the key performance indicator, target, actual performance, deviation from planned target and comments on the deviations.

In programme 1, the entity achieved 84% of its target to pay SMEs within 30 days upon receipt of complete invoice. A business decision was taken by management to suspend payments to service providers due to insufficient funding of the entity. In addition, Level 7 BBBEEE was not achieved due to budgetary constraints that impede the entity from spending enough on Skills Development to score minimum BEE points.

In programme 6, The Turnaround Solutions Programme (TAS) did not meet the annual target for the 2017/18 due to the funding not having been received on time and in full. It planned to support 150 companies and preserve 7500 jobs with a projected budget of R78 720 000. However, only R19 680 000 was received, which was stretched to intervene in 71 companies and ensure 8504 jobs were preserved.

The CCMA reported that it achieved 13 out of its 15 planned indicators. Underperformance was recorded on reporting on legislative mandates because the reports came outside the allotted timeframes. Highlights of the dashboard showed an increase in the number of cases it had resolved within 20 days, a percentage jobs saved, two inaugural labour conferences and the cases it had investigated and resolved. CCMA has a liquidity ratio of 1:66:1 and a 5% variance in total expenditure.

The Compensation Fund gave a comparative analysis of its year on year performance per strategic objective. The percentage of claims adjudicated showed that all Provinces met the target of claims processed and paid within 60 days. Only KwaZulu-Natal met the target of paying claims on injury within 15 working days. The decrease in revenue was due to the increased level of compliance and the implementation of the new estimation policy. Investment income improved by 21% and the claims expenses decreased due to actuarial allocation that was not captured at the time of preparing the report. The net assets increased as a result if surplus and appreciation of property values.

The Committee asked if the three entities had functional internal audit units and audit committees. The Committee indicated that it would need to engage CFO’s of the three on why they had material irregular and fruitless expenditures and supply chain management irregularities. Members suggested that Productivity SA explore a consultancy approach and accept funds for its training lay-off scheme, and asked about the status of its BBBEE compliance and the level of transformation in the companies it had intervened in. They further asked Productivity SA to give a feedback on the status of funds that was supposed to have been transferred from the Unemployment Insurance Fund. They asked the CCMA for more information on the collapse of the bargaining councils and its dispute resolution mechanisms. Members further observed that the CCMA had spent its funds well but asked how it would cope with the increase in disputes when the NMW Bill amendment was passed. The Compensation Fund was asked how it planned to reverse the qualified opinion status of the entity. The Committee agreed that it would send its other questions to the three DoL entities in written form and mandated the three entities to send the written answers to the Committee.

Meeting report

The Chairperson welcomed the delegation from Department of Labour (DoL), Commission for Conciliation, Mediation and Arbitration (CCMA), Productivity SA and Compensation Fund. An apology on account of ill health had been received from the Director-General and the delegation was led by the DDG Mr Sam Morotoba.

Ms S Van Schalkwyk (ANC) observed that Ms A Muthambi (ANC) and Mr D America (DA) had been sending in apologies on account of ill health for some time and suggested that the Committee send both members greetings.

The Chairperson asked other Members for their views.

Mr M Bagraim (DA) agreed with the suggestion.

Outstanding Minutes

The Chairperson asked Members to consider and adopt the Minutes of 29 August and 5 September 2018 and the meeting agenda.

The Minutes of 29 August were adopted by Ms L Theko (ANC) and seconded by Mr P Khoarai (ANC) while the Minutes of 5 September were adopted by Ms Van Schalkwyk and seconded by Mr Bagraim. The meeting agenda was adopted by Ms Van Schalkwyk and seconded by Mr Bagraim.

The Chairperson said the meeting was convened to receive a brief from DoL entities CCMA, Productivity SA and Compensation Fund on its annual performance reports for 2017/18 and the DoL on the National Minimum Wage Regulations. He invited the Department to brief the Committee on the National Minimum Wage Regulations.

Briefing on the National Minimum Wage Regulations

Mr Sam Morotoba, DDG: Public Employment Services, said the Chief Director: Labour Relations, DoL would brief the Committee.

The Chairperson said during the public participation meetings on the National Minimum Wage with Members many areas were flagged for clarity by stakeholders hence members would want to ascertain if the clarifications had been handled.

Mr Thembinkosi Mkhaliphi, Chief Director: Labour Relations, DoL, briefed the Committee on the National Minimum Wage Regulations. The Department’s approach was to first prioritise the legislations that were not in place and to regularise them before handling the areas of clarity. The Department was of the opinion that it needed to table the exemptions regulations on the day that the National Minimum Wage was implemented. Clause 15 of the NMW Bill empowers the Minister, on application by any relevant employer, to grant exemptions from the national minimum wage, and provides that the applications must be made in the prescribed form and manner. Clause 16 empowers the Minister to make regulations in the form and manner in which exemptions must be made in terms of clause 15, including the procedure for applying for an exemption;  information to be submitted with an exemption application; obligations on employers to consult with employees or trade unions concerning an exemption application; criteria that must be applied when evaluating exemption applications; period within which an application must be made; and period within which a decision on an exemption must be made. Clause 16 also gives the Minister the power to make regulations on any matter required or necessary to be prescribed. It sets out a standard publication and comment procedure in respect of interested parties.

In terms of the Draft Regulations - An application must be lodged through the National Minimum Wage Exemption system online by providing all the information required by the system. An exemption may be granted if the delegated authority is satisfied that:

-The employer cannot afford to pay the minimum wage; and

-Every representative trade union/workers has been meaningfully consulted

-The Employer must provide the bargaining council, union or affected workers a copy of the application – downloaded from the system

According to the draft proposals, a copy of the exemption notice must be displayed at the workplace where it can be read by employees. A copy must also be given to the representative trade union, every worker who requests a copy and the Bargaining Council.

Mr Mkhaliphi said the online system closes the gap against fraud and is quick and easy to operate. It informs the applicant if the exemption is granted immediately based on affordability. The exemption must specify the date of application, the period and the specified wage required which must not be less than the threshold in the Act as only South Africa grants exemptions on NMW.

The Chairperson asked Mr Mkhaliphi to clarify that exemptions could only be granted on 10% of the NMW.

Mr Mkhaliphi agreed that exemptions could only be granted on 10% of the NMW. The employer needed to display the copy of the exemption. Also, if the online system rejects the application for exemption the reasons for refusal would be given. He remarked that exemptions could be withdrawn if the employer provided false information, did not comply with the notice, the financial position of the employer had improved and there are justifiable grounds for withdrawing. The relevant parties will be consulted before withdrawal.

He outlined the system requirements and asked Mr Tsoetsti to take the Committee through the balance sheet section of the online portal.

Mr Max Tsotetsi, Assistant Director: Financial Liaison, DoL, said the programme on the online portal would confirm if the information reflected was true, complete and accurate by comparing with SARS records. The programme then adjudicates on affordability and determines if the exemption would be granted, refused or referred for an audit. Affordability tests are based on the company’s profitability, liquidity and solvency position. Also, test conducts audit triggers based on determined percentages and the company is either recommended for a financial audit or random audit. The commercial decision process was based on the Statistics South Africa (StatsSA) benchmark of profitability which was 8% on return on assets (ROA).

Discussion

The Chairperson asked Members if they were interested in the technical aspects.

Ms Van Schalkwyk asked for clarity on the term ROA because StatsSA statistics showed it was presently less than 8%.

Mr Tsoetsti said the term ROA referred to the return on investments made in a particular year. He agreed that the profitability percentage was 8% in 2016/17 when the programme had been designed but it was presently 6% in 2017/18 based on StatsSA report respectively. Hence the required increases on the NMW exemption would be on the remaining 94% earned by the employer. The application for exemption is refused if the profit of the company is higher than 6%.

The Chairperson said it may not be appropriate to list all the technical aspects of the programme and it would be adequate to say that the DoL had designed a system that would establish the affordability or non-affordability of a company to pay the increase in NMW via the systems’ recommendation.

Mr Bagraim said it was important to see how intricate the programme was as it could investigate the affordability of a company to pay the NMW. However, he expressed concerns that it would be difficult to evaluate this for a small company.

The Chairperson said the online portal contained an installed programme that would not be visible but would perform the function of calculating affordability internally and evaluate if a company could pay the NMW or not. He suggested that Mr Bagraim should have asked the Department to state how the affordability of small business concerns could be ascertained since it did not have the required personnel to prepare the necessary information needed to be submitted to Department. Also the Committee needed to have clarity on what would happen when the programme was down or offline as it happens to platforms installed by the Department of Home Affairs. The Department also needs to state if the manual and automated platforms to evaluate affordability gave the same results.

Ms Thekoagreed with the Chairperson that the Committee was being bothered with learning the details of a technical process and it might not be fruitful as Mr Bagraim was suggesting. She recalled that this programme had been in operation for three months. The Committee only needs to note its challenges with the use of the online portal make recommendations and then try to assist citizens.

Mr Bagraim said he had made the point to show that it would be cumbersome for small business and the Department was losing the opportunity to carry along informal traders and SMMEs.

The Chairperson said Mr Bagraim’s points should be part of the discussion and as such Members needed to wait for the Department’s brief to be completed before they asked questions.

Ms Van Schalkwyk agreed that Members should wait for the brief to be completed before they ask questions.

Mr Mkhaliphi said the basic criteria used was to examine the income and expenditure of a company and any company should be able to provide the information. The programme works on the principle that if a company’s’ profit is above 6% then it needs to pay an increase and would not be exempted. The online portal evaluates a company on financials submitted- if the financials submitted are suspect or it notices that the company is on a particular threshold the programme recommends a company audit.

The Chairperson invited members to interrogate the report.

Ms Theko welcomed the programme being embarked on and asked Department to confirm if the programme could ascertain the number of employees in a company. She asked the Department to state mechanisms to avert down times of the programme. How could the Committee assist citizens from getting underpaid while ensuring that the businesses of their employers did not close?

Mr Khoarai’s concerns were on whether working citizens in rural area where aware of the conditions on which exemptions were granted. He also asked the Department to state the timeframe on enforcement of 10% NMW exemption.

Mr Bagraim said he did not welcome the programme implementation because it did not allow the participation of small businesses such as informal business and SMMEs. He expressed concerns that a 10% NMW exemption regulation would also be imposed on non-profit organisations (NPO’s). This could lead to business closures because there was no difference between exemption processes of big or small companies. The company could either pay what it wants to pay or not even pay NMW. He remarked that 80% of businesses in the country were small businesses which had rudimentary balances, thus the programme might not apply for small businesses. The programme on the online portal focuses on big businesses hence small business would not be able to apply. He asked if the Department had conducted awareness campaigns to make small business aware of the exemption regulations. How many people would the Department employ in implementing the programme as implementation of the programme would involve more staff? Does the Department have the manpower to access withdrawal of exemptions? Further, he asked the Department to explain how it would assist companies that wanted to comply. He remarked that the affordability test would favour big business but would not favour small business and not exempting small business could lead to higher unemployment rate.

Ms Van Schalkwyk urged Members and stakeholders not to pre-empt the implementation of the programme. She asked if the Department could assure the Committee that exemptions could be granted to companies according to Section 15. What were the timeframes for amending the regulations and what would happen in the interim? She asked the Department to give the Committee insights on what stakeholders said during the public participation process. She asked if it took submissions at the NEDLAC stage into consideration before preparing the regulations. She sought clarify about whether the affordability test would be based on 6% profitability or if it would be reduced further. She asked if the Department had methods in place to assist SMMEs to fill the online forms on the portal because they might not have the capabilities needed.

The Chairperson sought clarity about whether the Department had linked its system to SARS income tax system and how it verifies a company annual financial statement. He asked the Department to clarify if the programme had any process in place to appeal for refusals, opportunities to update information and backups systems for downtimes.

Mr Mkhaliphi said the Department would start awareness programmes when the President implemented the NMW amendment Bill. The Department was prepared for the implementation and had checks within the system to prevent fraud and awareness and enforcement would be crucial. NPO’s threshold had been discussed and it was 11%. The Department has engaged with National Treasury (NT) and agreed that NT would include a clause on all tenders that companies would not receive jobs if the company would not be able to pay NMW. The Department would liaise with employees to check if employers implement the minimum wage. The departmental centres have officials that would engage with informal and small business owners to assist with differentiating between income and expenditure and also assist with filling the online forms. The regulation needs to be implemented first before CCMA would address the concerns. StatsSA 2017/18 report gives a threshold of 6% profit to test for affordability and if the company does not have this profit it is qualified for an exemption. The Department would not be able to make guarantees on beating fraud many companies present false information if the information is false audit triggers would be sent from the programme and it would recommend the company for an audit. The Department would not be able to run a manual and an automated system at the same time. Systems undergo downtimes in which they are not able to operate everywhere and such situations would be managed as they occur. However, the Department commits to having an efficient system that could be backed up and also avert fraud. Appeals have been debated but the process is transparent and the full criteria used are in the Regulations. An appeal could be because the company gave wrong information initially or the company’s circumstances have changed. The Department would enable the programme to allow the company to reapply. However the company can go to court if it is challenging the regulations.

The Chairperson said that an employer should have the obligation of changing its information when it changes hence he mandated the Department to fine-tune the programme. He remarked that a withdrawal of exemption did not provide companies punitive measures. The Department must initiate penalties to ensure companies did not take chances. The Committee mandated the Department to re-work the regulations as it wanted to stop instances where decisions were taken at the discretion of officials. He discharged the team from the Department and welcomed the team from Productivity SA.

Briefing by Productivity SA on its 2017/18 Annual Performance

Mr Mothunye Mothiba CEO, Productivity SA, said out of its 28 programmes in 2017/18 Productivity SA had an overall performance of 64%.

Highlights of 2017/18 include the following:

Through the TAS Programme, 71 companies facing economic distress were supported and in the process, 8 504 potential job losses or retrenchments were prevented against the target of 7500. Furthermore 62 workplace forums were established and 431 members thereof were trained and empowered to promote consultation and dialogue on productivity improvement solutions             between management and workers. Through the WPC Programme, 215 companies in industry sectors including Special Economic Zones and industrial parks were supported against a target of 200. 30 Black industrialists were supported and conducted 32 workshops targeting Workplace collaborative structures to promote a culture of productivity against a target of 30. Through the POS Programme, 5523 SMMEs and Cooperatives on Enterprise & Supplier Development Programmes (SOEs and Municipalities) were trained against a target of 5500.         Furthermore, 273 Productivity Champions, Education, Training and Development (ETDs), Skills Development Facilitators (SDFs) were trained across the business, labour and government spectrum against the target of 120. There is a marked improvement in governance and regulatory compliance. Productivity SA consistently obtained an unqualified audit opinion, with diminishing matters of emphasis.

Productivity SA gave a breakdown of performance per programme, looking at the key performance indicator, target, actual performance, deviation from planned target and comments on the deviations.

In programme 1, the entity achieved 84% of its target to pay SMEs within 30 days upon receipt of complete invoice. A business decision was taken by management to suspend payments to service providers due to insufficient funding of the entity. In addition, Level 7 BBBEEE was not achieved due to budgetary constraints that impede the entity from spending enough on Skills Development to score minimum BEE points.

In programme 2, there were zero Human Resources policies designed or reviewed due to staff shortages in the HR department. Also, the Climate survey was suspended until funding challenges have been resolved.

In programme 3, only 8 productivity awards were held. Free State and Northern Cape provinces were not realised due to difficulty in establishing partners in those provinces as well as resource shortage.

In programme 4, there was only one area where the goal was not achieved: the number of productivity modules NQF accredited (tools & techniques). Productivity SA completed all what was necessary on the two modules, but is waiting for the accreditation date which it has no control over.

In programme 5, the entity was only 50% successful in the number of research reports on priority sectors that were produced and disseminated. This was due to the lack of leadership and management control by the responsible Executive Manager.

In programme 6, The Turnaround Solutions Programme (TAS) did not meet the annual target for the 2017/18 due to the funding not having been received on time and in full. It planned to support 150 companies and preserve 7500 jobs with a projected budget of R78 720 000. However, only R19 680 000 was received, which was stretched to intervene in 71 companies and ensure 8504 jobs were preserved.

Dr Sibusiso Sabela, CFO, Productivity SA, gave the status of the outstanding three audit findings and said as a schedule 3a entity Productivity SA was dependent on funds from external bodies. He added that delays in receiving funds affected the targeted programmes.

Commission for Conciliation, Mediation and Arbitration (CCMA) concerns with NMW Regulations

Mr Cameron Morajane CEO, CCMA, said the CCMA had concerns with the NMW regulations.

Ms Van Schalkwyk said CCMA should be given the opportunity to submit its concerns on the NMW Bill regulations in writing.

Mr Bagraim supported the suggestion.

The Chairperson accepted the suggestion.

Mr Morajane invited the CCMA Project Leader to brief the Committee

Briefing by Commission for Conciliation, Mediation and Arbitration (CCMA) on its 2017/18 Annual Performance

The CCMA achieved 13 out of its 15 planned indicators. Underperformance was recorded on reporting on legislative mandates because the reports came outside the allotted timeframes. Highlights of the dashboard showed an increase in the number of cases it had resolved within 20 days, a percentage jobs saved, two inaugural labour conferences and the cases it had investigated and resolved.

Although the 87% performance registered for the 2017/18 financial year may seem like a performance regression when compared against the 2016/17 financial year, contextually, there is no performance decline, due to the following reasons:

-Three (3) targets were missed in the 2016/17 financial year, whereas two (2) targets were missed in the 2017/18 financial year

-The two (2) missed targets for the 2017/18 financial year related to conciliations and arbitration awards, and were missed by 0,1% and 0,2% respectively (the 2016/17 Annual Performance Plan did not contain the legislated targets)

-The 2017/18 financial year registered more over – achieved targets in the 2017/18 as compared to the 2016/17 financial year

A surplus of R33m, and a net asset position of R89m, is reported as at year end. The organisation managed its working capital effectively and continues to be in a financially healthy position, with a favourable cash position of R141m to meet the short-term financial obligations and commitments, translating into a liquidity ratio of 1.66:1.

The Chairperson asked CCMA to give clarity on the Auditor-General’s findings.

Mr Morajane said the CCMA had an enforcement arm and enforcement was vital in ensuring that it fulfilled its mandates. He expressed concerns that based on the NMW Bill, the CCMA needed to double its target hence he pleaded with the Committee to ensure that the issues raised by stakeholders about the Bill be resolved. He remarked that it was dangerous when court orders force the CCMA to undertake cases that should be referred to bargaining councils. CCMA received a clean slate on supply chain management but was questioned on its failure to report the funds it received which is out of the reach of CCMA.

Briefing by Compensation Fund (CF) on its 2017/18 Annual Performance

Mr Vuyo Mafata, Commissioner, CF, gave a comparative analysis of the year on year performance of CF per strategic objective. The Fund achieved 6 out of 9 targets in 2017/18 (67%).

In the period under review, 184 100 claims were registered with the CF and of these 179 789 were adjudicated (98%). 96% were adjudicated within 60 days. A breakdown by province shows that all provinces scored highly when it comes to adjudication within 60 days, with the lowest being Mpumalanga at 90%.

The Compensation Fund paid R3.6 billion towards benefits – with 69% on medical claims, 4%on compensation benefits and 27% on monthly pensions. 

Mr Thando Headbush, CFO, CF, explained the variances:

-Revenue from Assessments: the decrease is due to increased level of compliance and the implementation of estimation policy.

-Investment Income: Increase is mainly due to appreciation of the financial market resulting from positive sentiment.

-Claims Expenses: Decreased mainly as a result of actuarial allocation that was not recognized at the time of reporting.

-Total Assets: Increased as a result of appreciation of Listed shares, bonds and loans from the positive economic sentiments.

-Total Liabilities: Decreased as a result of benefits related liabilities

-Net Assets: Increased as a result of surplus and appreciation of the property values

the report. The net assets increased as a result if surplus and appreciation of property values.

Mr Mafata said the entity had implemented new strategies to deal with the qualified opinion and assured the Committee that Compensation Fund would move from the financial statement of a disclaimer within three years.

The strategies to deal with the AG’s findings include:

-Take stock of the current business processes, analyse gaps in a form on internal control deficiencies in the current processes, and development of new to be processes that will inform all systems in the CF.

-A review of the controls with regards the autopay functionality.

-Strict contract management of the RMA SLA and CF needs to pay only when service is rendered adequately.

-All issues raised by the AGSA regarding uMehluko should be sent to RMA with a deadline of when these issues are to be addressed.

-An assessment of the competencies required in Finance, Operations and an action plan of how these are to be addressed.

-Convening of a meeting by DG with CF Management to discuss the AGSA Report and each unit will be expected to detail what are the action plans to address the issues raised by the AGSA.

-Appointment a High level Steerco by DG to monitor management’s implementation of the action plans agreed at the meeting

Discussion

The Chairperson observed that Mr Mafata had not painted a good picture of the entity. He invited members to interrogate the report of the three entities.

Mr Bagraim asked for clarity on how the questions would be asked as he had a large number of questions but Members had a limited time due to parliamentary functions.

The Chairperson said Members could ask some questions and put the rest in writing.

Ms Theko welcomed the reports and asked Productivity SA to state the status of its BBBEE compliance and the level of transformation in the companies it had intervened in. She asked Productivity SA to give a feedback on the status of funds that was supposed to have been transferred from the Unemployment Insurance Fund. She congratulated the Compensation Fund on the new changes made and hoped that it would change the fortunes of the entity. She asked the new CFO how he planned to reverse the qualified opinion status of the entity.

Mr Bagraim appreciated Productivity SA on the feedback given on performance on workplace challenge programme. He suggested that Productivity SA explore a consultancy approach and accept funds for its training lay-off scheme. He applauded the CCMA CEO on his passion for enforcement and asked for more information on the collapse of the bargaining councils and its dispute resolution mechanisms. He observed that CCMA had spent its funds well but asked the CEO to state how it would cope with the increase in disputes when the NMW Bill amendment was passed. He remarked that although the audit finding on Compensation fund was much the Committee noted an improvement based on the report. He would send his other questions to the entities in writing.

Mr Khoarai said he would present his questions in writing.

Ms Van Schalkwyk asked Productivity SA why it had continuous supply chain management issues. She expressed concern about on the material errors found by the AG’s Office as well as its liabilities. She commended the improvement on service delivery at Compensation Fund but said the Committee needed a follow up meeting to engage with it on measures in place to report material evidence. She expressed concerns on CCMA’s high volume of irregular expenditure.

The Chairperson asked if the three entities had functional internal audit units and audit committees. He also asked the Department to clarify whether they had ever presented reports to management before and what management did with the reports presented. The Committee would need to engage CFO’s of the three of the three entities on why they had material evidence on irregular and fruitless expenditures, and supply chain management irregularities.

Response by CCMA

Mr Morajane said the CCMA would report on the dispute management initiatives in the first quarter. CCMA collaborates on research with organisations’ such as Human Science research Council. CCMA has a mandate of monitoring bargaining councils but it needs to know which organisation is responsible for each bargaining council. As mentioned earlier, bargaining councils are setting bad precedents as courts are giving orders to CCMA to carry out the mandate of the bargaining councils. CCMA only has funds to monitor bargaining councils. CCMA accepts that its monitoring is weak but if needs to increase its capacity if it needs to take over the activities of bargaining councils. It had been observed that out of 36 bargaining councils only 12 are using its case management systems. The dashboard only indicates the 188,000 CCMA cases that it has undertaken but it has also taken over cases of some bargaining councils due to court orders. This was why the CCMA is asking for additional funding for its IT department because its case management systems need to be facilitated electronically to ensure that an early warning signals is developed. The CCMA needs resources to effectively manage its mandate. Irregular expenditure is a cumulative of what has happened over the years. CCMA has functional internal audit units and audit committees’ but the challenge is that these audit complaints are not acted upon in good time.

Response by Productivity SA

Mr Mothiba said the report on initiatives that Productivity SA is using in supporting enterprises would be presented to the Committee. Productivity SA has not yet received the funds from Unemployment insurance Fund. Presently, discussions with the Department of Trade and Industry on the workplace challenges programme were underway. Productivity SA and CCMA have a memorandum of agreement on jobs preserved but its initiatives are hampered by lack of funding. The entity would look into ways to collect funds from big companies for its training intervention consulting services as Mr Bagraim had suggested. Productivity SA has functional internal audit units and audit committees. Action was not taken against staff in the past because they paint a picture that management is unfair to the press before such actions are implemented. There has been progress on the audit queries, irregular expenditure has reduced, in the past the entity had governance and regulation compliance challenges and some people had to be dropped. He appealed to the Committee to assist the entity with overcoming its funding challenges as not getting funding at the right time impacted negatively on its programmes.

Response from Compensation Fund

Mr Mafata said the Compensation Fund’s financial systems had been weak in the past but management is working on improving it. CF has an effective internal audit unit but the audit committee is new and its effect has not yet been felt.

The Chairperson said the Committee would send questions to the three entities in written form and would expect written answers. He observed that the Committee was aware that certain entities did not have competencies, some were afraid to take consequence management actions and some have produced ineffective action plans to improve operations in the entity. He remarked that the Public Finance Management Act was clear and all accounting officers were aware of it, hence the Committee would soon begin to recommend the removal of any accounting officer that did not adhere to the PFMA rules. He mandated Mr Morotoba to inform the Director-General of the Committees’ resolutions.

The meeting was adjourned.

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