National Treasury presented a performance update on the Employment Creation Facilitation Fund (the Jobs Fund). The Fund was created in 2011 with a target of creating 150 thousand permanent jobs. By December 2018, the Fund had created 170 thousand permanent jobs, 55 thousand short term jobs, 20 thousand internships and trained 220 thousand beneficiaries. The Fund operated on challenge fund principles, necessitating applications from private projects seeking government funding, which had to be matched. National Treasury noted the role of externalities beyond the fund’s control in this low expenditure, and was confident the Fund’s ratio of expenditure would return to acceptable levels in the medium term.
The Committee commended the Fund on its internationally competitive reduction of operational costs and high ratio of matched funding. Members raised issues including the Fund’s low impact on the Northern Cape, its method of verification of employment, potential high costs per job created, and the lag in fund distribution, which was only 71% of projected expenditure in the 2018/19 financial year.
The Chairperson commended the Fund on its strong performance, motivating for a possible extension or recapitalisation of the Fund. She noted, however, the lack of expenditure and the issue with PFMA compliance that this raised. Discussion on technical details of the fund drew largely positive responses from the Committee, with major complaints centring mostly on the low takeup in the Northern Cape. Some members also stressed the need to come up with a unique compliance framework for project financing vehicles like the Jobs Fund.
The Chairperson greeted members, staff and the delegation from the National Treasury. The meeting’s goal was to receive a progress report on the performance of the Jobs Fund (Employment Creation Facilitation Fund), its expenditure and challenges, to determine if it was worth its budget of R9bn. The Jobs Fund was part of a rapid response to tackle 3 challenges: unemployment, poverty and inequality. The Chairperson proposed it was one of the critical pillars to change socioeconomic challenges facing South Africans.
The Chairperson then moved to the second agenda item, apologies. Apologies were tendered by Mr Shaik Emam (NFP). The Chairperson then enquired as to apologies from the National Treasury.
Ms Najwah Allie-Edries, Deputy Director-General: Employment Facilitation, National Treasury, replied that the Minister and Director-General would not be in attendance. Mr Duncan Pieterse, Deputy Director-General: Economic Policy, National Treasury. expanded that the Minister and DG were attending a NEDLAC special executive committee meeting.
The Committee accepted the apologies, and the Chairperson ceded the floor to the Treasury delegation for a presentation.
Briefing on the Jobs Fund
Ms Allie-Edries clarified that the presentation was aimed at providing feedback on the performance of the Jobs fund to date. The Fund was launched in 2011 and capitalised to the tune of R9bn to support innovative approaches to employment creation and share these models with government and other organisations. The key focus of the fund is women and youth, with a target of 150 000 new jobs set.
The Fund operates on challenge fund principles, where an application for grant funding is competitive and transparent, as well as requires co-finance, distinguishing it from other funds. Co-financing shares financial risk with the private sector and civil society.
The Jobs Fund has 4 funding windows each for job creation from the supply and demand sides. On the supply side, there is a skills mismatch in the economy that burdens young people with employment challenges. The Fund seeks to address skills challenges through skills upliftment, training and job placement. On the demand side, the Fund seeks to intervene through its infrastructure and enterprise funding windows, in order to stimulate new jobs in the economy.
The legacy target is the creation of an enabling environment, through partnerships, growth-oriented businesses, funding infrastructure that has an impact beyond the Fund’s lifetime and the recycling of grant funding.
The Fund issues rolling calls for proposals, projects are given a period to implement, the intention is to create sustainable jobs that endure beyond the grant period. The Fund does, however, operate in a specific context: despite periods of economic growth in the last decade, unemployment remains high. To address this, South Africa requires much higher levels of inclusive economic growth. Key determinants of growth include macroeconomic policy environment, foreign direct investment, the infrastructure asset base and the educational environment. It has been suggested that the relevant policy to address low growth revolves around encouraging skilled labour, upgrading of semi-skilled and unskilled workers, reorientation of manufacture towards exports, emphasising job creation in small businesses and agriculture, restructuring government expenditure to favour infrastructure and public services, targeting the poor and underprivileged, and restricting recurrent spending. There is also a need to improve ease of doing business in South Africa, which is ranked 82nd of 190 countries. The Jobs funded is not intended to tackle structural causes of low growth and unemployment, but rather to target job creation in the short-to-medium term that will provide a knowledge base for job creation models that can adopted by government and the private sector.
Ms Allie-Edries gave a summary of the results: The Fund has been in operation for 8 years and has issued 8 funding rounds. Projects have 3-5 years to implement and a further 2 years of monitoring. As of December 2018, the Fund has 126 projects on its portfolio and has allocated R6.7bn in grant funding, which has aided to leverage from co-financing partners a further 9.5bn towards job creation. The Fund has 125 reporting projects, which have received R4.6bn, and contributed R8.6bn.
Ms Allie-Edries then expanded on the impact for jobseekers: in excess of 200 000 people have received skill and work-readiness training, more than 20 000 internship programmes have been completed and 50 000 short term and 170 000 permanent jobs have been created. The Fund has been able to implement projects across all 9 provinces.
In the Fund’s 8th funding round, applications have asked for a total R4.9bn. This is anticipated to be the last funding round, as the Fund was not intended to be a permanent programme. Once the R9bn has been fully disbursed, the Fund would come to an end.
In terms of the Fund’s overall portfolio performance: disbursements are projected using cash-flow projections made by funded projects. Projects indicate how and over what period they will draw down funds they have been granted. These projections go beyond the Medium-Term Expenditure Framework period, but have not factored in the 8th round. In the 2018/19 financial year, fund expenditure was markedly different from the projection. It is important to note that the projections for the new funding round will start flowing towards the end of FY2019/20, slow down and then ramp up again as projects gain traction. The implementation period for new projects ranges between 3-5 years with a further 2-year monitoring period.
There are two key factors driving the disbursement lag: the first factor was the economic slowdown, which has had a direct impact on project implementation. The second factor was increased exposure to the agricultural sector, where drought has slowed down funded projects. Project terminations also impact on disbursement expenditure.
In FY2018/19, expenditure was 71% of the projection. Controlling for externalities of the economic downturn, 84% expenditure would have been reached, and without the 12% explained by terminations, disbursement would have reached 96%. The focus of the Fund has been on quality of disbursement, entailing a rigorous process of vetting projects. If a project doesn’t work, it can be terminated, which also impacts on projected expenditure. It is important to note that the disbursement lag has not stopped the progress of the Fund. The current funding ratio stands at 1 to 1.8, i.e. for every rand spent by the Treasury, partners spend nearly two. Grant funding is also recycled through on-lending via blended finance instruments.
Ms Allie-Edries then moved to the topic of improvements of the fund since inception. The management of fund had been defective, but the Fund has built up implementation capability that is unusual in government. The Fund is often approached by other departments and entities to see if it is able to help them, as well as by the World Bank, with the goal of sharing the Fund’s design with other countries. The recently launched SMME fund was based on the Jobs Fund. Compared to other funds globally, the Fund is very competitive, with operation costs at only 10% of total. The breadth of the Fund’s projects makes in-housing of expertise impractical, entailing short-term usage of private consultants, to minimise Fund costs.
Taken relatively, the Fund has a low cost of interventions, low public subsidy and the comparative costs of stimulation of a new job are low, when taken with the ensuing return to fiscus. Treasury has calculated that on a R4.6bn disbursement, there has been a 20% return to fiscus in the form of VAT and PAYE. While the headline target was to stimulate 150 000 jobs, the overall impact is much broader. Because the Fund is a pilot, it is able to experiment and share what it has learned. The Jobs Fund can advise and indicate key components of new funding projects.
In terms of effective fund management, there are very clear operating guidelines. New members are inculcated with this ethos, which is also shared with other units, which then don’t have to hire consultants. One of the key lessons in improvement has been attracting positive partnerships, working with the private sector, other departments and NGOs, which has improved the operation of the Fund.
In terms of specific initiatives taken to improve alignment, on an annual basis projects are allowed to re-project. Working with development projects drives a need to accommodate and re-project based on realities. There is a constant review of grant funding, and whether projections are plausible or feasible. When funds are approved, because things have changed, applicants don’t have match funding from other areas, which drive delays contracting and eventual disbursements. When projects are started by companies that then are restructured, this also impacts on projected disbursements.
Relating to making the grant more accessible, the Fund has run a pre-funding round roadshow in every province with government departments and development stakeholders, handling what the new funding round is about, the history of previous rounds, and what the Fund is seeking in applicants. The Fund then makes a team available to help streamline and target projects that wish to apply.
Regarding budget allocation vs expenditure, having explained the context, Ms Allie-Edries reviewed expenditure trends (viz. page 17 of the presentation). In 2011, expenditure was much less than projected, and much of the expenditure was operational as there was no project pipeline. Between 2012-2015, expenditure grew as projects were able to draw down. The portfolio was significantly impacted from 2016-2019 by the economic slowdown and drought, as well as many projects completing implementation. The Fund nevertheless maintained its expenditure at 91% of what was projected. From FY2019/20, expenditure will increase again as new projects are implemented then taper off in FY2024/25 as the Fund is run down. The operations budget has been pegged at 10% of the fund’s capitalisation. All Jobs Fund staff are contract staff, and positions will be reviewed as the Fund runs down. The question of the lifetime of the Fund is frequently raised: the nature of the projects funded determines this – however the Fund has not asked for new capitalisation and intends to run down the current capital over time.
Ms Allie-Edries then addressed the 4-fold value of the fund:
From an economic perspective, the Fund leverages funding from partners, and the matched funding ratio has been surpassed comfortably, at nearly 1:2 (from a target of 1:1). Operations expenditure has been kept within 10% range, where other challenge funds across world have a much higher proportional operational expenditure.
In terms of efficiency, there is the often debated topic: what is the cost of a job? Ms Allie-Edries submitted that the cost of a job was only one element of the value for money. Furthermore, the cost of a job is often influenced by the sector and business model, the type of project intervention. When it comes to benchmarking the cost of a job, it is impossible to get a fixed standard. In most cases, the cost per job is not considered a reliable measure of value for money. However, looking at the Fund’s performance, 170 000 jobs were capitalised at a cost of R27 000 per job. Including short term jobs, the cost dropped to R20 000, and including internships, R18 000. The DDG clarified that comparative analysis with other job-creation initiatives was invalid due to differences in operation.
In respect of effectiveness, the Fund is performing at relatively satisfactory levels, with a 95% achievement rate.
Regarding equity, the strategy of targeting women and youth continues to deliver, with the majority of permanent jobs created being filled by Previously Disadvantaged Individuals.
Though the Fund operates across sectors, most projects sit within the agriculture sector, although there is a good spread including manufacturing, business services and education.
Ms Allie-Edries then gave a number of specific examples, covered in pages 27-30 of the presentation document.
The Fund’s objective is clear, and it has demonstrated the possibility for public, private and civil society sectors to collaborate. The Fund can now draw on lessons learned and share models on how to start successful projects in different sectors. Many projects have been completed or scaled up.
The Chairperson called on Members to reflect on and interrogate the presentation. She opened the floor for discussion
Mr M Shackleton (DA) started by enquiring as to whether there was a system in place for assessing the skills needed in the economy. He noted that the education system has been criticised as it doesn’t provide the right skills. The Northern Cape seemed to lag behind other provinces, even granted its small population. Regarding the disbursement not reaching 100%, he asked the delegation to elaborate on challenges faced. The presentation also mentioned an independent Jobs Fund investment committee – he enquired as to the composition of this committee. Regarding due diligence site visits, were they continuous, and if so how often?
Mr Shackleton also enquired as to plans to increase number of jobs created. Relating to permanent placement in vacant positions, what challenges were faced in this respect? Did the overshooting of the target for training of beneficiaries, did this have a negative impact on the Fund’s budget? He ended by requesting further information regarding the A2Pay project, in order to promote this (viz. page 29).
Ms D Senokoanyane (ANC) welcomed that the funding partnerships worked in the government’s favour. She asked who ultimately identified the beneficiaries to be recruited in projects- did that go through the investment committee, or was it done by private sector? In terms of the geographical spread: how were the figures by province distributed – were they targeted? She noted that rural provinces should probably be targeted. She wanted a clarification on the difference between overall portfolio performance and performance controlling for externalities. She closed by echoing Mr Shackleton’s sentiments regarding A2Pay, given that this could be key for rural constituencies.
Mr B Martins (ANC) also noted disparities in provincial job creation, asking what could be done to increase the Northern Cape numbers, given that the Fund’s impact is clear in other provinces. He requested a clarification as to challenges in this matter and how provincial distribution could be improved.
Mr N Gcwabaza (ANC) questioned what the timeframe for “permanent jobs” was. He further requested an explanation of the Fund’s apparent attractiveness to private funding partners, and how it could be further improved so they add more. Regarding short-term jobs, internships and trained beneficiaries, he asked whether there was a checking mechanism to follow up on these beneficiaries after they left their temporary positions.
Mr A McLoughlin (DA) requested clarity as to the distribution of the cost per job, given his personal calculation that, all told, jobs created under the programme cost R170 000 – what did this pay for? If this statistic was expanded to the roughly 10 million unemployed South Africans, it would cost R1.7tn rand to employ them all. Did the creation of one job facilitate easier creation of more jobs? In terms of the return to fiscus through VAT and PAYE – how was this calculated? Were the salaries the Fund’s employees received part of operating expenditure? Where there was huge disparity between budget and expenditure in FY 2012/13 – what happened to the difference? Was it returned to fiscus? What was the meaning of “facilitation” in terms of job creation, and what explained the disparity between total trained beneficiaries and jobs created between pages 27 & 30? What was the wider economic impact of the Jobs Fund besides the jobs it creates?
Ms S Shope-Sithole (ANC) requested a list of the partners involved with the Jobs Fund. She praised the outperformance of international agencies – this was a big plus and the media didn’t pick this up, although it would actually promote South Africa. The news always talks about how stupid the government is, but the National Treasury performed better than other international agencies which are in the First World. She wondered how this success could be advertised. She also asked about the interest of the World Bank in the Fund.
Mr Gcwabaza asked about the involvement of the Fund in infrastructure projects besides the automotive sector – how has this relationship been, and could the Committee have an idea of the overall sectoral spread of the Fund? He commended the Fund’s progress, recalling that in one of the committee meetings complaints were made about Treasury underspend, but now one was beginning to get the sense that the job being done is better, in comparison to negative stories heard in recent times about reckless spending in problem-solving areas which did not have an impact. The Jobs Fund was a more measured type of spending, which showed good results. He questioned what lessons had been learned that would urge the Fund to spend a bit faster but not slip into recklessness.
The Chairperson thanked the delegation for an informative report that had enabled the Committee to get a picture of what the Fund was doing and how far it was in achieving its mandate. She enquired as to the possible impact of the running down of the Job Fund, and the outcome that ending its mandate would have. The Fund had identified beneficiaries, relationships had been established, if these links were cut, what would happen to the beneficiaries? The Jobs Fund had been a shock absorber for unemployment, and had succeed in creating jobs for PDIs - had the termination of the Fund been well consulted? The Chairperson also questioned what informed disbursement projections. Were these funds paid at the end of the implementation period? Furthermore, how did the Fund verify the job creation figures? To what extent has this programme assisted in promoting PDIs to move into the economic stream? Not in terms of percentages, but the actual impact?
Ms Allie-Edries addressed the queries. Regarding assessment of demand for skills, when designing a funding round, the Fund considers where jobs are needed and can be created, where the impact is needed, and then attempts to influence the market by using the incentive of grant funding. When considering an application, the Fund also considers an applicant’s ability and what informs their application (research, location and capacity) to try and attract the right behaviour from market.
In terms of the lag in distribution, one of the key challenges has been the economic slowdown. For example, the Fund partnered with a programme that would make money available for funding of small businesses. This applicant was an asset manager that would attract money from pension funds using the leverage of a R60m guarantee from the Fund, which allowed it to achieve a 600m funding commitment from private sources. As this fund was scaling up, the economic slowdown made risk-averse pension funds decide to wait to invest money. Funds do not want to spend in small business development not knowing what the economic future will look like. The Fund saw the everyday impact of the slowdown on the economy, which saw investment in job-creation programmes dry up. This was a significant challenge to the Fund, which relies on matched funding.
The investment committee members include government representation, women empowerment stakeholders, private sector representatives and small business experts. There is a level of experience brought by investment committee members, which is useful for administrators. The Fund’s employees come to a conclusion on an applicant, then takes it to the investment committee, which then presents a unique take based on its own body of knowledge.
Relating to the frequency of due diligence: this was standard practice. The Fund has a 2 stage application process, the initial concept submission to determine the ideas and plausibility, with a focus on value for money, innovation and permanence. Should the idea resonate with the investment committee, the applicant is invited to submit a full business case, at which point the team will go to the site and work with the applicant team. The Fund has found that often people underestimate the effort taken in implementation. When applicants say “we will get a loan from Land Bank”, the Fund verifies with the Land Bank in terms of application and its progress and prospects. The project team goes out on a quarterly basis to various projects. The Fund then verifies whether implementation plan has actually been fulfilled, and sees what has changed and what challenges have arisen. The site visit was also aimed at helping, as the government are jointly invested in the success of applicants. She gave the example of a fruit-farmer who had recently erroneously acquired a packhouse, leaving him with little funding left to harvest his crop. The Fund was working with an expert in the sector to look at bridging finance, rather than losing the possible benefit of the harvest.
The Fund itself doesn’t create jobs, partners create jobs. The Fund merely facilitates the funding and operations thereof. The Fund works with matching institutions such as the land bank to ensure the presence of co-finance before it distributes the grant. The Fund attempts to encourage and support, and creating an environment which is amenable to job creation.
The permanent jobs achieved by the programme were across the life of the programme. There was no negative impact on the Fund budget for extra trained beneficiaries.
A2Pay started out in peri-urban areas and townships, with an intention to roll out further and scale up.
The Fund did not have direct access to beneficiaries, who were identified by project partners – however the Fund incentivised selection of PDIs through its application process.
Ms Allie-Edries recognised Members’ concerns about the slow pace of job creation in the Northern Cape and Free State. However, the fund was an open fund that required applications to award funding. Encouraging all provinces to participate in the new funding round necessitated interaction with the public, the private sector and NGOs in all provinces to raise awareness of the Fund. If an applicant had an idea but was struggling to package it, the Fund would send a team to assist. The Fund could not award grants in the absence of an application.
She clarified the Fund’s performance controlling for externalities. Performance for FY2018/19 was not as good as hoped – however the external environment had a large impact on disbursements through two areas: terminations and economic slowdown. The broader economic trend and the response of projects could not be controlled by the Treasury, and these external factors somewhat explained the underperformance in terms of expenditure for the financial year.
The relatively high match funding ratio was probably explained by the Treasury’s willingness to share risk. Fund partners were trying to do something different and new, which always brings risk. The Fund’s guarantees and grants reduce the impact and magnitude of that risk. Often organisations make loan funding available and expect money back, but have no deeper appreciation of risks faced by small business, including access to market, technical assistance, training and advice. The Fund’s risk-mitigating style of funding that covers funding of the aforementioned concern made its projects more sustainable. The Fund also did not fund projects that would tank after grant money ran out. Analysis was done to ensure that funded projects had a reasonable chance of success alongside the assistance and access to market provided. This was an eco-system approach to development funding, which has allowed close cooperation with Land bank, which could not do some things the Fund could, so they complement each other. Many found the Fund a pain as it demanded constant monitoring and information, although on the other hand, some projects had commented that, without the Fund, they would not have had the control systems in place that enabled them to attract more funding.
Regarding a tracking system to follow where trained people go, this was done by partners, who take beneficiaries’ ID numbers, which are tracked as they go into jobs.
In response to Mr McLoughlin’s series of questions, Ms Allie-Edries clarified that the costs associated with funding a project were variable by type of project. Projects, such as business accelerators, that chiefly require liquidity could recycle the Fund’s investment many times. However, in agriculture projects, infrastructure expenditure was far more important, which immediately made costs much higher. In terms of projects for work seekers, the cost of jobs was very competitive as initiation costs and training formed the bulk of expenditure. The Fund’s return to fiscus from VAT/PAYE was determined by assessing job placement and position due to the fund, then looking at tax returns. Fund officials’ salaries were paid out of the R9bn capitalisation. Funds unspent in a specific year remain in the programme, but are rescheduled. The Fund used the terminology “facilitation” of job creation to indicate the Fund is not the direct job creator, but rather enabled this creation. In relation to the breadth of the Fund’s economic impact, the jobs facilitated by the Fund allowed beneficiaries to spend on necessities like housing or education. The list of the Fund’s partners was available on its website.
The Fund’s competitiveness was noted by its independent evaluators, who were international challenge fund experts.
In terms of the World Bank – the Bank’s interest in the Fund was related to implementing similar projects in economies with similar socioeconomic issues and constrained fiscal space, to drive the leveraging of private funding through government guarantees.
The Fund’s projects were not purely in infrastructure – because the funding rounds were open, sectoral awards were determined by who applied. In the automotive sector, the Fund had seen success with Mercedes-Benz, Nissan and was working with BMW. Initially, the Fund was not trusted and seen as another government project that would not deliver. The Fund had made a point of being predictable, reliable, transparent and fulfilling its side of the bargain. Funding was surveyed and disbursed on a quarterly basis, which required a quarterly performance report that proved a certain level of achievement in order to earn the disbursement. 80% performance was required every quarter to unlock the tranches of money. Initially, seed funding was given, but subsequent drawdowns for the life of the project’s implementation was based on performance by quarter. The Fund had been highly disciplined in the provision of funding.
Regarding what would happen to beneficiaries should the fund start closing down: Treasury ensured that beneficiaries form sustainable initiatives, so that when grant funding ends, the projects may continue. The extension of the fund’s period was an issue for government. There had been adoption of the Fund’s models across sectors. For example, the Fund supported a project providing loans to the gap market – once banks realised the sustainability of this project, they expanded into this market, meaning there was no longer a need for government spending in this space. There would be an assessment of the project and whether it had a role to play in the future. The Fund’s formidable implementation capability could be leveraged by government.
In terms of Treasury projections, all projections reflected what the expenditure will be based on reprojected numbers from the projects themselves, which were bundled up and included in NT assumptions. When a new project began, the Fund gave seed funding based on a matched amount plus an amount it has determined. Where a drawdown is requested, match funding is required before the grant can be drawn. The Fund had decided to delay funding in the Harambee case as an experiment, where it only pays upon successful delivery of jobs. When a project comes towards the end of the implementation period and it hadn’t met targets, the Treasury withheld funds until the evidence of delivery of outcomes, despite usually giving funding in advance.
Determination of the number of jobs created is done by looking at the schedule of ID numbers and is verified. Site visits were also used to verify jobs by looking at employment contracts.
Relating to women and youth promotion, criteria in the application process privileged these goals. In the area of poverty alleviation, the Fund had relations with Phakamani, a microfinancing project for women in rural areas. With the Mercedes Benz project, the Fund insisted that jobs go to young unemployed women.
The Chairperson moved to follow up questions.
Mr N Kwankwa (UDM) apologised for his late arrival. He noted that the Jobs Fund had a reputation of being too demanding and asking too many questions, which was positive. Verification is required and the Fund’s good work must be kept up. He asked if the lack of geographical spread was not a capacity issue, as the need was greatest in provinces which are the least capable. If there was a capacity issue, were there no interventions to be made to facilitate applications? He also identified a possible need for a better tracking and verification system to follow beneficiaries of the Fund, to preclude possible misreporting of figure. He also raised the example of an ICT programme in Cape Town which was struggling to place beneficiaries.
Mr Shackleton wondered if municipal connections could not be used to expand the pool of applicants in underserved provinces.
The Chairperson enquired as to how Treasury made sure that, in late disbursement funding such as the Harambee case, it was not overpaying for jobs. Experience had shown that in a project’s implementation, deviations and expansions could bloat the budget. How did the Treasury ensure it would not overpay? She recalled a previous engagement with the fund on the concern of under-expenditure. She stressed that the Fund’s already good performance could be bettered if it became compliant with the PFMA in terms of expenditure of its budget.
Ms Allie-Edries welcomed the grassroots feedback about the rigour of the Fund in performance assessment. Capacity was one issue stopping the Fund from extending its efforts evenly to underserved provinces. The Fund did provide details and technical support for potential applicants in an effort to address this issue.
Regarding the improvement of tracking of beneficiaries, whatever had been self-reported by projects was looked at very completely during site visits, including comparison of invoices and bank statements, which was a painstaking, time-consuming process. This often meant results weren’t as rapid as the Fund would have liked, although the target of sustainability made rapid reactions unlikely.
Ms Allie-Edries noted that a number of government interventions to alleviate poverty operated in concert with each other to cover the short, medium and long-term, including social grants and the Extended Public Works Programme. Where project non-performance became evident, the Fund would withhold grants until proof of progress was given.
Ms Allie-Edries stressed it had been a huge challenge working with municipalities.
In terms of preventing overpayment in late disbursement programmes, Treasury costed the price of a job in the Harambee project based on historical costs, and would only disburse the total estimated cost per job, and not more. The Fund continued to monitor costs, and had appointed an independent auditor to ensure compliance.
Relating to underpayment and the PFMA, Ms Allie-Edries had heard there was an appreciation of the difficulty of the flow of disbursements, which was dependent on estimations made by projects. On an a yearly basis, the Fund was not disbursing as intended, but would have disbursed fully by the end of the project. She identified a need to marry project finance and public finance in the case of the Fund, which could only disburse what projects requested and review projections. She gave an undertaking that the Treasury would attempt to bring the projections in line, and figure out a different mechanism for regulation of project finance in the broader public finance architecture.
Mr Nkwankwa sympathised with the Fund’s difficult situation, where it was dependent on projections for disbursements, and externalities beyond Treasury’s control determined underspending. He advanced the need for project financing systems to be dealt with in a unique and specific manner. If the Fund had to spend without due process, this may lead to reckless expenditure. He called on the committee to help the Fund.
Ms Allie-Edries thanked members for the opportunity to present and the attention paid to its challenges faced. She noted the positive impact that interaction and acknowledgement of the fund had on staff morale, and proposed that should any members wish to visit one of the Fund’s projects, this could be arranged.
The Chairperson noted that, on under-expenditure, the concern was a balance between performance and compliance. There was no excuse for non-compliance, so there was a need for an innovative way to ensure the Fund would comply, as part of inculcating a culture of respect of the law, which included the PFMA. There was no choice; the PFMA had to be respected.
In closing the engagement, the Chairperson thanked the Treasury, welcoming the deeper understanding given to the Committee. There was a need to appreciate the success and formulate solutions to existing problems. The mandate of the Committee was to ensure compliance with the efficient use of public money as prescribed by the PFMA. There was always room for improvement, even where one has done well. The presentation had shown there was clear value for money in the Jobs Fund, and the figures presented, which had been questioned and understood, were credible due to the Fund’s close monitoring and evaluation on a quarterly basis. The key insight was that the National Treasury was a key supporter of job creation. There may be a need for a different view on the running down of the Jobs Fund, which had served as a shock absorber of unemployment focusing on PDIs, addressing poverty reduction and youth upliftment. This informed her thinking that the Fund was needed more in the present than before. The Fund had ensured creation of 98% jobs to PDIs, 68% to women and 57% to youth. If the Fund could improve on underspending, it could possibly deliver a rate of 70% to youth as a target. The Fund had created 170 000 permanent jobs, 55 000 short term jobs, 20 000 internships and trained 240 000 beneficiaries. The National Treasury had spread the Fund across 9 provinces, and its impact was more evident in rural provinces such as the Eastern Cape and KwaZulu-Natal. The Chairperson emphasised the need for a strategy to improve performance in the Northern Cape. The Treasury needed to ensure there was adequate consultation before the programme was run down, especially given the state of unemployment and prioritisation of job creation in the SONA. She stated her hope that the 6th Parliament would continue to support and evaluate the Fund.
Adoption of Draft Minutes
The Chairperson then continued with the adoption of minutes.
Regarding the Minutes of the 26th February, Mr Gcwabaza proposed a grammatical correction and a clarification in section 3.3 of the draft minutes, to emphasise the importance of capital outflows.
Mr McLoughlin noted that any untaxed profits were the issue at hand, and proposed amending the sentence to handle the term “untaxed profits”, in order to read as “the issue of capital outflows and untaxed profits of international companies doing business in South Africa was raised”.
The draft minutes were adopted due to a move by Ms Senokoanyane and a second by Mr McLoughlin.
The Chairperson moved to the draft minutes of the 27th February.
Mr McLoughlin noted the absence of the names and titles of two SANDF officials who attended, which Committee Secretary D Arends proposed to rectify in coordination with the Parliamentary Records Office.
Mr Shackleton raised a point about vagueness of time periods in section 3.5, with the Chairperson resolving in future to use specific dates in minutes.
A number of other clerical and grammatical mistakes were rectified.
Adoption was proposed by Mr McLoughlin and seconded by Mr Gcwabaza.
The Chairperson noted there were no announcements, but reminded members of upcoming sittings of the Committee on Wednesday and Thursday of that week. She thanked the Members for their contribution and preparation.
The meeting was adjourned.