Department, Supported Employment Enterprises, Compensation Fund, UIF Quarter 4 performance

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Employment and Labour

27 August 2019
Chairperson: Ms M Dunjwa (ANC)
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Meeting Summary

There were apologies from the Director General who was at a summit and the deputy minister who was at a G20 working group on employment in Japan. The Minister was attending an NCOP committee meeting and then leaving for a meeting in Johannesburg.

The Department of Employment and Labour (DEL) presented on the Quarter 4 Performance Plan for 2018/19. Also included were summaries of its Quarter 3 performance. Throughout the report there were comparative analyses of the four quarters. Some information pertained to Quarter 4 alone while some was accumulative and included information from the first three quarters as well.

The DEL categorises its work into four programmes and seven strategic objectives. The four programmes are: Administration, Inspections and Enforcement Services, Public Employment Services and Labour Policy and Industrial Relations. The seven strategic objectives are: Promote equity in the labour market, Protecting vulnerable workers, Strengthening multilateral and bilateral relations, Contribute to employment creation, Promoting sound labour relations, monitoring the impact of legislation, Strengthening the institutional capacity of the Department.

Quarter 1 overall performance was 80%, Q2 performance 80% as well, Q3 performance 82% and Q4 performance 72%.

The Q4 breakdown of 72% was: Administration - 75%, Inspections and Enforcement Services – 50%, Public Employment services - 100% and Labour Policy and Industrial Relations 66%. The presentation gave ‘per programme’ breakdowns of the contributions per province.

Challenges experienced in the Administration programme during Q4: Fruitless and wasteful expenditure report to the value of R 2 896 605.76 and Irregular expenditure to the value of R 1 502 954.17.

Inspection and Enforcement Services performed 61 642 inspections, which constituted 94% of its target for Q4. Challenges encountered were non-compliance with the Employment Equity (EE) Act such as staff without the necessary experience or authority were appointed as senior EE managers and EE consultative forums were not properly constituted. The DEL inspectors also found non-compliance with the Basic Conditions of Employment Act (BCEA) in Q4. The dominant sectors for non-compliance were wholesale and retail, domestic work, hospitality, farm worker and private security sectors. The most common ways in which the BCEA was contravened were underpayment of wages, non-issuing of payslips and illegal deductions.
The Northern Cape was a challenge as there is a high turnover, because most inspectors were not from there, could not cope with the vastness of the area they were responsible for, and were poached by mines, which, in some cases offered them many times the salary government paid them.

The DEL reported spending 94% of its 2018/19 budget of R3.28 billion and provided an expenditure breakdown into programmes and economic classifications.

SEE had one, two or three sites in every province except Mpumalanga and was responsible for employing people with particular disabilities who could not function within a normal work environment. The workshops and factories produced products made mainly from wood and/or metal such as furniture, school desks and tables, as well as textile products, producing mostly hospital linen.

Challenges facing it was that too few government departments procured from it. It is expected to compete for government tenders like any other private company in the open commercial market. It has been petitioning National Treasury since it lost its preferential treatment status, when it came to procurement by government departments. Treasury had to date not done much to assist the plight of the Supported Employment Enterprises (SEE). MPs could assist SEE by lobbying government departments and municipalities to procure from it.

The Compensation Fund presented its Q4 Report. It showed its performance trend over the last five years and the trend is upward, from 41% to 67%. Its strategic objectives were to provide effective and efficient client oriented support services, and to provide faster, reliable and accessible Compensation for Occupational Injuries and Diseases (COID) Services by 2020. Its four programmes are Administration, Compensation for occupational injuries and diseases services operations, medical services and Orthotic and rehabilitation. Overall performance was 67%. The challenge of the Compensation Fund is to provide services to sick and injured workers as efficiently as possible. The performance indicators are mostly about the speed with which claims should be processed and services delivered. The presentation contained tables and graphs, broken down by province, and expenditure.

In Quarter 4, the UIF scored 100% on the objective to ensure financial sustainability, 0% on strengthening institutional capacity and providing user-friendly services through multiple access points, 83% on improving service delivery and 50% each on collaborating with stakeholders to improve compliance with legislation and enhancing employability of UIF beneficiaries. On the strategic objective: improving service delivery, the UIF had a national call centre. The number of agents were not enough and the UIF created 32 additional posts in the call centre. The posts were advertised and 11 000 applications were received. The UIF had to create a database of 11 000 applicants and had to shortlist 5 applicants per post. The administration of this recruitment process took very long and the agents had not been appointed by the end of 2018/19. These posts will be filled in Quarter 1 of 2019/20.

The other unachieved indicator was installing wi-fi in labour centres. The UIF created an online application system three years ago, so that people did not have to come to labour centres to apply for benefits. The challenge was that unemployed applicants did not have internet access. This led to the decision to provide wi-fi at labour centres so that applicants could access it with their own devices. However, the procurement process took long and the UIF managed to install it in only 33 of the 126 labour centres. This roll-out will continue in the current financial year.

The increase in rand value the UIF paid out in Quarter 4 2019 compared to Quarter 4 2018 was around R500 000 000 which is an increase of 23.18%. Financial performance of the UIF was  Programme 1: Administration spent 88% of its budget, Programme 2: Business Operations spent 109%; Programme 3: Labour Activation Programme (LAP) spent 13%. The LAP underspend is due to the programme starting late in the financial year.

Members asked the reason for the high turnover of labour inspectors in the Northern Cape, if DEL had a retention strategy and incentives for labour inspectors to stay in their positions. Members also asked why government departments were not obliged to procure from SEE and why SEE had to compete for government tenders in the open commercial market. Members asked from where the Compensation Fund procured its medical devices and how it ensured that the devices were of a good quality. Members asked the reason for the UIF under-expenditure during the fourth quarter.

Meeting report

The Chairperson read out apologies from the Director General who was at a summit and the deputy minister who was at a G20 working group on employment in Japan. The Minister was attending an NCOP committee meeting and then leaving for a meeting in Johannesburg. She encouraged the Department to give women in the department the opportunity to give presentations.

Department of Labour Quarter 4: Impact Analysis of Annual Performance Plan 2018/19
Ms Aggy Moiloa, DEL Acting DG, co-presented with the DDG: Public Employment Services, Sam Morotoba. She started at slide 17, noting that slides 1-16 dealt with the performance of the department during the previous three quarters.

Slide 17 showed the strategic objectives as defined by the department and how the department fared in each of these areas during the fourth quarter, totalling overall at 72%. Slide 18 shows the breakdown of the 72% in the programmes. In the ‘per program’ breakdown for Quarter 4, the only program which reached its 100% target was ‘Public Employment Services’. ‘Administration’ rated 75%, ‘Inspection and Enforcement Services’ rated 50% and ‘Labour Policy and Industrial Relations’ rated 66%, bringing the overall performance to 72%.

Slide 20 compared the four quarters per programme. The problematic programmes seem to be ‘Inspection and Enforcement Services’ as well as ‘Labour Policy and Industrial Relations’. When comparing ‘Inspection and Enforcement Services’ performance per province, the provinces of the Northern Cape (NC) and Western Cape (WC), as well as the North West (NW) prove to be the underperforming provinces.

When comparing ‘Inspection and Enforcement Services, the Northern Cape and KZN were underperforming at 50% each. The reason for the underperformance in KZN was the closing of the centre due to health and safety considerations during the period. In the broader picture which includes ‘Public Employment Services’ comparison, NC, WC, Mpumalanga and NW prove to be the underperforming provinces.

Slide 22 shows Northern Cape dropped from 100% to 75% in Public Employment Services.

Slide 23 shows that, while the WC achieved 100% for ‘Inspections and Enforcement Services’ over Quarters 3 and 4, it still forms part of the group of four provinces which underperforms.

Slide 26 shows the performance of Programme 1: Administration in Q4 of 2018/19. While no unauthorised spending had been reported, there was R2 896 605.76 fruitless and wasteful expenditure and R1 502 954.17 irregular expenditure.

Slides 27-39 on Communication list all the media, marketing, advertising and stakeholder relations activities; slides 40-42 list all media statements and slides 43-44 list media enquiries in Quarter 4.

Programme 2: Inspection and Enforcement Services
Slide 46 shows 61 642 out of the targeted 65 620 inspections (94%) were conducted. 49 615 (81%) were compliant and 12 022 (19%) noncompliant.

Under-achievements are due to a lack of proper planning, but DEL is aware of the deficiencies and able to correct itself. Remedial actions are being taken to prevent the deficiencies from being repeating, so that DEL can reach its targets.

Slide 47 deals with the DG’s review of Employment Equity. The target was 700 and 680 were realised (97.1%). 273 companies were compliant and the 339 non-compliant companies were issued with DG recommendations with which these companies had to comply within 60 days. Slide 48 gives a breakdown of the sectors reviewed as well as which parts of the law were contravened.

Slide 49 shows the areas of noncompliance such as companies assigning junior staff without proper authority of resources to be assigned senior equity managers and consultative forums that are not constituted as required by the Employment Equity Act.

Slide 50 stipulates interventions by DEL, which include monitoring the due dates for companies to comply with the DG’s recommendations and quarterly workshops to capacitate newly recruited EE Inspectors. There were only nine employment EE inspectors nationally, which means that this had to be capacitated. Currently there are 50-60 being trained.

Slides 51-53 deals with procedural adherence to the EE Act. The target for Quarter 4 was 388 and 384 (99%) employers were inspected. 271 were found compliant and 113 not. Since the promulgation of the EE Act in 1998, not one company in SA was found to be compliant on its first inspection so as to give an idea of how ubiquitous non-compliance is. Non-complying employers were issued with notices to comply within 14 days. Areas of non-compliance are the same as those mentioned earlier and the interventions include conducting EE advocacy sessions with employers and as well as direct referral for prosecution for those employers who were found to be operating without an Employment Equity Plan

Slides 54-57 shows that monitoring adherence to the Basic Conditions of Employment Act, 48 038 workplaces were inspected against a target of 52 638. 87% inspected were found to be compliant and 13% were non-compliant and issued with enforcement notices to comply within 14 days. Of those in inspected in Q4, 6 413 were found to be non-compliant.

Major non-compliance was found in the following sectors: wholesale and retail, domestic work, hospitality, agricultural and private security. Areas of non-compliance were: underpayment of wages, non-issuing of payslips, illegal deductions, non-issuing of particulars of employment, non-signing of attendance to prove working hours, including overtime. Interventions include conducting project-based inspections to determine areas of non-compliance in sectors; re-introduction and strengthening of structured advocacy sessions under the BCEA, deepening the employers and workers understanding of BCEA and National Minimum Wage Act.

Slides 58-64 deals with the Occupational Health and Safety Act. There were 190 specialised inspectors nationally. The Occupational Health and Safety was working closely with the Compensation Fund to get the information on sectors and companies where the most compensation claims come from. Inspections planning is also informed by this information. 6 887 OHS inspections were conducted against a target of 6 857. 63.5% of employers inspected were compliant and 36.5% non-compliant and were issued with enforcement notices to comply within the defined period or to take such action as the law allows.

Slide 59 shows the sectors reviewed per province (see presentation). Slide 60 deals with investigations into injuries on duty. The department sets itself a target of rounding off 65% of investigations within 90 days. To give an idea of how long these investigations can take, it was still dealing with the Greyton Bridge collapse in 2015. Some cases, like the bridge collapse, are more complicated because it threatens the public interest. There were nine sets of lawyers involved in investigating and resolving this case. Slide 61 shows incidents reported vs incidents investigated, with Gauteng (GP) showing the biggest backlog. Challenges include the inaccessibility of injured persons and witnesses when incidents were investigated and the long periods the National Prosecuting Authority took in taking prosecution decisions.

Slides 65-68 on Employment Audit Services show 5 485 procedural audits were conducted against a target of 4 644, 56.4% employers audited were compliant and the 44.6% who were non-compliant were issued with enforcement notices to comply within 14 days. A total of 371 payroll audits were conducted against a target of 344. 156 employers audited were compliant and 215 were non-compliant and issued with notices.

The areas of non-compliance were: Declarations in terms of section 56 (3) of the Unemployment Insurance Act (UIA), failure to register with the Fund, and non-payment of contributions. The most non-complying sectors were wholesale & retail, hospitality and farm work sectors. Interventions include structured advocacy sessions reintroduced and to deepen the employers and workers understanding of UI legislation.

The DEL managed to recover monies through penalties from non-compliant employers. The slide was outdated as the presenter stated that the department had in fact recovered R9 billion, parts of which will be paid out to legitimate beneficiaries.

Programme 3: Public Employment Services (PES)
Slide 71 details the number of work seekers that registered with PES during Q4 per province, and in each province consistently more people registered for employment than the targets set by the department, totalling 233 881 new registrations against a target of 174 000 nationally. 63% (146 465) of registered work seekers are young people aged 16-35 years. Slide 73 details the work seekers by disability, with blind work seekers being the dominant category.

In terms of equity, 86% (200 431) of work seekers registered were Africans, 10% (23 853) Coloureds, 3% (6 424) Whites and 1% (2 737) Indians. The following sectors registered the most work and learning opportunities: Agriculture 10 927, Construction 8 160 and Safety and security 5 588.

Slide 80 details placements during Q4 with 49 968 work and learning opportunities filled by registered work seekers, of which 60% (30 156) were formal jobs, 28% (13 906) were projects, 7% (3 695) were learnerships and 1% (680) were internships. Agriculture, safety and security, construction and banking were the biggest absorbers of these placements (slide 81). Most placements came from the 26-35 age group.

Programme 4: Labour Policy and Industrial Relations (LP&IR)
DEL received 33 applications for trade union registration in Q4, making it a total of 133 for the year. Four were approved and 29 were refused within 90 days of application with one trade union deregistration in Q4. Slide 85 is the number of applications per sector. Slides 86 and 87 is the number of union members per sector in Q4. Slide 89-91 shows number of workers impacted due to DEL refusal to accept the union registration, broken down per sector, to a total of 15 503.

Supported Employment Enterprises (SEE)
SEE provides work for people with disabilities and has three sites in Gauteng, two in KZN, WC and EC each, and one in NC, FS, LP and NW. There is no SEE site in Mpumalanga. SEE had two targets: employ 100 additional people and increase its sales by 10% by Quarter 4. It achieved both.

Slide 101 gave a head count per factory, with Ndabeni (WC) employing the largest number of people (172). A challenge is that the Durban SEE factory had been destroyed by a storm two years before and it had not been fully restored, due to a long queue at the Department of Public Works (DPW). Workers had spent more than a year at home due to this. Since then SEE, working with DPW, had managed to restore the cafeteria and a part of the factory which had sustained less damage, to a degree that it could be used as work space to continue production. The rest of the factory is still unusable. These SEE sites produce mainly products made from wood and/or metal creating furniture, and others work with textiles, creating mainly hospital linen.

Investments of the sales proceeds: SEE receive an annual allocation from National Treasury to maintain its facilities and to meet some of its operational costs. SEE was allowed to invest proceeds from its sales in employing additional people and expansion of manufacturing capabilities. Large scale investments had been made in the new Limpopo Seshego factory, as well as the replacement of old machinery in existing factories across the country. The sales proceeds generated during 2019/20 will fund expansion and establishment of a new factory in Mpumalanga for additional people to be employed.

SEE faces the following challenges: The SEE factories receive support from very few departments, such as the Department of Basic Education and the Department of Health. SEE is expected to compete for government tenders in the open market with private organisations. The market for SEE products is shrinking, especially amongst government departments. Provincial governments prefer buying furniture from private suppliers, which is significantly more expensive than SEE products. The Department impressed upon schools to buy products from the Department of Environmental Affairs (DEA) and the Department of Correctional Services (DCS). When buying SEE , DEA or DCS projects, it creates direct employment for people in these projects and the cost was significantly lower.

SEE factories have the potential to create more employment opportunities for people with disabilities. MPs could assist the entity through oversight, highlighting SEE’s plight and lobbying municipalities, provincial and national governments departments to procure SEE products. DEL was reinforcing the call for government to oblige government departments and the private sector to spend a certain percentage of their procurement budget on procurement from women, youth and people with disabilities.

The SEE achieved its targets, but received a qualified opinion from the Attorney General (AG), both on the performance and financial statements. The qualified opinion on the performance had to do with the alignment between the strategic plan and the annual performance plan (APP) which was raised at the year-end. The SEE management tried to correct it, but because it was year-end, it could not be corrected. The qualified opinion on the SEE financial statements had to do with the methods SEE applied to calculate the costs of raw materials. There were also other areas of conflict. The AG wanted SEE to put a value to 40-year-old equipment, while SEE valued these pieces of equipment at R1, which was standard accounting practice. The AG also wanted SEE to put a value to the buildings, which belong to the DPW, which SEE was using free of charge. Mr Morotoba was confident that the matters with the AG would be resolved and that an agreement would be reached on a methodology to account for the old equipment and the buildings. The AG appointed an advisor to assist SEE to rectify these areas of conflict within the next two months.

DEL Financial Report
Mr Bheki Maduna, CFO: DEL, said the information was accumulative, in other words, for the whole year and would be reflected in the Annual Report as well.

As at 31 March 2019, the Department had an expenditure level of 94%. He provided expenditure according to economic classification. Current payments were divided into two categories. Of the R1 271 652 000 earmarked for the compensation of employees, 90% had been paid out. Of the R585 034 000 earmarked for goods and services, 94% had been paid out, totalling to R1 700 606 out of R1856 686, which equals 92%.

Transfers for Programme 3: Public Employment Services went to subsidised workshops for the blind, National Council for the Blind, subsidised work centres for the disabled, DEAFSA, Productivity SA, the UIF and the Compensation Fund totalling R241 365 000 out of an earmarked R254 708 000 (95%).

Transfers for programme 4: Labour policy and Industrial Relations went to the International Labour Organisation (ILO), African Regional Labour Administration Centre (ARLAC), Commission for Conciliation, Mediation and Arbitration (CCMA), NEDLAC, civil society organisations, totalling R 1 050 297, which is almost 100% of the allocation.

Compensation Fund
Mr Vuyo Mafata, Commissioner: Compensation Fund, started with slide 6, which shows how the Fund had been faring for the last five years since 2014/15 to 2018/19. The Fund achieved 67% of its targets. Slide 7 gave a breakdown per strategic objective. The Fund had two strategic objectives. The first was to provide effective and efficient client oriented support services. The second was to provide faster, reliable and accessible COID Services by 2020. Slide 8 gave a breakdown per programme: Administration, COID Services, Medical benefits and Orthotic and Rehabilitation Services.

Slide 9 gave a quarterly comparison. The performance was accumulative in nature, which meant that Q4 performance was the performance for the entire year.

Slide 10 demonstrates programme expenditure. All programmes overspent except Orthotic and Rehabilitation Services, which underspent by R15 797 000. In total R6 537 925 000 was allocated and R11 024 089 were spent, which means an overspend of R4 486 165.

Two targets in Programme 1 were unachieved: lift the Fund’s risk management maturity level to 4% by 31 March 2019 as it was raised to 3.5%; grow the investment by 6.7% on the JSE but it grew by 1.6% due to the country’s slow economic growth.

For Programme 2, the Fund aimed to have 75% of active registered employers assessed by 31 March 2019. It achieved 55% so the target was unachieved. All employers have to register with the Fund and submit ‘Return of earnings’ which determines how much they must contribute to the Fund.

Slide 14 - 17 shows how the provinces performed. Slide 14 shows the target of 90% registered claims adjudicated within 40 working days. In Q4, 156 223 claims were registered and 152 795 adjudicated (98%). The tables for the other programmes were provided (see presentation).

Slides 18-21 compares performance per programme over the four quarters. It shows trends using arrows and shows negative performance trends with red arrows.

Ms N Nkabane (ANC) noted that SEE spent some of its investments on fixing old machinery. She asked if SEE had an operations and maintenance budget separate from the investments spent on maintenance.

Mr Morotoba replied that there was an operations and maintenance budget. It received R154 million from Treasury. It was expected that SEE generated additional revenue to do other things.

Ms Nkabane asked if SEE had an asset management system as the lifespan of old machinery was noted. Should machines not be replaced after a certain time of service?

Mr Morotoba replied that SEE had 13 factories and that the assets ranged from huge machinery to screw drivers. It had an asset management system to track all assets including wood panels as raw materials.

Ms Nkabane referred to Corporate Services and asked if there were there no interventions to mitigate the underperformance caused by a high staff turnover in the Northern Cape.

The Chairperson asked if it was the remuneration or the workload which made inspectors leave in the Northern Cape. Did DEL have a recruitment programme recruiting students from high school/university?

Ms N Hermans (ANC) asked about the high turnover of inspectors in the Northern Cape, if DEL conducted exit interviews when inspectors left. Were the problems the long distances between sites or a lack of opportunities. What incentives could be offered to retain inspectors there? Was there a retention strategy?

Ms Bahumi Matebesi, DDG: Corporate Services, replied that DEL had a pool of inspectors. Students studied, for example, electrical engineering and when they completed their studies, they were absorbed into the ranks of inspectors. DEL did conduct exit interviews, which were analysed and reported on. The report was available. She believed retention was a culture which needed to be built within an institution. DEL provided the inspectors with the tools of the trade like cars, cell phones, computers and tablets. Inspection was treated as a core function. To retain inspectors, there needed to be some form of upward mobility within the department. Previously inspectors were appointed at levels 5,6, and 7. Currently inspectors could go up to director level. Also, the bursary scheme had been revised. It used to provide only a portion of the financial needs of a student. This used to impact on the number of students who could complete their studies, as some stopped studying due to financial exclusions. Now the bursary scheme provides 100% of the student’s financial needs, ensuring that more students completed their studies. This decision however means that a smaller number of students can be supported. DEL also exposed staff and managers to soft skills training. In the Northern Cape the environment posed a challenge because it is a mining area. The inspectors were mining engineers and were in demand at mining companies. DEL constantly lost inspectors to mining companies as the mines could offer much larger salaries.

Ms Moiloa said DEL trained inspectors in occupational health and safety. They were experts in their own areas, if they were construction, chemical engineering or health and hygiene specialists. Recently some of these inspectors delivered a presentation at the Goodyear Tyre factory in PE, and the international managers of Goodyear listened in on them from overseas. Inspectors were well trained and they were poached because DEL could not match the salaries the corporate sector offered.

Some inspectors came in with the understanding that the work consisted of only pure auditing. If an inspector started off with unrealistic expectations, the person did not stay long. The challenge in the Northern Cape was that most inspectors were not originally from the Northern Cape. The main provincial office was in Kimberley, while their area of inspection covered Springbok which was over 800km away. DEL was working closely with Sol Plaatjie University to try and recruit local inspectors, as an intervention to alleviate the high staff turnover in the Northern Cape.

At head office there were technical experts, which were sent out to service recipients, to ensure that the service was not compromised due to the staff shortages. This meant that the workload of that technical expert at head office was not being addressed. Consequently, some targets were unachieved, as specialists at head office had to help out in the provinces.

DEL did recruit specialists from institutions of higher learning and took them through internships and on-the-job training in specialised areas. This was done on a continual basis.

Ms Matebesi added that DEL vacancy rate was 9.2% at the end of 2018/19 which was the norm in the public service, so DEL was still within the limit. The staff complement in DEL was 9 000. Currently, it was 8%, which translates to 792 vacant posts. One of the retention strategies DEL applied was to employ and promote from within. Sometimes one saw that the net effect was zero. It looked like there was no movement in filling vacancies, as people moved from the bottom up, with a little bit of employment from the outside. This did not mean that posts were vacant for a very long time.

There was no breakdown of these vacancies per province but this could be provided at a later stage. Every provincial head had to submit their vacancies. The turnaround time for a vacant post to be filled was within six months. If a post was vacant for a year, it could be abolished, unless it was a critical post, because the department could function without it. DEL was facing a budget cut on compensation of employees to reallocate funds to needy areas within the public service, which means that posts will have to be abolished. This process was on going at this juncture.

Mr N Hinana (DA) asked if the department did not set its targets too low, so that it was easily achievable. He referenced education where the pass mark was lowered to 30% so that it could be easy to pass, but it lowered standards.

Ms Marsha Bronkhorst, COO: DEL replied that years ago DEL had more indicators. There were 4 or 5 different types of inspections. The Department was advised by the then AG to combine indicators, because an inspection was an inspection, irrespective of its nature. If one had four indicators and one was inspections, and it was not achieved, it was an underachievement of 25% whereas one underachievement out of 15 was a much lower percentage of underachievement. The department combined indicators, because it also looked at the human resources available. It sets realistic indicators which were achievable if planning and management were done correctly. At one stage, there were 30 indicators, but the department increasingly combined them and set indicators that were SMART.

Ms Moiloa said DEL had independent quality assurers. The Department of Planning, Monitoring and Evaluation scrutinised its performance throughout. It made sure DEL stuck to baselines. National Treasury also checked for quality and quantity improvement.

Mr M Nontsele (ANC) was still dissatisfied with the indicators where DEL scored 100%, while there were many areas of concern in the report. He asked DEL to find a way to reflect the reality more accurately so that the efficacy and effectiveness of the Employment Equity Act can be more visible, supported by concrete examples.
Mr Hinana referred to the media DEL uses to reach its audiences. He asked if it made use of Mhlobo Wenene as it had recently been voted the best radio station in SA, and had a huge audience.

Mr Makhosonke Buthelezi, Acting Director: Communications, replied that DEL did make use of mainstream radio stations like Mhlobo Wenene, SABC radio stations as well as RSG.

Mr Hinana noted that the agricultural sector was one of the sectors with a high contravention rate of labour laws in general. The employer/worker relationship was a very unequal one. In some sectors workers needed to be educated about the rights they are entitled to.

Mr Hinana referred to slide 71 and said that now that the unemployment rate was 29%, what was the department doing to reduce this? What were the major contributing factors to the high unemployment rate?

Mr Morotoba replied that this was a big issue. It was an international phenomenon. In an environment where you do not have economic growth, you would obviously have unemployment. Where you do not have major investment you will have unemployment. Where companies are not expanding, or diversifying their products and using high-tech equipment, those factors contribute to unemployment. Those were the macro issues contributing to unemployment. That was why government had announced a number of measures to attract investment to deal with unemployment.

Ms Hermans said SEE was facing a shrinking market for its products and asked, in light of this challenge, if Public Works could make a commitment to procure a minimum percentage from SEE when it refurbished old buildings or built new ones.

The Chairperson asked from where the Compensation Fund procured its devices as people complained about the quality of the wheelchairs. Was the Fund making sure that they were of a good quality?

Mr Mafata replied that the Fund annually published tariffs for medical procedures and what medical practitioners charged for services rendered to injured workers as well as a list of all devices. On this list the device would be described which the patient would need. The Fund did not procure the device. The patient would go to a practitioner. The practitioner would send a request to the Fund for approval and subsequently dispense the medical device, after which the practitioner would claim payment from the Fund. The Fund did not prescribe to practitioners which brand to dispense, but it had to be within gazetted specifications.

The Chairperson asked what the presentation meant by ‘chronic’ disabilities.

Mr Morotoba replied that the slide was giving an indication of the number of people registered in Public Employment Services. The people suffered from various disabilities. SEE worked in line with the Employment Services Act which aligns with the United Nations definitions of disabilities. SEE did not employ a person with any level of disability. Employment within SEE was limited to certain categories and levels of disabilities. People who are employed by SEE could not function in a normal work environment. Applicants were referred by special schools and psychiatrists after assessments. Other people with disabilities were normally employed in factories. There were 10 factories that SEE subsidised, which currently employed 650 candidates, which would increase to 900 in 2020. These factories received a flat-rate subsidy for every person they employed. These factories were subsidised for their operations. There was a slide which showed the transfers from SEE budget to these institutions.

The Chairperson was confused. She asked that he unpack the ‘chronic’ conditions.

Mr Morotoba replied that ‘chronic’ was used for lack of a better word to describe the sector. When people come to SEE to register, they had to fill out a form. Work seekers have to indicate their disability such as visually impaired, speech impaired, hearing impaired. ‘Chronic’ was a collective noun for many different disabling conditions. It could also be described as ‘other’. If a better term could be suggested, it would be welcomed.

Mr Morotoba  said DEL had statistics for Quarter 1 as well. The information was available if the Chairperson would like them to present it.

There were slides that showed the contribution by each of the labour centres for placements and registrations. Slide 71 gave a breakdown of registrations per province and there was a slide on placements per province. In Gauteng there were 24 labour centres. For each province there was a breakdown of the contribution per labour centre.

Ms Moiloa replied that DEL applied the three pillars when approaching inspection work. The three pillars were Advocacy, Inspections and Enforcement. There had to be an element of advocacy. If it was, for example an EE inspection, the inspectors would take both employers and employees through the legislation. Thereafter they would conduct the inspection. Where there were contraventions, notices would be issued. Where there was non-compliance, there would be enforcement.

On how DEL addressed non-compliance, she replied that after conducting a DG Review and a company is found to be non-compliant, DEL served DG recommendations. DG recommendations were sent to the CEO, but the law requires that members of the local Employment Equity Forum should also receive them. From top management through to the lowest level of employees, all racial and ethnic groupings and gender had to be represented on the forum. The non-compliance was spelled out and recommendations to address them.

Unemployment Insurance Fund (UIF)
Ms Judith Kumbi, Chief Director: Operations, noted the UIF Commissioner had briefed the Committee the previous week on UIF objectives, operations and functions and she started at slide 8 which reflected UIF had 16 performance indicators and targets of which 10 were achieved (63%).

Slide 13 listed the six strategic objectives used to compare the four quarters with each other. In Quarter 4, the UIF scored 100% on the objective to ensure financial sustainability, 0% on strengthening institutional capacity and providing user-friendly services through multiple access points, 83% on improving service delivery and 50% each on collaborating with stakeholders to improve compliance with legislation and enhancing employability of UIF beneficiaries.

On the strategic objective: improving service delivery, the UIF had a national call centre. The number of agents were not enough and the UIF created 32 additional posts in the call centre. The posts were advertised and 11 000 applications were received. The UIF had to create a database of 11 000 applicants and had to shortlist 5 applicants per post. The administration of this recruitment process took very long and the agents had not been appointed by the end of 2018/19. These posts will be filled in Quarter 1 of 2019/20.

The other unachieved indicator was installing wi-fi in labour centres. The UIF created an online application system three years ago, so that people did not have to come to labour centres to apply for benefits. The challenge was that unemployed applicants did not have internet access. This led to the decision to provide wi-fi at labour centres so that applicants could access it with their own devices. However, the procurement process took long and the UIF managed to install it in only 33 of the 126 labour centres. This roll-out will continue in the current financial year.

The UIF needed to implement the SAP enterprise resource planning (ERP) system. The idea was to have one system throughout UIF. This system was to be implemented over three years to improve service delivery. Halfway through implementation, problems were discovered with the contract. The project was paused to limit the amount of irregular expenditure. By the time UIF was ready to resume the project, the service provider could no longer complete the project. Another service provider was appointed who could continue the work. The handover between the old and new service provider could not be finalised before the end of the financial year in March 2019, but the process was continuing in the current financial year.

Slide 17 addressed the core business of the UIF, to pay out UIF benefits, and all indicators had been achieved. Under Programme 2: Business Operations on slide 18, the third indicator had not been achieved. This is the process of issuing companies with complete information with compliance certificates. Percentage of applications with complete information issued with compliance certificates or tender letter within 10 working days had a target of 90% within 10 working days. The UIF managed 79% within 10 working days. To remedy this situation this process is going to be automated.

Slide 19 indicated that 64 577 instead of the targeted 65 000 new employers were registered in 2018/19. The reason for the target not being met was that the data centre had to move, as the building it was occupying became unfit for occupation. The systems had to be shut down while the move was happening.

Slide 21 lists the targets not achieved, the reasons why they occurred and the action UIF was taking in addressing them.

Slide 26, 27, 28 shows a comparative analysis of UIF performance over the four quarters of 2018/19, broken down into provinces. This illustrates where performance improved, stayed the same, or worsened when illustrated with a red arrow. Slide 26 looked at unemployment benefits processed, Slide 27 at in-service benefits processed and slide 28 looked at death benefits processed.

The increase in rand value the UIF paid out in Quarter 4 2019 compared to Quarter 4 2018 was around R500 000 000 which is an increase of 23.18%. Financial performance of the UIF was  Programme 1: Administration spent 88% of its budget, Programme 2: Business Operations spent 109%; Programme 3: Labour Activation Programme (LAP) spent 13%. The LAP underspend is due to the programme starting late in the financial year.

The overspend on Business Operations is because UIF budgets a certain amount ahead of the year for benefits to be paid out to beneficiaries, but it cannot foresee exactly how many applications it is going to get and how much exactly it is going to amount to. In this particular case it received more legitimate applications that had to be paid out, than the amount it budgeted for. hence the 109% overspend.

Mr S Mdabe (ANC) was concerned that the Compensation Fund mentioned it received close to a million claims and that almost 95% had been paid out. He was concerned about the number of claims to do with health and safety. Is there any synergy and reconciliation between the Fund and the Department Inspectorate? What would be the value of the 940 000 claims that had been paid out?

Mr Mafata replied that in the last financial year the Compensation Fund paid R4b in medical claims. 937 000 invoices were received for the various treatments workers received. The number of claims registered were 190 000. Claims could relate to major injuries or minor injuries like a cut in the finger requiring treatment by a doctor. As long as it has been registered with the Fund. The Fund realised that paying compensation in the event of an injury was not a preventative measure. It was a reactive measure. The Fund wanted to play a bigger role in preventing workplace injuries and diseases. That is why the Fund partnered with the Inspections and Enforcement Unit so that it could start helping employers play a role in preventing workplace injuries. The Fund has now taken over the funding for occupational health and safety in DEL so that DEL could have the capacity to expand its occupational health and safety inspectors to be able to do the prevention work that it wanted to happen.

Mr Mdabe asked if there was a document which showed claims, broken down between private and public sectors.

Mr Mafata replied that the majority of claims came from the private sector. In the public sector there were some hospitals that dealt with injury-on-duty cases. With the Compensation for Occupational Injuries and Diseases Act (COIDA) no payments or pre-approval could happen without medical reports. Public sector hospitals and doctors were inundated with patients and often the patient had to wait to be treated and the medical report took longer to reach the Fund. Claimants could not get finalisation with outstanding medical reports. The dominant trend was to send the injured worker to a private health facility to get medical treatment and the report would follow more quickly. A breakdown could be provided the next time the Fund presented.

Mr Mdabe asked if DEL still provided internships. Was the programme still going? If not why not? If yes, what was the programme going forward?

Mr Morotoba replied that when Skills Development was under the Department of Labour, before its transfer to Higher Education and Training, the Skills Fund used to fund training such as learnerships, internships, apprenticeships, skills programmes, bursaries and grants. Currently there were discussions about the future of Skills Development.

Mr Morotoba added that the UIF was responsible for re-skilling retrenched workers for re-employment, as funded by the UIF and partners. Those programmes would include internships and learnerships. He said DEL did take on a number of young people that it trained through various internship programmes, and funded it through the 1% payroll that DEL normally retained as part of the funding for skills development. Some of these candidates were recruited into positions that arose in DEL. He said there was a suggestion that SEE ring-fenced funds for training. This was precisely what SEE was appealing for.

Mr Mdabe said the underspending of R214.5 million was substantial, taking into account there was no breakdown of the amount into vacancies, goods and services, etc. What impact did it have on the 2019/20 allocation, as it would have an influence on the DEL current performance plan.

Mr Nontsele said Slide 52 covered areas of non-compliance with the Basic Conditions of Employment Act which companies were guilty of. He was interested in the interventions DEL launched and what the outcomes were.

Ms Moiloa said DEL added much value. There were companies which had no idea of what the law required of them which, with the guidance of DEL, were currently fully compliant with all labour legislation. DEL had recovered millions of rand. Some went to the fiscus. Some companies in contravention of labour legislation opted to settle out of court, paying amounts of between R200 000 and R700 000. There were cases where DEL had recovered money for individuals, where there had been illegal deductions. These were bread and butter issues. There were cases where productivity levels had gone up and absenteeism had gone down. There were case studies where these facts have been recorded.

Mr Nontsele asked about SEE. If Treasury fixed prices, what concessions should the Committee ask for to deal with the unfair competition during tendering processes. He asked if the DDG could make suggestions about some formal engagement with Treasury.

Mr Morotoba replied that government entities used to get preferential treatment. Government Printing Works is the first option for printing for GCIS and government departments were forced to buy furniture from SEE. If government did not support these factories, they were trouble, because many retired policemen and soldiers used to work for these entities. Police stations and correctional facilities had to buy from them. The furniture within these institutions still show the good quality of the products. There was an element of preferential treatment and only if they could not supply, could departments go to other suppliers. Since Treasury took away that status, SEE had been engaging Treasury. The challenge was that there were different divisions within Treasury. One division would fix prices and would agree to preferential treatment for SEE, and another would be in favour of open competition on the commercial market. SEE has tried to get the different parties together, because they do not agree amongst themselves, but to no avail. SEE will continue to pursue this quest, to get preferential treatment for SEE.

The previous DG tried a number of things. There was a formal written request and a formal request for further meetings to pursue this with Treasury. Treasury allowed SEE to charge 50%. It allowed some flexibility around procurement procedures for some government departments. For example, the health department did not have to follow complicated procurement procedures when they procured from SEE. Other government department did not want to do this.

Mr Nontsele asked what measures UIF was putting in place to deal with the non-expenditure.

Ms Kumbi replied that there were two areas where the UIF had underspent. The underspending on the CAPEX budget happened due to the failure to appoint a service provider in time. All the budgets not spent in the previous financial year were rolled over to the current year. A service provider has since been appointed. The old service provider had to hand over to the new service provider. The second contributor will complete the project and by the end of 2019/20, wi-fi will be in all 126 labour centres. The project should be completed by October. As UIF rolled out the wi-fi to additional labour centres, the budget would be spent. This will be reflected in future reports.

Mr Nontsele asked about the link was between under-expenditure and vacancies. One of the reasons cited for under-expenditure was vacancies. Not all vacancies were inspector vacancies. Some were critical supply chain or financial management positions. The inspector vacancy rate had been dealt with sufficiently. What have DEL done to fill those other posts, especially in provinces that failed to reach critical targets.

Ms Kumbi said the second instance of under-expenditure was unfilled posts. Staff had since been appointed and this will be reflected when the UIF present on Q1 and 2 of the current year.

The Chairperson asked about non-compliance in the domestic work sector. She heard DEL reporting that it engaged with domestic workers. DEL never engaged MPs on whether  they had complied with the Basic Conditions of Employment Act (BCEA) for their own domestic workers, although MPs and DEL officials were all employers.

Ms Moila replied that DEL targeted domestic workers rather than employers. They were the most vulnerable category of worker. Employers were a lot more powerful than domestic workers, and more likely to abuse their powers. DEL went the extra mile for domestic workers, helping them with hands-on projects. On communication with employers, DEL did high-level advocacy using media campaigns, where it got the attention of the employers.

The Chairperson requested a breakdown of labour inspectors by gender, race, age, class.

Ms Moila replied that the breakdown of the inspector base into gender, age , and ethnic group would be made available in writing.

The Chairperson requested a breakdown of claims into private versus public. It was important for the discourse on transformation.

Mr Mdabe said previously public representatives made a UIF contribution. Has the department looked at the policy impact of taking out a particular sector in relation to revenue generation. Was it sustainable? Taking into account the economic downturn, did the policy have an impact?

Ms Kumbi replied that the public representative sector was very small and did not have much impact. She added that the process followed whenever there were changes to legislation, not necessarily to policy, was to go through NEDLAC. After the process was finalised, the impact analysis would be done. NEDLAC looked at the changes in the Act, and look at the impact it would have on the UIF being able to pay benefits. They also looked at the impact it would have in terms of loss in contributions. They would then report to the UIF and say if the changes the UIF requested were sustainable or not.

There was an annual ministerial review of labour and financial contributions. According to the legislation, the employee should pay 1% and the employer 1%. The ceiling in UIF means that if somebody earned R30 000, the UIF still calculated 1% of R17 000, which was the ceiling, and that will be the contribution paid. For anyone earning R17 000 and less, it will be 1%.

Normally the ceiling increases every year. In 2018, the Minister of Finance asked the Minister of Labour if the ceiling could remain at the same level, and there was no increment due to current economic conditions . The ceiling was taken into account when paying out a benefit. The UIF paid more than what it collected, because of the new amended Act. A contributor earning R30 000 could contribute like somebody earning R17 000, but when collecting benefits from the UIF, it would be on R30 000. This practice was up for review, as it was unsustainable. The UIF will have a problem if the ceiling is not adjusted. The ceiling adjustment would be effected by the new Minister.

Closing remarks
The Chairperson thanked DEL for the presentation and for the level of patience which it displayed with all the reporting requirements. DEL would return to report on its Annual Report 2018/19 and Q1 of 2019/20 while the Q4 report was still fresh in everyone’s memory. She asked SEE for information on its demographic breakdown, because when talking about transformation, one should not be apologetic. SEE would be one of the institutions which the Committee will visit to see how it could assist with empowerment.

The unemployment crisis was coming to the fore. During the first week of September, a motion will be tabled in Parliament, in which the Committee would be engaged. DEL coming to the Committee or briefings was empowering for both parties. Parliament, the Committee and DEL had the responsibility, difficult as it was going to be, to effect a change in the mind-set and narrative about employment and unemployment in SA. An unemployed person was not interested that mass unemployment was a global phenomenon, or the historical reasons for it in SA. That person wanted a decent home and a plate of food on the table.

The Chairperson confirmed that the Committee and DEL would reconvene the next day.

The Committee adopted the minutes of the meeting of 5 July 2019.

The meeting was adjourned.

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