The portfolio Committee received a briefing from the Ministry of Labour on the 2018 Job Summit report. The Job Summit was aimed at addressing the unemployment challenge that was currently being faced in South Africa. Various social partners had agreed to work collaboratively in addressing this challenge for the benefit of the people. Through the various interventions agreed upon, 275 000 jobs were expected to be created annually.
A pertinent aspect of the presentation included localisation as one of the means to grow the economy, which could be achieved by promoting local procurement within both the public and private sectors. The government had also taken the initiative and had made a commitment to support local procurement.
The framework agreement identified five key interventions as a means to unlock job creation and job retention. The first key area focused on economic sector interventions to secure faster growth in the agriculture, mining and manufacturing sectors, as these were the key drivers of exports. The second key area of intervention involved supporting the growth of small, medium and micro enterprises (SMMEs), which were recognised as important players in economic development. The third key area focused on providing education which provided the relevant skills for employment in a rapidly changing economic environment. Inclusive growth interventions were the fourth key area, focusing on mechanisms that could improve workplace collaboration between the workers and management, the gender pay gap, worker equity and representation on company boards. The fifth key area dealt with interventions which addressed public employment issues, such as improving the impact of the expanded public works programme (EPWP) and supporting the government in combating corruption.
Members were concerned that the framework did not adequately address the technological challenges of the fourth industrial revolution. The education curriculum needed to be revised so that learners were guided from the primary school level towards making the correct subject and career choices. Although South Africa had an open economy, it was still a developing country, so there needed to be some degree of protectionism to support local businesses. There was concern that some of the five key interventions might be in conflict with each other, and the agreement itself was not binding on the social partners. However, the Department of Labour assured the Committee that the agreement was authoritative, and monitoring mechanisms were being developed to hold each social partner accountable.
The Chairperson said the primary aim of the meeting was to discuss the Job Summit. The report on the summit was out, indicating the social partners and the National Economic Development and Labour Council (NEDLAC) had agreed to various issues. The presentation would be based on that agreement. The recently held investment summit had supported and supplemented the Job Summit to a certain extent.
The Chairperson mentioned that he had received information that the Human Rights Commission (HRC) had produced a report that sought to question the constitutionality of affirmative action and the employment equity policy. He would try to access that report and ensure that the Members received it. If that information was 100% correct, there may be need to invite the HRC to inform the Committee about what it felt was wrong with affirmative action. As far as he was aware, when the affirmative action policy came out, it had been tested many times in law. They needed to explain if the “ballgame” had changed, so that the Committee was informed.
Though the investment summit was not wholly in the domain of the Department of Labour (DoL), as was the case with the Job Summit, he asked the Department whether the report of the investment summit was out and if it could be accessible.
Ms Aggy Moiloa, Acting Director General (DG) and Deputy DG: Inspection and Enforcement Services, DoL, said that at the centre of the investment summit was the issue of unlocking job opportunities. She was not yet aware if the report on the investment summit was available. However, through the presentation on the Job Summit, the Committee would be aware that there was a golden thread between the Job Summit and investment summit.
2018 Presidential Job Summit: Framework Agreement
Mr Virgil Seafield, Deputy Director-General: Labour Policy and Industrial Relations, DoL, presented a report on the outcomes of 2018 Presidential Job Summit: Framework Agreement.
The core of the summit had been to address the unemployment rate in South Africa. Currently, the country was facing a critical problem of unemployment, which stood at 27.7%. The Department believed the challenge of unemployment was not as a result of the economy not creating jobs, but rather that the ability of the economy to absorb the number of job entrants into the economy was restrained by a number of factors. For instance, issues of policy uncertainty existed, which meant that certain policies hindered progress. A lot of policy inconsistencies had been identified which inhibited the ability of the economy to grow. To take a case in point, visa regulations had an impact on the tourism sector and affected migration. The country required investors to apply for a visa every time they intended to enter the country. Such regulations brought into question the purpose of having all the stringent regulations for people that were willing to invest in the country. The Committee was assured that job opportunities were in place, but the policy uncertainties that were currently in place prohibited exploring and making use of such opportunities.
In addition, the case of water licensing in South Africa required the applicant to wait for five years in order for a water licence to be granted. If one was looking at a micro farm, it would essentially take five years to use that water. This was among many examples where policy uncertainties were displayed and needed to be looked at in depth.
A critical issue raised at the summit was that the majority of the young people in the country lacked the necessary skills and experience to find jobs and participate meaningfully in the economy. The youth had certain qualifications such as degrees, but lacked the skills that were actually required.
The framework agreement was as a result of intensive discussions by various social partners on how to address the current critical job crisis. It provided an outline of an emerging social compact to grow an inclusive economy and fundamentally transform society. It had also made provision for monitoring mechanisms to ensure effective implementation of all that had been agreed to.
The Social partners at the summit agreed on five key interventions aimed at unlocking job creation and job retention.
Key Area 1: Economic Sector Specific interventions
It was agreed through the discussion proceedings that there was indeed a need to grow the economy, and jobs needed to be created. The framework agreement promotes local procurement within both the public and private sectors. The government, together with a number of companies, had made a commitment to local procurement. It was emphasised that there was need for the government to create an enabling environment for the local economy to grow.
Even though promoting local demand was essential, the social partners agreed on the importance of aggressively promoting South African exports. They planned to drive exports by focusing on the key industries that were drivers of the exports, such as agriculture, mining and the manufacturing sectors. This would be achieved mainly by eliminating all challenges to export, such as inefficiencies at ports and a lack of knowledge of potential markets.
Finances would be mobilised to champion this agreement, and the focus would be on building manufacturing capacity. The financial sector would be investing R100 billion over a five-year period in black-owned enterprises. The government, in conjunction with the financial sector, would be developing facilities for financing at preferential rates and extended repayment terms.
The framework agreement supported a number of areas. It had agreed to focus on developing and deepening South Africa’s industrial capabilities in the downstream metal and machinery value chain. It also supported the process towards the finalisation of the retail clothing, textile, leather and footwear masterplan 2030. The social partners had also agreed on a range of initiatives to support sound water resource management.
The benefits of waste management had been identified. Currently, South Africa throws away 110 million tonnes of waste annually. This waste could be utilised to sustain the economy by creating job opportunities and employment. Waste may be looked at not only in terms of recycling, but also as a means of providing energy. Ultimately waste management could be used as an opportunity to create jobs and for entrepreneurial undertakings.
Key Area 2: SMME Interventions
Small, medium and micro enterprises (SMMEs) were recognised as one of the economic enablers. The social partners agreed to maximise the relationship between the public and private sector hubs and incubators. The government also had a critical role to play by devising various programmes and incentives that fostered the growth of SMMEs. One means through which this would be achieved was by providing financial support. The government was supporting the rural / township clusters by providing R1.5 billion for the Smallholders Support Fund, and R1.5 billion for the Township Enterprise Fund.
Key Area 3: Education and Skills
The social partners agreed on a number of areas concerning education and skills development. These were as follows:
- They agreed to collaborate to create different models of community-based institutions that offered programmes for both formal and non-formal opportunities.
- They had collectively undertaken research and worked on a partnership model to increase the relevance of technical and vocational training to the manufacturing sector.
- Mechanisms were being put in place to enable companies to form partnerships with nearby technical and vocational education and training (TVET) colleges, where the colleges offer the theoretical component of the programme and companies offer the practical and workplace components.
- Effective skills development on a large scale would help to expand the opportunities and capabilities of young people and would also assist in reducing the wage gap between the lowest and highest paid due to skills scarcities.
Key Area 4: Inclusive Growth Intervention
Regarding inclusive growth interventions, the social partners had agreed to explore various opportunities that could support building an inclusive and cooperative workplace engagement between the employees and the management in solving workplace problems. They had also agreed that it was essential to provide the employees with equity, as this could ultimately deepen transformation and how the workers engage. Another issue was on addressing the wide gap in terms of gender. This was agreed to be a critical element of increasing inclusion in the economy. Other interventions would be implemented by the South African Revenue Service (SARS) in association with social partners, with the aim of eliminating customs fraud and illegal trade.
Key Area 5: Public and Social interventions
The social partners had committed to various public and social works interventions which included, but were not limited, to the following:
- Developing a social audit framework which would establish a linkage with the existing Expanded Public Works Programme (EPWP) monitoring and evaluation framework.
- The tax incentive scheme was agreed for a further extension of ten years, with a five-year review in place.
- A range of approaches to improve the design and application of the training layoff scheme were agreed.
- A number of initiatives were devised to develop training and combat corruption.
- The social partners recognised the government’s intent to introduce financial disclosure for government employees as a way of enhancing the transparency of public servants.
In conclusion, Mr Seafield told the Committee that an estimated 275 000 jobs would be created as a result of the interventions. Further discussions needed to be held and monitoring mechanisms had to be in place. The National Economic Development and Labour Council (NEDLAC) was currently in the process of developing a monitoring framework.
The Chairperson commented that the intention of the meeting was not to amend the agreement, nor to review, but rather to understand what was entailed in the document so that the Committee could engage the relevant partners and sectors. This was in terms of their own commitment to what they would do in the framework agreement. He added that this was an opportunity to get clarity and understand the contents, what they were committed to and to understand fully and hold them accountable to what they had agreed on.
Mr D America (DA) commended Mr Seafield on the passion exhibited throughout the presentation. He was pleased to hear that the labour movement would establish its own factory and looked forward to seeing them offer their employees the same conditions of service that they often demanded from other employers.
An inquiry had been made on the statement made regarding initiatives to support job creation. His views on buying local, proudly South African products as a way of stimulating internal demand and consequently creating jobs was a contrary viewpoint. He believed that although internal products (within the country) were important, it was important to acknowledge an external / global approach in terms of developing a strategy. The reason South Africa was not able to create jobs was the lack of competitiveness of the South African industry. There were strict statutory obligations that have to be complied with.
Concerning the minimum wage, the wage that was implemented as minimum wage had a direct impact on other industries. South Africa had high interest rates which placed cost burdens on businesses and had an impact on industry. Economies of scale also affected competitiveness, policy uncertainties as well as investments. As a government, there was a particular need to look at how SMMEs could become competitive, because they usually did not have the ability and economies of scale, and therefore they did not grow. A specific policy on SMMEs that operate in townships was needed. Such businesses normally did not grow beyond their own backyards, so they needed support.
Mr America referred to the high unemployment rate in the country, and said there were a number of countries that did not have a high unemployment rate. It was important to understand what those countries had done correctly. The employment rate in South Africa was relatively high compared to the western countries, which had a very low rate. Was anything currently being done in order to learn from other countries’ best practices? There was a need to look beyond the country and have a global approach and vision towards how business was done. Government had to look at the environment and assist local companies to become competitive so that they could sell their products worldwide.
He acknowledged that many job seekers had restrictions in terms of resources, such as a lack of money to go and look for a job, and parents who did not work. There was therefore a need to help the youth and provide them with the necessary assistance so that they could easily access opportunities. He was pleased with the fact that the City of Cape Town, and MyCity in particular, had an initiative that enabled unemployed youths to enjoy free transportation as they looked for a job. He was yet to get full details on how the whole system currently worked.
The creation of 275 000 jobs was a low target, but was attainable. At the same time, it was nowhere near enough to absorb the new entrants in the market. Economic growth therefore was important to enable the creation of the necessary jobs that the economy/youth required.
He asked if the Department had identified or considered whether there was labour legislation that restricted job creation. Labour legislation was great for big businesses, but not for small enterprises, because they did not have the capacity.
Mr W Madisha (COPE) observed that after going through the document, his conclusion was that a lot of things that were meant to have been done had not been yet achieved. Emphasis had been made on the need for people to get access to all the basic services such as food, housing, security, water, sewerage and health, among many others. However, the people were not fully accessing these services and facilities due to insufficient money and lack of jobs. He suggested that there was need for being open and for all parties to work together and look at the country in its entirety and look at the areas that needed to be addressed.
The Committee needed to base its discussions on the empirical evidence that was there in the country. Although the unemployment rate was said to be 27%, he believed it was beyond 40%. He mentioned that the youth in the country represented more than 66% of the population, and they were not employed. The older people who were not working represented about 27%. On that basis, he questioned the scientific basis used to arrive at the 27.7% unemployment rate.
Another issue of concern was that the majority of the employed population were not South Africans. For instance, there were those working at filling stations and restaurants, among many other jobs. Essentially, this meant South Africans were not employed.
He said it was unfortunate that the Committee had not been invited to participate in the Job Summit. The summit had not looked into the Fourth Industrial Revolution. Currently, what was happening in the country was that the majority of people were not getting the right education. Various jobs required the use of machinery or information technology, such as the banks. Most tasks had been automated. The issue of the fourth industrial revolution seemed to have been overlooked, as there was need to look into it and improve the lives of the people. After going through the document, he was not satisfied that they were able to deal with this issue properly.
South Africa was known to be one of the top countries for the production of various mineral resources such as manganese. However, it could not be seen from the Department that any action or plans were intended. The country produced various raw materials which were then exported and processed into finished products. Thereafter, final products were sent back to the country at a high price. He wanted to find out how the Department was proposing to deal with that issue. He was not satisfied with just mere acknowledgement of the areas and things that needed to be looked into.
The Chairperson urged the Committee to take the initiative in understanding the Job Summit framework agreement, and to hold all the people who agreed to the framework accountable. He commented that it seemed the intention coming out of the summit was that there was a move to process minerals further before exporting, as opposed to the current situation.
Ms T Tongwane (ANC) asked whether the partners committed on the Job Summit had agreed on timeframes for achieving the set goals.
Ms S van Schalkwyk (ANC) observed that the committee that had been established consisted of various stakeholders who would be responsible for driving this process. However, looking at the government sector, there were a lot of issues that had to be dealt with internally and were cross-cutting between the departments. She questioned whether there was a structure proposed in terms of inter-departmental cooperation in order to strengthen such an agreement. For instance, if the talk was about a mismatch of skills, it was well known that there were various departments affected. One of them was the Department of Higher Education and Training, and it would be necessary for the DoL to take action. To deal with the mismatch of skills, there was a need for a change in the curriculum. The majority of job seekers, including those coming from the secondary education level, were not given proper guidance. Different departments needed to play a role, including the Department of Basic Education (DBE) in trying to point prospective job seekers in a certain direction. This could be in choosing subjects that would be outcomes based. When looking at entrants into higher education and training, one would find that sometimes they did not meet the requirements needed for certain jobs. Interventions were needed from grass roots level.
With regards to action, timeframes were required and there was need to see things happening.
On the issue of localisation, it was well known that various departments were dealing with that issue. She asked whether there were enough measures in place to sensitise the community at large to buy locally produced goods, because when people go shopping, some did not have the knowledge to search for them. There was a tendency to focus on exporting and there was no urgency or loyalty towards locally produced products.
Initiatives to assist prospective job seekers needed to be strengthened so that young people could find jobs.
The Chairperson asked whether the DoL, together with NEDLAC, had analysed the agreement. It seemed that it was multifaceted and had various components. It recognised globalisation and that South Africa had an open economy. Part of the agreement also sought to address elements that required protectionism. However, support was required from communistic production methods to ensure that targeted objectives were achieved, which was contrary to an open economy where it was not possible to enforce protection. In cases where small industries in the townships had limited capacity, and the objective was that people must buy local, there was a need for elements of protectionism to be incorporated.
There were contradictory elements of the agreement, so there had to be an analysis of each and every individual concept agreed on as an intervention. He asked what kind of support the interventions would get under the current economic conditions.
Regarding small businesses, some level of protectionism was required as they were operating in an open market where there was competition. Within the economy there were contradictory forces once investments from outside the economy were incorporated. On the one hand, investors would need a return on their investment, but they would invest in a business that was an open market related business. There was high possibility that investors may bring lots of machinery into the country, which would not create job opportunities. The investments would assist in growing the economy, but not the number of job opportunities. Essentially, this was what the fourth industrial revolution would do -- jobs would be taken over by machines. He referred to a proposal that he once made at previous meeting on the need for a counter policy, that sought to target certain sectors where production would be labour intensive in order that millions of peoples’ jobs would not be displaced while machines were producing in the factories. Such investments only benefited the owner and not the community, as the machines did all the work.
Plans must be devised that deal with the consequences of jobs being shared, and had to ensure that the fourth industrial revolution did not displace so many people’s jobs.
Even though South Africa was a global player, the fact was that it was still a developing country which still faced skills challenges, so it could not be just a 100% open market.
The Chairperson asked for an explanation on the level of authority that this agreement has. What sort of recourse had the partners agreed upon amongst each other? How authoritative was the agreement among the partners not to retrench jobs? Were there punitive measures for partners who did not comply?
Mr Seafield said that the various social partners had agreed that there was a problem of unemployment in the country, and assured the Committee was assured that the agreement was indeed authoritative.
No punitive measures had been put in place, but an accountability matrix had been built during the Job Summit agreement. A monitoring mechanism was still being developed in terms of how the social partners would hold each other accountable.
Another issue raised at the summit was that there was need to develop a global approach to dealing with jobs and the economy. The Department shared the same sentiments as the Committee, that they could not operate as an island in the economic sphere. As such there was indeed a need for clarity regarding what protectionist role the Department should play in the economy. The South African government had not played a protectionist role to a large extent, and that was why more often than not, people in the hospitality industry or at filling stations were not South Africans. Nevertheless, there was a need to acknowledge that South Africa was a member of the global community, so members in the Southern African Development Community (SADC) region could not be excluded from the economy in terms of employment.
There was a host of initiatives that the government had put in place to deal with restrictive measures affecting engagement in the economy. For example, it had put in place a one stop shop service, so that if an individual wanted to establish a business and invest in South Africa, they could easily go to one access point and deal with all the legislative inquiries.
Mr Seafield said the issue of policy uncertainty cuts across various areas. For instance, he questioned whose domain it was to establish policies about inflation targeting -- whether it was the Reserve Bank’s, or the government’s.
In many countries that had seen economic growth, such as China and India, among many others, they have no inflation targeting in their policy. He asked if such a direction was something that South Africa was willing to follow.
With regard to innovation, research and development, the framework looked at innovation in a number of ways. One area was in relation to small businesses’ access to funding and training. Other areas of innovations were product innovations.
The Department agreed with the Chairperson’s remarks, that a degree of protectionism was needed so that a socialist approach to doing business was not adopted, but rather one that dynamically included smaller enterprises in the global supply chains. It was a well-known fact that SMMEs were drivers of the economy across the world.
One factor that impacted the labour policy was unemployment. A study by the World Bank indicated that the fundamentals of the labour policy in SA were sound. However, this brought into question the underlying problem with the current labour policy.
Regardless of the broader or narrow definition of the unemployment rate, it was irrelevant whether is was 27% or 40%, because it was huge and the challenge had to be addressed. There was need to get people into employment and entrepreneurship.
Regarding labour migration, the DoL was currently in the process of coming up with a labour migration regime which sought to address the concern raised by Mr Madisha, that non-South Africans were filling jobs where South African citizens could be employed. It had been found that SA workers did not want to work, compared to other nationals. A case in point was a certain asparagus farm, which went around looking for workers. They had found that South Africans did not want to work on the farm, so the employers had been forced to go across the border to find workers. The underlying issue needed to be identified and addressed, and see if it was because people were lazy or not. However, this may not be the main issue, as could be seen from the number of South Africans on the streets willing to sell various products. There was need for a clear understanding of the makeup of the unemployed, besides the racial dimension. However, the main issue was whether job opportunities were being offered to the people.
The framework agreement had also underpinned the notion of the fourth industrial revolution. The agreement went beyond it and even talked about ‘Just Transitions’ in terms of the impact of global warming..
On the issue of time-frames, they were dealing with a monitoring mechanism which would hold each social partner accountable to not only their commitment, but the timeframe that had been set in place in terms of developing the commitment.
In response to Ms Van Schalkwyk, he said the majority of the economic stimulus measures had the understanding that there was a need to include South African people and the township economy in the opportunities identified. The framework agreement acknowledged the reality that the people had to be included and talked of support, finance and capacity-building among many other interventions
Localisation had also been identified as an important area of focus.
Mr Seafield said the framework agreement had to be read in conjunction with all the other government initiatives. It had been agreed that there was no need to reinvent the wheel, as the government had a number of initiatives already in place to deal with the reality of the country. This was so that a broader picture was achieved as to what South Africa had to do in order to deal with the various issues and to grow the economy.
A key understanding was that the South African education system did not deliver what the economy in the fourth industrial revolution d, and it was not plausible to just start at the secondary and tertiary level. It had to start at the primary education level. There had to be a rethink of how the education system was structured, from primary school level. As an illustration, India had changed its curriculum so that it was compulsory for students to be taught coding from the primary education level. In addition, the majority of employees in Silicon Valley were not Americans but Indians, because India had understood the reality back then.
The Chairperson said that the key areas were worth being analysed in terms of their risk levels towards each other, and also how contradictory each key area was in terms of practical application. It could be agreed that two economies, formal and informal, existed. The risk levels needed to be analysed for each intervention, as some interventions could have a negative impact on another sector of the economy.
He said that the authority of the document could not just be on a ‘gentleman’s agreement’. The agreement also involved other partners, and if they did not wish to comply or participate there was little that could be done. If it was possible, the Department must consider a certain mechanism that forced each of the partners to comply.
Ms Moiloa commented that the Job Summit agreement was not a silver bullet that would solve all issues, such as inequality. It was not a panacea that would solve all the problems, but rather aimed to complement other job creation initiatives. The issue of the fourth industrial revolution was an interesting dynamic that needed to be looked at further.
The Chairperson concluded by emphasising that someone in the Department needed to be proactive and champion the fourth industrial revolution, otherwise it could impose itself on the country if action was not taken. The social partners had to find a way of creating authority in the framework so that every partner was equally committed.
Consideration of minutes
The Chairperson went through the draft minutes of 31 October. No issues were raised by the Members and the minutes were adopted.
Committee’s 2018 Annual and Fifth Parliament Legacy Reports
Members had previously been advised to go through the reports and recommend if there was a need for any changes, and also to provide input on additional information needed. The content advisor informed the Committee that both documents were scheduled for adoption on 21 November 2018. The Chairperson asked the secretary if any input was suggested, and was advised that no information had been received so far. The content advisor was advised to proceed, as there had been no objections from Committee members. The report of the high level panel was duly adopted.
The meeting was adjourned
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