Stats SA on current national and provincial rate of unemployment; Department audit outcomes: AGSA & FFC briefing

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Employment and Labour

04 September 2019
Chairperson: Ms M Dunjwa (ANC)
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Meeting Summary

The Committee was briefed by Statistics South Africa on the current unemployment situation in the country, and by the Financial and Fiscal Commission (FFC) and the Auditor General of South Africa (AGSA) on the audit outcomes of the Department of Employment and Labour.

Key challenges identified by the three institutions which would require the Committee’s attention included:

  • The official unemployment rate in South Africa was at 29.0 percent. The rate of unemployment had increased from 4.3 million in the second quarter of 2009, to 6.7 million in the second quarter of 2019.
  • The number of employed persons had increased from 14.4 million to 16.3 million in the same ten-year period.
  • The impact of the introduction of the National Minimum Wage on employment statistics had to be assessed, as there may be a concern that jobs were being lost due to employers not being able to afford the minimum wage.
  • The Auditor General had over the last six years been unable to provide an opinion on the financial status of the Compensation Fund due to the lack of supporting documents from the entity.
  • Hundreds of investigations into fraud and irregular expenditure at the Compensation Fund had not yet been completed, as the internal controls for the processing of the investigations were weak.
  • Many of the entities did not have a controlled environment for the detection of irregularities, as they were relying on the audit process for the identification of material misstatements.

The Committee Members raised concern about young black women forming the largest group of unemployed individuals in the country. Agriculture and trade were identified as the key sectors most likely to contribute to job creation in the future. The Committee recognised that in fulfilling its newly expanded mandate to facilitate the creation of jobs, it would have to work together with the private sector in ensuring that there was an environment that encouraged the creation of jobs.

It was noted with concern that the continued situation at the Compensation Fund, where AGSA was unable to express an opinion about its financial status, could render the portfolio and the Committee ineffective. The Committee expressed its intention to engage with the Department of Employment and Labour and the AGSA at the next meeting on the challenges raised.

Meeting report

 

Statistics South Africa on unemployment

Statistics South Africa (Stats SA) highlighted key statistics on the relevant employment figures in the South African labour market.  The unemployment rate had increased by 1.4% in the second quarter of 2019, the highest rate of unemployment since the first quarter of 2008. The official unemployment rate in South Africa was now 29.0 percent. The number of unemployed people had increased between 2009 to 2019, from 4.3 million to 6.7 million. Black South African women were the most vulnerable, with an unemployment rate of over 30%. Overall the black and coloured population groups were found to be the most vulnerable groups in the labour market.

Over the same ten-year period, the number of employed persons had increased from 14.4 million to 16.3 million. The age group with the largest rate of unemployment was the 15 to 24 year old age group, with an unemployment rate of 56.6%. According to the report, unemployment rates were higher among the youth, regardless of education levels. There was also a category of persons known as “Not in Employment, Education or Training” (NEET), who were disengaged from both work and education. Persons in the NEET category constituted approximately 3.3 million, or 32.3% of the10.3 million youths aged between 15 and 24. The NEET rate had increased by 0.7% in the second quarter of 2019, compared to the second quarter in 2018. The highest rate of employment was in the elementary occupations.

The formal employment sector had made an increased contribution towards employment, increasing from 10.1 million in the second quarter of 2009, to 11.2 million in the second quarter of 2019. The informal employment sector had also increased from 2.2 million jobs in 2009, to 3 million in 2019.

Discussion

Mr X Ngwezi (IFP) said that the information presented was based on data collected from persons between the ages of 15 and 65 years. Employed persons aged between 15 and 19 years were involved in child labour, and he asked whether there were institutions employing persons between the ages of 15 and 17 years, adding that they should be dealt with within the prescripts of the law. At what age was a person regarded as too young to work, as according to his knowledge, those aged between 15 and 17 were too young to be employed?

Mr N Hinana (DA) asked whether the statistics for unemployment rates included both South African and foreign nationals. Had a distinction been made between these groups, as this factor may influence the correct statistics of the employed people in South Africa? He referred to the lack of statistics in relation to people with disabilities in the presentation, and asked how many unemployed disabled persons there were in the country. Were there were any factors linked to the high unemployment rates in rural locations? Did cultural traditions related to a patriarchal system contribute to the vulnerability of women in the labour market? What other factors might be playing a role in this regard, and how could this challenge be addressed?

Dr M Cardo (DA) said that in the past, according to Stats SA, black South Africans between the ages of 24 and 35 were less skilled in comparison to their white, coloured and Indian counterparts. He asked what the cause of the decline in the acquisition of skills among young black South Africans was, and what could be done to address that decline, particularly within the context of the Fourth Industrial Revolution. Was Stats SA was conducting research into what the likely impact of the Fourth Industrial Revolution would be on employment rates in South Africa?

He referred to the recent document review by the National Treasury, which contained some specific ideas on job creation in South Africa, particularly recommendations that the Government should consider full or partial exemptions for small, medium and micro enterprises (SMMEs) from certain labour regulations, including the extension of certain Bargaining Council Agreements. He asked whether Stats SA had conducted any research that could support that proposal, and whether it was something that they would support as a policy intervention.

South Africa only had about 43% of its population in employment, while the rest of the world averaged 60%. Where were the biggest employment opportunities? What had Treasury suggested the Committee should be supporting in labour intensive sectors such as agriculture and tourism? Where were the major job creation opportunities in South Africa, bearing in mind the country had a major skills deficit? Was Stats SA conducting research into the effect on employment of the introduction of the national minimal wage (NMW), and if so, was there a correlation between the introduction of the NMW and increasing retrenchments?

Mr M Bagraim (DA) said that the information did not come as a surprise, as the issue had been looming for years. The figures presented, when compared to those of other countries, indicated a position that was probably the worst globally. Figures like this had been likened to “an Arab Spring” which had resulted in uprisings, and perhaps Stats SA should conduct some research into the meaning of the figures from that perspective. Despite numerous government initiatives and labour summits, these interventions did not seem to be working. Was it possible for Stats SA find an answer as to why this was the case, or could they perhaps indicate what the Committee was doing wrong?

Regarding the unemployment rate in the 25 to 34 age group being more than double of that of the 45 to 54 age group, could this be the result of a shrinking economy and people not being absorbed into the economy? He also asked whether it was possible that those individuals in the age group 45 to 54 had already found employment before the more onerous legislation had been put in place, as it was now almost impossible to get people into the workplace because of the onerous legislation.

Referring to the profile of those not in employment, he said he was aware that research had been done on individuals with an education, and that it had been established that educated persons have a better rate of employment, but he felt a lot of education was useless as it did not train individuals for the work place. He suggested some research into what sort of education was needed. It appeared that freight, construction and agriculture had the highest employment figures. Were there were any figures that could indicate which sectors to concentrate on and possibly educate people towards entry into those industries?

Regarding employment in elementary occupations, he asked whether this was where the next expansion of employment would be seen over the next few years, as it appeared the rest of the jobs had been frozen. He observed that the rate of long-term unemployment had increased, and raised concern that the current situation was likely to worsen, as figures in Europe indicated that the longer an individual remained unemployed, the less likely they were to ever find employment. Had the informal job market been considered in the figures presented, as it was also very active in South Africa?

He said that a lot people were not in the tax net and that many jobs in the informal sector were not registered, yet people were making a living. Would it be possible to investigate that issue? The number of young uneducated black women was increasing, and he asked whether Stats SA could give insights into that issue. A point had been raised about people not having money to attend a job interview, and asked whether research could be conducted on that issue, and whether government could intervene in getting people to be in an employable position.

Mr M Nontsele (ANC) asked the presenter to elaborate more on the reported decline of discouraged work seekers and what the reasons for that could be. What contributed to the high levels of unemployment among the youth, despite their levels of education -- was the problem the type of education or the absence of jobs? Could the increase in elementary occupations be attributed to the introduction of the national minimum wage? Could Stats SA provide the number of foreign nationals who were currently employed in the various sectors already mentioned, and indicate in which industries foreign nationals were most likely to be employed? 

Ms H Jordaan (FF+)  asked whether Stats SA could provide reasons for the large employment losses of 44 000 and 19 000 respectively in the professional and elementary occupations, as reflected in the second quarter survey.

The Chairperson asked whether Stats SA could indicate the level of education of those employees engaged in elementary occupations, and also reiterated the question about the number of foreign nationals who were employed. Did the elementary occupations include domestic workers? She also raised concern about the inclusion of 15 to 17 year age groups in the employment survey, and wanted to know whether their employment did not constitute child labour. Had child-headed households been included in the employment survey, and where the figures related to drop-outs who had not passed matric been included in the report?

In relation to the issue of Black women having higher unemployment rates, she asked what the contributing factors might be so that the Committee could gain an understanding of the challenges. Had individuals in the informal labour market been interviewed, and were such individuals taxi drivers, hawkers, people working in shebeens etc? How were these interviews sampled?  

Stats SA’s response

The presenter said she would not be able to answer questions about the contributing factors, or provide reasons for the statistics provided. The role of Stats SA was only to provide the figures. There were relevant departments that had the mandate to address and investigate the issues around the figures presented.

Regarding the employment of 15 year to 17 year olds, she referred to an Education Act that stipulated that parents should ensure that their children attend school until Grade 9, or until the age of 15 years, which was the compulsory school-going age. The age of employment therefore commenced at 15 years. In relation to international standards, numerous countries also consider 15 years as the age when employment may commence, while some countries accept 10 years of age as the minimum age for employment. If the employment was to be referred to as child labour, some thresholds in relation to time worked and conditions under which a child works existed. In relation to time, if a child was below the age of 11 years, they could work for not more than 14 hours a week. Children between the ages of 12 years and 14 years could work for a maximum of 28 hours a week, and children 15 to 17 may not work more than 48 hours a week. The conditions under which children work played a role in whether their employment was perceived as child labour. If a child was working under harsh conditions or operated machinery that could harm them, those instances were considered child labour.

She was unable to answer the question about which institutions were employing in children, but indicated that children between the ages of 15 and 17 years may assist in their household’s businesses and participate in part-time work after school, and if they engaged in such work for at least one hour a week, they were regarded as employed. Their engagement in work did not mean that they were not at school. Children also included in the employment estimates were those who were 15 years and above and had indicated that they were available for work, or had applied for work.

In response to the question about children being too young to work, the presenter stated that the question was one based on perceptions, and that the answers had been obtained from the individuals asked. Some participants in the survey may regard themselves as too young to work if they were still in school and their parents did not require them to engage in work, while those living in households with businesses may consider themselves old enough to work. The question had been posed to a wide age group and had asked participants whether they perceived themselves either too young or too old to work, and those in the older age bracket may indicate that they were too old to work.

The figures presented did not differentiate between foreign and South African nationals. There was a module on labour migration conducted every five years, in which a distinction is made between South Africans and non-South Africans. There were also employment figures for South African-born and foreign-born individuals. However, the presenter advised that she did not have those figures with her at the meeting and offered to share them with the Committee at a later stage. She also indicated that the latest figures that distinguished between South Africans and foreigners had been published in 2017, and the next batch would be published in 2022.

Regarding the NEET category and the people with disabilities not being reflected, the presenter said that these figures were indeed not included in the quarterly labour force survey. However, they were in talks with the International Labour Organisation (ILO) about the types of questions they could include in the survey for the purposes of identifying people with disabilities in the labour force. For international and regional reporting, it was important that persons be grouped according to their disability status.

She was unable to answer the question about why the rural locations had a higher rate of unemployment, or why women had a higher rate of unemployment than men. The figures on the education levels of unemployed youth could be provided to the Committee. They had not conducted research on the impact that the Fourth Industrial Revolution would have on youth employment.

Regarding the impact of the NMW on employment levels, Stats SA had recently provided the Department of Labour with the figures of what people were earning, as the figures assisted in providing data on whether the national minimum wage had influenced employment levels.

She answered the question about people not having the resources to look for jobs, saying that Stats SA was aware of the reasons provided by jobseekers, but it had not conducted research into issues such as how jobseekers could be assisted with funds to look for jobs, attend interviews or buy work clothes. However, the questionnaire had provided about 16 possible reasons as to why jobseekers could not find employment, and three of those questions had been used to indicate whether an individual was a discouraged jobseeker, where they would state that there were no jobs in the area in which they lived, or there were no jobs requiring their skills, or they had no hope that they would find a job.

She also could not give an answer for the decline in the number of discouraged jobseekers in the second quarter, but said that they had observed a similar shift in March 2003 when discouraged jobseekers had taken the initiative to go and look for work. Perhaps this could be the result of possible renewed hope that employment could be found. She could not answer the questions related to the challenges faced by the youth in finding employment and had no answer as to why people were engaged in elementary occupations. She clarified that individuals in elementary occupations included those employed in jobs that did not require education or training to operate machinery, which would include herd boys, domestic workers and drivers. She also clarified that domestic workers form part of the elementary occupations group, but were reported separately.

She advised that non-South Africans were employed mainly in the trading industry, and were self-employed. Research indicated that non-South Africans employed at least two South Africans in their businesses.

The quarterly labour survey did not contain questions that assisted in identifying child-headed households, but the general household survey did include these questions. As to whether the survey accounted for people employed in the informal sector, the presenter said that all individuals were interviewed and from there an assessment was made whether they were employed in the formal or informal sector. She clarified that businesses in the informal sector were either not registered for income tax or value-added tax, employed fewer than five people, and did not deduct Pay-As-You-Earn tax from their employees. Informal businesses may include shebeens and taxi drivers.

Further discussopm

Mr Hinana said he was not satisfied with some of the answers provided. He questioned the lack of consistency in the response about whether children below the age of 18 years were permitted to work, and asked that the official position on the matter be made clear.

Mr Nontsele proposed that Stats SA present the data for 15 to 17 age groups separately from the rest of the age categories, to reflect the current legislation’s position on child labour. He pointed out that children in the performing arts were required to obtain special permission from the Department of Labour, and these were some of the safeguards against children engaging in employment in South Africa. The categories for the minimum age of employment reflected by the ILO were those reported by the member states, and countries were free to decide their own minimum age of employment. He requested a copy of the document published in 2017 containing the figures of foreign workers.

Mr Ngwezi said they had asked for the names of institutions that employed those in the 15 to 17 age group so that the Committee could visit some of them during their programmes to check the conditions under which they were employed. He was concerned about the employment of those in this age group, as they should be at school and not employed. They could be vulnerable to abuse in the labour market.

Ms Jordaan said it was unfortunate that the Committee could not be provided with background information as to why some sectors had lost jobs. She asked that the earnings data be made available to the National Minimum Wage Commission, as well as to the Committee, so that they could understand how earnings had been affected by the introduction of the NMW.

Stats SA’s response

The presenter welcomed the proposal to have the 15 to 17 year categories reported on separately, although she said this may pose a challenge because the age group 15 to 19 was used in the benchmarking process. There may be a need to consult the methodology to see whether this could be possible.

It was possible to make the report with the information on foreign nationals available to the Committee.

The National Minimum Wage Commission had to make a special request to the Statistician General for the earnings data, as this data was not in the public domain and to obtain the data, the Committee might need to go through a similar process.

Regarding the figures on the employment rate of children, she advised that according to the survey conducted in 2015, which focused on child labour among children from the ages of 7 to 17, fewer than 3% of children in the 15 to 17 year old age group were employed. Stats SA was also currently embarking on another child labour survey that would focus on the age group between 5 and 17 years, to determine whether those between the ages of 5 and 6 were engaged in child labour or not.

 

The Chairperson contested the methodology used, stating that there were individuals who may be graduates but who may choose to take jobs that were available. She also asked about the inclusion of farm workers in the survey, as nothing had been said about them during the presentation. She questioned the methodology used, and said that in her view it was not a true reflection of the challenges, so the data was not empowering the Committee. She acknowledged that the Committee could not get access to the earnings data, and asked the Members to be patient in that regard.

The Chairperson thanked the presenter, and said that further engagement with the Department would be necessary in the future.

Financial and Fiscal Commission: briefing on labour and employment

Professor Daniel Plaatjies,Chairperson: Financial and Fiscal Commission (FFC), said the FFC was dealing with several issues arising from a series of events that had taken place since the beginning of the Sixth Parliament. He explained that he would introduce his colleagues and leave for the Appropriation Committee meeting which was addressing the special appropriation of Eskom. He apologised for this.

He said that ordinarily the FFC did not look into a vote and advise Committees on the vote. Its work was concerned with economic and fiscal policy, legislation, budgets and the fiscal impact of policy. The appropriate institution to brief the Committee in terms of the request made to the FFC, was the Department of National Treasury, as only the Treasury had access to the Department of Labour’s budget. He advised that the questions asked about the impact of statistics on the economy and growth were the issues the FFC could address.

Treasury was the appropriate institution to consult because it knows the trends and the value of funding per programme in the vote. Treasury was also in a position to provide for each spending item such as the programme, the sub-programme, economic classifications,; how much money was spent on the compensation of employees; the transfer of goods and services and the challenges in those areas; where money was supposed to be spent; and it identifies the risks associated with the budget of the Department, which could be done for all the entities of the Department. They could also provide for the small expenditure items, because the Treasury had a designated person for the budget. Treasury also publishes a Section 32 report, which was a quarterly public finance management report required by law and produced by each department. Treasury had access to this report and makes it available to the Committee. The Committee could also use the report to verify any budget information provided by the departments.

He advised that the FFC would be interested to return to the Committee, if so invited, as the department had five outcomes which were directly and indirectly related to economic growth and development. The FFC would be able to provide their independent advice on the new economic policies. He asked the Committee, for the purposes of the presentation, to refer to the new presentation document provided. He handed over to his colleagues for them to proceed with the presentation.

The FFC presenter said the presentation would give insights into the current labour and economic market dynamics, as well as the departmental budget analysis. Employment creation was low, and this was the main reason for high unemployment rates. Spatial differentiation affected unemployment figures in regions such as Gauteng, which had high unemployment rates. Unemployment was no longer prevalent only in the rural areas. In the case of urban areas, unemployment rates included those of large populous areas. NEET individuals were disconnected from the labour market, and research showed that as they were predominantly unemployed in the medium to short-term, there was the potential for their unemployed status to advance to long-term unemployment, where the risk of remaining unemployed was at its highest.

The presenter referred to the financial and budget analysis, commenting that there had been underspending across all programmes for goods and services and compensation of employees in the portfolio. The under-expenditure in goods and services could indicate the implementation of cost-cutting measures.

The presenter highlighted the importance of the impact of the Minimum Wage Bill and the questions around whether it created employment or caused unemployment. In terms of the economic strategy, the FFC stressed the importance of leveraging public procurement in stimulating economic growth. This would involve efforts to curb corruption, wastage and irregularities, and to improve governance.

Discussion

Mr  Bagraim said the report had answered a lot of the questions posed to the previous presenter. He pointed out that the portfolio was failing to achieve the goal of supporting job seekers. Could the FFC comment or provide ideas on how this could be achieved? The Committee was aware of the need to play a more significant role in job creation, but who could provide direction on how this could be done? The expansion of job creation in the provinces and municipalities was not within the Committee’s mandate, and he therefore agreed with the FFC on this. He did not agree with the FFC’s statement that unemployment could not be addressed through active labour market policies only, as it was the government’s role to create an environment in which the private sector wanted to create jobs. It was not government that must create the jobs, as this would put too much strain on the fiscus.

Referring to improving and aligning the training content of the sector education and training authorities (SETAs), he said that this was also not in the mandate of the Committee. Educating people with skills that did not assist the labour market was not productive. Regarding the strengthening of youth employment interventions that incentivise job creation, he said that government was trying to do this, and asked the FFC to comment on that, or to explain further. He asked for comments on what the government’s efforts were in effectively addressing unemployment, as he knew of a foreign direct investment that had built factories which did not have enough people to work in them.

Ms Nkabane said that the Department of Labour’s expanded mandate was to create an enabling environment for job creation. The Quarterly Labour Survey reported on the sectors that create the most employment, and she wanted to know the causes of underperformance in the other sectors, and what measures could be put in place to ensure they contributed effectively.

The Chairperson commented that she would have liked to see the FFC’s reference to strengthening youth employment interventions include a mention of the State of the Nation Address of 2018, where the President had pointed out that the issue of experience was a challenge for entry-level job seekers. There had been no mention in the presentation of the National Minimum Wage survey results that the public was waiting for, and that would disclose the effects of the introduction of the NMW. This could bring awareness to the public that there were other processes under way and were yet to be finalised. The Chairperson asked for more information regarding which departments which were not paying SMMEs on time. She asked the presenter to elaborate on the meaning of the FFC’s assertion that there was a need to redesign the active labour market policies (ALMPs) to focus on labour market outcomes.

FFC’s response

The presenter responded that the Chairperson was correct in her observations -- the FFC had done a high-level critical analysis of the report, and a detailed version of the analysis of the report was yet to be done, specifically on the interventions proposed by the document. The statement about the redesigning of the ALMPs to focus on labour market outcomes meant that the policies of the Department were mainly focused on protecting employment. An example would be the minimum wage which was designed to protect the minimum wage of workers so that they were not exploited by the system. The statement seeks to encourage government to go beyond protection strategies and to facilitate the creation of jobs, as already established through the expansion of the Department’s mandate.

Regarding foreign direct investment, this was ultimately a debt and that it was important to pay attention to the terms and conditions, as the investors expect a return on their capital and the interest. South Africa had great potential for development, and such potential must be managed well. Focusing on niche areas such as manufacturing could assist in the creation of a strategy for increasing jobs.

He warned, however, that there needed to be safeguards against ill-doers, and government had to be cautious about being over-indebted in instances where international organisations or companies were involved. Attention should be paid to the job-creation potential of these investments, and he agreed with the Committee on this point. The statement that unemployment could not be eradicated by active labour market policies meant that the government could not be the employer for everyone, and that the government needed allies in the private sector to create the jobs. This meant that the government had to play a facilitating role that provides policy certainty, an economic growth strategy that was very clear, targeted and inclusive, and a long-term vision of how the people in the country would reach that goal. The government’s role was that of promoting public good and values and the betterment of the people. That was why public infrastructure had been referred to in the presentation.

Regarding the role of industry, he agreed that economic growth and employment were both tied to industries -- the value chain they offer, the services and infrastructure they need -- and said that these factors influenced employment outcomes. The oversight role of the Committee was to call the Department and National Treasury to account for many of the issues identified, including why the rate of unemployment was so high, despite the Department being adequately funded.

The Chairperson thanked the presenter for the answers, and commented that the role of the government and Parliament would, in addition, be the protection of workers through legislation.

Auditor General (AG): overall financial performance of Department and its entities

 

The AG’s presentation focused on the review of the Department of Employment and Labour’s financial statements, compliance with laws and regulations, and credible reporting of performance against the predetermined objectives. The audit outcomes considered the performance of three entities -- the Department of Employment and Labour, the Commission for Conciliation, Mediation and Arbitration (CCMA) and the National Economic Development and Labour Council (NEDLAC, which had an unqualified opinion with material misstatements, the Unemployment Insurance Fund (UIF) and Supported Employment Enterprises (SEE), which had qualified opinions, and the Compensation Fund (CF), which was in the disclaimer category.

The CCMA was the only entity without material findings on legislative compliance, while some of the other entities had material non-compliance with the quality of their financial statements, the prevention of irregular of expenditure and the prevention of fruitless and wasteful expenditure.

The CF was the only institution requiring intervention for the implementation of action plans and oversight responsibility. 

Overall the financial management of the portfolio was good. The portfolio had enough reserves, primarily with the UIF. The fruitless and wasteful expenditure in the portfolio had reduced from R13.8 million to R11.4 million. Most of the wasteful expenditure came from the CF, resulting from litigation claims. The fruitless and wasteful expenditure in the portfolio had, however, decreased, when compared to the previous financial year. The Department and CF were found to have not investigated some of the cases of fruitless and wasteful expenditure from the current and previous audit. The audit had revealed allegations of fraud and financial misconduct which had not been investigated by the CF. In the previous year, NEDLAC and the Department had had the same findings, but they had improved during this audit and did not have such findings.

 

Discussion

Mr Bagraim (DA) said that it appeared there had been six years of failure by the Department, and asked whether it would be possible for the AG to offer some assistance to the Department so that they could improve their performance. He referred to the top five non-compliance areas, and observed that only one entity had passed, namely the CCMA. The lack of compliance at the entities holding large reserves of funds, such as the UIF and CF, was very worrying. He asked why Productivity SA had not been audited. He observed that the overall financial health of the portfolio was good, and acknowledged that as a good result, but said he understood that the UIF was planning to expand its mandate to pay those who had resigned. He asked whether extended and paternity leave had been considered, in light of the portfolio’s financial health, in the coming year.

He said it was pleasing, although not exciting, that the fruitless and wasteful expenditure had decreased by R2 million. However, the portfolio had still lost R11 million, and he was not sure whether any action had been taken. With the AG’s expanded mandate, he was sure that the AG would investigate what action had been taken against those individuals responsible. He asked about the litigation claims at the CF and whether they were the result of wrongdoing, or whether individuals who had been injured were not happy with their claims. He also asked whether the R4 million for damage to vehicles was the result of people not having licences, and whether any action had been taken. He asked about the R200 000 for parking at the UIF, and whether parking could not be arranged at another state institution. The reduction of irregular spending by half was good, but irregular expenditure of R49 million was still a large amount, and he wanted to know whether action had been taken. He commented on findings that fraud had not been investigated formally and that some investigations had taken more than three months, and asked for AGSA’s comments.

The Chairperson asked for reasons why the CF’s irregular expenditure investigations had not been completed.

AG’s response

Responding to the question about the six years of failure in the Department, the presenter said that the portfolio had stagnated in a challenging position. The auditees in the portfolio relied on the audit process to identify the areas that they needed to correct. The core issue that that there was no consistently controlled environment throughout the year, to ensure that by the time the audit happened there were no material misstatements for the auditors to pick up.

Over the last six years, the AG had not been able to express an opinion about the state of the CF. This was due to the lack of supporting documentation, and this was the biggest challenge of the portfolio.

In response to the question about the expanded mandate of the UIF, the presenter said that the risk of the current situation with the CF continuing was that it would render a few institutions ineffective, including the Parliamentary Committee. If there were no documents to support the assertions made, it was impossible for the auditor to express a view. She asked that the Committee ask the CF to provide the supporting documentation so that an assessment could be made, and a plan for moving forward could be put in place.

She answered the question about the auditing of Productivity SA, saying that it had not been audited by AGSA and was audited by an accounting firm, as the entity had the power to select and appoint its own auditors. The financial health of the portfolio was reflected primarily in the reserves or surpluses with the UIF and CF, and the challenge would be to ensure that these reserves were used responsibly to achieve service delivery.

Regarding the wasteful parking expenditure at the UIF, the UIF had disclosed that there had been a lease agreement. The lease had expired, but the UIF had continued to make payments even though they were no longer using the services.

In response to the question about the investigations at the CF not being completed, the presenter said that there were over 300 investigations, and only 22 of them were new. 137 of them were related to supply chain management, and 72 to fraud cases. Most of them therefore were long-term cases, yet to be completed. They did receive reports from the CF regarding the status of cases and what action had been taken, but the internal controls for the processing of the investigations remained weak. 

The presenter responded to the question about the litigation claims at the CF, and clarified that these were the result of garnishee orders. Regarding the damage to vehicles, the drivers did have licences, but the problem was how well the state vehicles were being maintained. In cases of suspected negligence, the Department needed to follow up and investigate them. 

The Chairperson thanked the presenters and said the responses of the AGSA needed to be considered. The Committee and AGSA had to address the issues with the Department and the entities during the next meeting.

The meeting was adjourned.

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