Medium Term Budget Policy Statement: hearings on Social Security

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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report


19 November 2003

Chairperson: Mr T Ralane (ANC) [NCOP: Free State]
Co-chairperson: Mr N M Nene (ANC) [NA]

Documents handed out
Department of Home Affairs Submission
Department of Health Submission
Department of Social Development Submission
IDASA Submission
IDASA Powerpoint Presentation
Human Science Research Council Submission

During the discussion on the Department of Home Affairs submission Members sought clarity on the reasons for the increase in costs for the Lindela Detention Centre, the Department's plans to improve the provision of its core services, a progress report on the update of the Department's IT systems especially HANIS and the Department's plans to ensure greater co-operation with the other government departments in the cluster in the provision of Identity Documents.

During the discussion on the Department of Health submission Members sought clarity on the reason for the drop in the Department's expenditure during the 2003/2004 financial year, clarity was sought on the Department's plans to ensure an integrated approach between government departments rather than competition and the Committee asked whether the decrease in social development spending would place undue pressure on health services delivery

Members asked the Department of Social Development to explain the reasons for the largest increase in expenditure allocated to the Western Cape province even though it did not have the largest population, the Department was asked to indicate the kinds of discrepancies it had encountered in the grants application forms received and its plans to keep these abuses, and the Department was asked to provide a progress report on its poverty alleviation projects.

During the discussion on both the Human Sciences Research Council and IDASA submissions the Committee sought the reasons for South Africa's current unemployment problem, the amount of people that would be absorbed into the economy if a skills match were to be done, whether land reform could be used to address the problem with unemployment as well, the current number of AIDS orphans in South Africa, whether it would be wise to fund the HIV/AIDS projects via both the municipal and provincial equitable shares when neither have spent such funds properly in the past, and whether government itself should bear the brunt of the responsibility to create employment.

Department of Home Affairs Submission
Mr P Nkambule, Department CFO, presented the submission (document attached) which outlined the Department's contribution to government's Social Security cluster in effecting service delivery, and the Department's budget position with relation to service delivery. The submission highlighted the service delivery constraints experienced by the Department, and its turnaround strategy for improvement.

Ms C Botha (DA) [NCOP: Free State] asked the Department to explain the reasons for the tremendous escalation in the costs for the Lindela Detention Centre, which currently stood at R52m.

Mr Nkambule responded that the reason for the increase in costs was to accommodate the vast influx at Lindela, which was constituted mainly by people entering South Africa from neighbouring countries such as Mozambique and Zimbabwe. He stated that the Department was doing its level best to ensure that only persons with adequate documentation were allowed into the Republic. The South African Police Services (SAPS) were conducted raids and would transport those persons to Lindela, and they would then be returned to their country of origin. The problem was that the influx was endless.

Mr J Fick, Department Head: Strategic and Executive Support Services, stated that Lindela remained a hot potato for the Department, and the problems facing that institution should be regarded in light of the major challenge facing South Africa with the unlawful influx of persons from other Africa countries as well as the East and Eastern Europe. This was a global problem, and no country was able to successfully document the influx of undocumented foreigners. This was aggravated in South Africa by the porous nature of its borders.

The process put in place at Lindela to address the problem was actually only the tip of the iceberg, as the Department repatriated approximately 150 000 people per year. Many of them returned to South Africa once repatriated. Thus the entire issue concerning the management of illegal foreigners was very complicated, of which Lindela was only one aspect.

Ms Q Mahlangu (ANC) [Gauteng] requested the Department to explain its plans to improve the provision of its core services, especially to the rural areas. She noted that this aspect was not mentioned in the submission at all.

Mr Nkambule replied that the Department was trying a number of vehicles to deal with this issue. The Department was rendering its services through the Multi-Purpose Community Centres (MPCC's), it visited schools as well to issue Identity Documents and birth certificates. The Department has visited the deep rural areas where it was unable to erect the necessary infrastructure, and was using it's Mobile Units. At the beginning of this year these mobile units were not properly equipped, but the Department has approached Treasury and in 2004 the Department would be introducing approximately 67 mobile units. This would enable it to better reach out to the communities in the most rural of areas.

The Department also endeavoured to render its services to communities through the municipality and traditional leaders with which it enjoyed good a good working relationship.

Mr Fick stated that it was a factual situation that in the remote rural areas as well as in most marginalised urban areas, the services of the Department were extremely poor. The Department simply did not have the necessary spread of capacity and facilities to provide the kind of service it would like ot provide in those areas. This was made worse by the fact that it was in those areas in which the Department's services were most needed.

The Department was still suffering to a large extent from the legacy it had inherited in this regard. In the more rural provinces such as the Eastern Cape and Limpopo there was extremely poor departmental infrastructure as many of the offices did not even have water and electricity and, above all, they were not computerised. This made the provision of prompt service that much more difficult. The addressing of this situation was one of the major thrusts of the turnaround strategy, but it was an extremely costly exercise and one which would take some time to roll out.

Some of the immediate steps taken by the Department were to endeavour to share the provision of services with other organisations, wherever possible. In this regard the Department has received significant co-operation from traditional leaders and municipalities especially, and they have assisted the Department with the infrastructure needed in order to provide its services.

The Department was actively participating in the system of MPCC's. The Department has received an instruction from the Minister that it needed to provide services via these MPCC's in the areas in which the Department's services were currently thinly spread. The total roll out of such a plan was not an instant solution and did have all sorts of cost implications

Mr G Schneeman (ANC) [NA] stated that there were many people who still did not possess the necessary documentation needed to apply for Identity Documents, and this was an especially pertinent problem as the possession of a valid Identity Document was a needed in order to obtain permanent employment, Child Support Grants (CSG) and even pension. He asked the Department to explain its plans to ensure greater co-operation between itself and the Departments of Education and Health, to ensure that people receive valid Identity Documents.

Mr Fick responded that this was definitely the case. It must be remembered that, due to South Africa's history, the population registry was fragmented. This was exacerbated by the negative inclination towards personal registration processes in the past, and people were reluctant to register themselves. This remained a problem. The Identity Document campaign contributed largely to addressing the problem, but it was very difficult to state exactly how many South Africans were not documented at this stage.

The situation was unfortunately made more problematic by the fact that these very processes were major routes that were being used by illegal foreigners to fraudulently obtain South African citizenship. A major factor which contributed to this was the late registration of the births of South Africans. It was mind-boggling to come across the kinds of businesses that have emerged which assisted illegal foreigners by manufacturing false schooling and baptism certificates. The same applied to "marriages of convenience" that have become endemic, especially in certain areas of South Africa. Although the Department realised that these processes were drawn out, but there was no other alternative.

Ms M Malumise (ANC) [NA] asked whether the funding for the Lindela Detention Centre was provided solely by government.

Mr Nkambule replied that Lindela was currently dependent solely on the Department's vote, and did not have any independent funding.

Mr Nene sought clarity on the reasons for the slow progress made by the Department in upgrading its IT system, as this would surely assist in addressing some of the problems that faced the Department. He requested the Department to update Members on the implementation of the Home Affairs National Identification System (HANIS).

Mr Nkambule replied that HANIS was progressing very well and the Department was reaching its goal. The Department's IT platform was however not sufficiently robust and was thus unable to accommodate the demands of HANIS and other systems. The immediate challenge was to upgrade the IT system. The Department was relying mostly on other government departments for its IT needs, and it thus became difficult to roll out some of the Department's programmes because the running speed of the programmes were negligible. The upgrading of the Department's IT infrastructure was thus of paramount importance.

A Transaction Advisor had currently been appointed to evaluate the smart cards, and the report was expected in January 2004. This report would outline the direction that would have to be taken by the Department in providing this service, as to whether the Department should outsource this function or whether it should engage a Public Private Partnership (PPP) initiative.

Mr Fick stated that the Department currently had approximately 357 mobile units. The Department was very excited about the fact that Treasury had approved the acquisition of the 67 properly equipped mobile units, that were being designed professionally and would be fully mobile. They would even be linked electronically, so that services could be provided on the spot. This initiative was regarded as only the beginning of a major drive to roll out services in the rural communities especially.

Following the appointment of the new Director-General and the acceptance of the turnaround strategy, the Department recently held a major IT workshop. The focus fell on the integration of the processes and developments in the IT field, and this rationalisation would really enhance the capabilities and possibilities pertaining to the new systems. The HANIS System would create an integrated service console, which would provide every customer with on-line departmental services one of the Department's offices. The hope was to establish such consoled outside the Department as well, much like autobanks.

Mr Nene indicated that the Committee's records indicated that the Department had only spent 12,4% of its capital budget, and requested the Department to respond in writing as to the reasons for this.

Department of Health Submission
Mr G Muller, Department CFO, presented the Department's submission (document attached) which outlined the Department's Medium Term Expenditure Framework(MTEF), it's adjustment appropriation for 2003/2004, the Department's programmes which indirectly and directly benefit public health and the concerns of the Department. The submissions concluded that while the budgetary allocation to the Department might seem "rosy", the Department was faced with the challenge of insufficient allocation of resources needed to provide proper health care.

Mr Nene requested the Department to explain the "time horizons" it employed in compiling the figures indicated on the "Increased Workload" and "Ratio of health expenditure per uninsured person of provinces to lowest spending province" slides.

Mr Muller replied that the figures and time series quoted were based on the best available information currently available to the Department, and it was for this reason that the time series in the two slides were different.

Ms Malumise asked the Department it indicate the areas it has identified for the Black Economic Empowerment (BEE) programmes.

Mr Muller responded that the Department has eased its procurement conditions so that a larger band of people and suppliers could be utilised, which would enable it to make use of more and more BEE businesses to support both the Department's services and to supply services and goods across the whole health sector.

Ms Joan Fubbs, Chairperson of the Gauteng Province Standing Committee on Finance, sought clarity on the reason for the drop in the Department's expenditure during the 1999-2004 period.

Ms Matsau replied that this was a very valid issue. The fluctuations in the exchange rate were not that protracted enough that they could be used to explain budget consumption over a long period of time. The Department has made considerable efforts to increase public awareness of health not only as a commodity but also as a right, and it has increased access to health services considerably. This has had a very significant implication on the consumption of the budget.

The Department has opened up free services and has introduced services where there were previously no services at all, and this improvement of services has come at a price. She stated that the fact that the provision of services was improved, as well as the fact that seven million more people were now accessing primary health care services over the past eight years, was much more significant than the issues of currency fluctuations.

A second factor was that, as indicated in the submission, more and more South Africans were becoming gravely ill and the length of stay in hospitals was becoming longer. The gravity of their illnesses and the demands on the resources of the health system have grown considerably. This was due to factors such as poverty, unemployment and the advent of HIV/AIDS.

The fact that improved service and the provision of service to more people has contributed to the persistent budget decline.

Ms Fubbs stated that the catering costs for food provided in hospitals were not reviewed on an annual basis, and needed to be brought in line.

Mr Muller responded that it was true that there was concern that the depreciation in the currency would result in prices of equipment, food prices etc. going through the roof. He stated that the Department would simply have to be sharper and more aware in its contract management system. He assured Members that, in terms of the Department's procurement practices and contract conditions, the foreign currency adjustments were made timeously. This allowed the Department the advantage of paying lower prices, particularly regarding the purchase of equipment and prophylactics.

Ms Fubbs sought clarity on the major factor that influenced the massive increase in the funds spent on laboratory or technical-type services.

Mr Muller replied that since the National Health Laboratory Service has come into operation a much more efficient billing service was now available. In the past, to a large extent, there was some "underbilling" which had now been addressed.

Ms Mahlangu asked the Department to explain it's plans to retain administered prices within the inflation targets.

Mr Muller responded that these arose primarily with regard to the communication and IT type services. This also related to municipal services, because every hospital in some way consumed municipal services.

The Department had structures in place to ensure that the administrative prices it levied were not out of line, and these were scrutinised and benchmarked against the Consumer Price Index (CPI). The Medical Aid Industry has a reference price system which ensured that prices charged in that sector do not get out of hand.

The Chair stated that it appeared that departments in government's social services cluster were competing with each other, rather than integrating and focusing its efforts to effect service delivery. He requested the Department to explain its efforts to ensure this integrated approach.

Ms M Matsau, Acting Director General of the Department, responded that this was a crucial concern. During the mid-1990's when the issue of integration was addressed seriously and, at that stage, not only were the sectors competing but were actually duplicating services. This period was now firmly in the past, but it did involve a long process just to eradicate the duplication and establish individual service delivery. All government departments in the cluster have endeavoured to handle this process and sensitively and as effectively as possible.

The short answer was that it was true that there was some still competition, to some extent. But the competition indicated in the slides was not the focus of the Department's presentation, but was only aimed at highlighting the performance of the other sectors. It was true that integration had not been achieved, but the Department was working on it. The more recent developments have been in areas such as skills development, schools, youth behaviour, integrated nutrition and school-feeding programmes, and all these were previously multiplicated.

Mr L Zita (ANC) [NA] requested the Department to indicate the arguments advanced by Treasury over the years to justify the slow decline in health expenditure.

Mr Muller replied that Treasury has in general been quite accommodating in terms of the budget increases that have been received by the Department in the past. It must be remembered that did have a multitude of demands for funds and, although the Department has had problems in the past in motivating for the allocation of additional funds, in the end a compromise would be reached in most cases.

Mr Zita requested the Department to explain how demobilising it considered the current budget to be.

Mr Muller responded that the Department would be able to cope with its current allocation, although it would be difficult. The Department would have to try and ensure efficiencies wherever it can and, in some cases, services would not be able to be provided as soon as the Department would have liked them to be rolled out.

Mr I Cachalia (ANC) [NA] questioned whether the decrease in social developmental spending, as indicated in the submission, would not place extra burden on health services delivery. These competing demands were problematic.

The Acting Director-General answered in the affirmative. She stated that it was for this reason that she did not want the graphs to be viewed in terms of competition, but should rather be viewed as the developments taking place within the Department in comparison with its partners in the social services cluster. It was true that the Department did not begrudge the Department of Social Development for being allocated more funds, as they should be allocated more funds in view of the services it provides and its efforts to keep people away from health facilities.

The Department was of the view that unless that social net was covered and fully complemented by the requisite provision from the Department, it would not normally be very effective. In order to "close the net" all the major partners must be adequately resources, as a disparity was not beneficial and would not offer optimal protection for society.

Mr Muller stated that a maximum benefit from an investment in social health development would only be possible if the social services initiatives were to move in synchrony.

Mr Nene requested the Department to provide an written explanation of what exactly the additional allocation of R90m for HIV/AIDS would be spent on.

Department of Social Development Submission
Mr C Pakade, Department CFO, conducted the submission (document attached) which focused on the social assistance initiatives of the Department, and outlined the background to social assistance, the Department's policy priorities over the medium term, the beneficiaries of social assistance over the medium term and the challenges facing the Department is improving its social assistance service delivery.

Ms Fubbs asked whether the establishment of the Social Security Agency and the concomitant centralisation would not result in a reduction of administrative costs in the medium term.

Mr S Jehoma, Department Chief Director: Grants Administration, answered in the affirmative. The Department's business case rested on the fact that the Department currently spent about 7% of the total budget on operational costs. This was way above international benchmarks, which was set at about 2%. Yet a 2% figure would not be reached in the near future due to the extent to which the Department has to pay grants to people in the rural areas, and people were not generally making the move to banks. The Department did envisage a serious reduction in cost of operations.

Ms Fubbs sought clarity on the reasons for the largest increase in expenditure trends in the Western Cape, as indicated in the submission, which was certainly did not have the largest population.

Mr Jehoma responded that in the increase was pretty much inline with the evidence in the Census which indicated that migration to the Western Cape from other provinces. It was also stated almost as gospel that the Western Cape had a more efficient and effective administration system, and it was thus able to reach its beneficiaries much quicker with the roll out of any new grants or current grants. The Western Cape also had a much better infrastructure.

The Kwazulu-Natal figures were in line with the poverty indicators. A common factor to both the Kwazulu-Natal and Limpopo provinces was the fact that there used to be a huge gap between the eligible population and the take up rates. Over the last two years Treasury has made major adjustments to the model and the gap was closing rapidly in both provinces. In fact two years ago the Limpopo Province was unable to pay its beneficiaries for a period of six months, but this problem has been addressed. The backlogs have thus been worked away. These factors would explain the high growths.

Similar growths would have been expected in the Eastern Cape Province but, despite a huge budget allocated to it both during this year and the previous financial year, the capacity constraints appeared to impede that provinces ability to close that gap both for children under 7 as well as those under the new grant structure. While there has been an increase in the amounts allocated for grants there has not been a concomitant increase in the amount allocated for staff capacity. The Eastern Cape province also had a serious historical backlog, and the Department was currently looking into addressing this problem via the implementation of the Norms and Standards document.

Mr Pakade stated that if one considered what has happened within the Eastern Cape Department during 2003, it could be stated with confidence that that provincial department would definitely be on the same level as the Western Cape in the next financial year. The Eastern Cape province has been lagging behind in terms of its intake in numbers, especially the CSG, whose targets have been far below the accepted average.

For the first time that department was "fighting fierce fights" with its Treasury in 2003 around projected deficits because, with the intervention currently happening in that provincial department, there has been much collaboration and co-operation between social security and other components. They were interacting with stakeholders, driving the campaigns and the trend was really increasing rapidly.

Ms Fubbs suggested that the 2001 Census figures was really informing the MTEF period, in particular the social services figures. It was difficult to add up the more robust Census figures regarding the mortality rates of a specific age group, due to HIV/AIDS among other things. She asked whether the disability and old age grants were being referred to in the submission.

Ms Malumise requested the Department to explain whether it saw it fit to extend the CSG to children under the age of 18, especially with regard to the current legal definition of a "child".

Mr Jehoma responded that this was in part a difficult answer to explain from a political, policy and fiscal point of view. It was a wise decision to phase in the extension within the Department over a number of years. This kind of incremental approach was advisable.

Ms Malumise stated that she was pleased that the Department was taking active steps to guard against the grants fraud perpetrated by its own civil servants.

Secondly, Ms Malumise asked whether the Department had experienced any discrepancies in the application forms lodged for child grants in certain areas where, for example, families would fraudulently lodge different forms for the same child in order to receive grant money.

Mr Jehoma replied to these two questions by stating that all social security systems the world over were exposed to abuse, and the Department has established a bench mark in this regard. The corresponding government department in Australia currently dedicated 1 500 to deal exclusively with fraud, whereas the Department was unable to dedicate even 100 officials nationally to address that problem. Research conducted by the Australian government estimated leakages to be around 5%. The Department estimated its own leakage figures to be higher, because it did not have the necessary capacity to focus on this problem.

The Department was aware of the kinds of abuse mentioned by Ms Malumise. The Gauteng provincial department conducted door-to-door visits and discovered that children who were supposed to receive the grant were either non-existent or had become deceased. The Department was working constantly on this issue in a fraud prevention and detection strategy in collaboration with the Scorpions and other departments. This needed to be done constantly, and for that reason the capacity was really being increased in that area.

Mr Zita sought clarity on the costs involved for the establishment of the Social Security Agency.

Mr Jehoma responded that he could only give a rough figure of about R157m for Year 1, R134m for Year 2 and about R150m in the third year.

Mr Zita asked the Department to inform Members of the progress made in its poverty alleviation projects, and asked whether the Department was affording those projects sufficient attention. It also must be assured that poverty relief initiatives were located within the proper government departments.

Mr Pakade replied that there were two answers to this question: the first was that the Department was aware of the current challenge of the abnormal ratio between social security and other social welfare services. The position for so long has been that the budget had been split between the main three major spending agencies of the Health, Welfare and Education provincial departments, as against the other provincial departments. It was difficult to move on from this situation due to the fiscal constraints, because constitutional rights could not for example be taken away from Social Security simply because the equation needed to be balanced. Instead the system could be made more efficient by releasing some funds to be transferred to other services, or to gradually increase the other component as the Department planned ahead.

This has been a learning process for the Department in addressing the poverty alleviation and food security programmes. This would be borne out by the fact that, in the first two years of the poverty alleviation programme, there was gross underspending which resulted in a public outcry. The Department has since picked up several capacity problems, and it engaged that services of the Independent Development Trust (IDT) and other stakeholders to address this situation. There was thus a gradual improvement, but it would have to be monitored and managed over time rather than requesting Treasury to double the allocation when the Department would not be able to spend those funds.

The Department was currently looking at a new model for welfare, and a draft model was submitted to the heads of Departments at the end of October 2003 regarding the first attempt at the financing model for welfare services. This would include the remuneration of social workers, the funding on Non Governmental Organisations (NGO's) etc, and the Department believed that in the next budget cycle it would be able to present a very strong business case to Treasury. In fact, the Department could very well be challenged if it did not put this new model in place as it would play a large role in the realisation of socio-economic rights, because the Department has been very vulnerable in this area.

Mr Zita asked whether the Department had put sufficient monitoring mechanisms in place to ensure that the Child Car Grant money actually goes to the child it was supposed to benefit.

Mr Jehoma responded that, as indicated earlier with regard to Ms Malumise's questions, the Department has identified specific instances of abuse but the Department needed to do more. It has a monitoring unit which will now conduct a second KIDZ study for Kwazulu-Natal, and would perform a second round of impact monitoring on the difference that a grant payment makes to the lives of the children it benefited. The information received from the first study indicated that the need of the child was met to some extent through the grant, and the advantages in providing the grant outweighed the disadvantages inherent in not providing the grant.

Dr P Nel (NNP) [NCOP: Free State] asked whether the elimination of the pension medical officers meant that all medical certificates issued by the treating doctor would be accepted as completely correct, and whether this certificate would be scrutinised to ensure accuracy.

Mr Jehoma replied that all medical doctors were registered with the Department of Social Security or would be placed on the register together with their signatures, and the Department did have its own compliance units which would go through those signatures on a regular basis. The certificates were not simply taken at face value. The Department also conducted regular checks to identify doctors who handed out medical certificates "willy nilly".

Dr Nel asked whether the Department would require x-ray reports, laboratory reports or other special investigation reports to accompany the medical certificate.

Mr Jehoma responded that the Department did not require laboratory reports and other supporting information. The doctor would essentially be requested to indicate whether the person was physically or mentally able to engage in gainful employment. The Department has just completed a new tool, with the help of the Human Sciences Research Council (HSRC), which more rigorous and the doctors have already indicated that they were now required to ask too many questions to the patient. This new tool required the doctor to complete many detailed forms before the Department could accept the doctor's opinion as to whether that person was indeed eligible for a disability grant.

Ms N Tsheole (ANC) [NA] asked the Department to explain the extent to which allocation has been made for the training and capacity building programmes for social services and social workers themselves.

The Chair requested the Department to respond to that question in writing. He stated that both the IDASA and HSRC submissions would now be heard by the Committee, and a discussion would then follow on both submissions.

Human Sciences Research Council Submission
Dr M Altman, HSRC Executive Director: Employment & Economic Policy Research, presented the portion of the submission (document attached) that dealt with employment which outlined the rising unemployment rates across race groups, the employment figures per sector, whether government would meet its 2014 unemployment goal, alternative solutions to the unemployment problem and government's expenditure on Early Childhood Development (ECD) and HIV home care.

Dr I Woolard, HSRC Senior Research Specialist: Employment & Economic Policy Research, presented the portion of the submission which dealt with social security which outlined the average household access to wage income, the extent to which South African households rely entirely on grant funding, the social security spending patterns, statistics on delivery of the old age pension, CSG, disability and foster care grants.

The HSRC submission concluded that a balance struck between social security and employment imperatives could have serious budgetary implications in future, required job creation to meet employment targets could cost R10bn on an additive basis and the current social security structure would have to be reviewed and improved.

IDASA Submission
Dr S Govender, IDASA Programme Manager, presented the submission (document attached) which outlined the importance of using the national budget as a tool to alleviate poverty in the context of unemployment, revenue and growth trends in South Africa. The submission focused on the manners in which the MTBPS has contributed to poverty alleviation in 2003, which included increasing non-interest spending, priority given to service spending in sectors important to the poor. It also indicated that the challenges that arose in MTBPS in 2003 included HIV/AIDS spending, the provision of basic services, the Expended Public Works Programme (EPW) and the need for the rapid roll-out of the CSG programme.

Mr Zita asked the HSRC to explain what informed South Africa's current unemployment problem.

Dr Altman replied that she was extremely surprised at the results of the HSRC research in this field, because she assumed that the study would not produce the result for the private sector that it eventually did. The result showed that over 1 million jobs were created, and this was so unbelievable that the figures were queried and rechecked.

The legacy of unemployment arose from a variety of sources, one of which related to massive job loss in resource-based industries. These included the huge job losses experienced in the mining and agriculture industries, which took place over a very short period of time. Developing countries usually went through that process over a much longer period of time. Normally the structural adjustment process involved the move from primary industry, through secondary industry and to the tertiary industry. Yet South Africa, within a period of essentially four years, left from a primarily mining to a services economy and leap frogged over a labour intensive growth path in which people organically become absorbed into industry, which many other countries have undergone.

What has happened in South Africa was not that unusual, and did occur in many other economies with a similar structure in which the economy depended on high value mineral exports. Similar countries would include Latin America. In such economies there was typically a capital-intensive structure in the economy, and manufacturing would absorb people into the economy very slowly. The problem in South Africa was that approximately 1 million people lost their jobs over the 1990's, yet the economy was exhibiting very slow growth and the country had a very young population. The fact that South Africa had a very young population should have been a positive aspect from a social security point of view, but it was not in this particular case.

The problem was that a very large number of people had lost their jobs and there was at the same time a very slow uptake in the private sector, which could not provide a massive surge in labour intensive exports quickly enough.

Mr Zita asked the HSRC to indicate how many people would be absorbed into the economy if a skills match were to be done, and to what extent this would alleviate the current levels of unemployment.

Dr G Koornhof (ANC) [NA] asked IDASA and the HSRC to indicate whether it has identified the economic sectors in which the new jobs that were needed would be created.

Dr Altman responded to these questions by stating that the degradation of human resources has had a huge dampening effect on growth. It was generally recognised that the weak education system especially at tertiary level, was a problem and perhaps bursaries could be provided. The HSRC has begun work with the private sector to explore its role in matching skills. The studies conducted by the HSRC at certain institutions indicated that white graduates still did very well, while black graduates experienced significant problems in finding their first job and earned less money. This occurred in every area except engineering. The matching problem did not deal entirely with money as much had to do with basic behaviour, and dealt with the manner in which the labour market operated.

The skills matching would thus not necessarily solve the problem, but it was also incorrect to say it would not make a difference. But what exactly that difference would be, was only currently beginning to be identified. The HSRC had an employment scenarios process which was aimed at asking big policy questions, and this included questions such as how much of a difference it would make if every black matriculant were to be granted a bursary. This would allow the difference to be modelled over a period of time, but the figures were not available because the project was still very new.

Mr Zita stated that he was surprised that the HSRC did not propose land reform programmes as one of the interventions government to address the problem with unemployment.

Dr Altman replied that she was not an expert in this area, but the experts on this matter at HSRC who work with food security and agricultural development were of the view that land reform was not actually a solution. Their view was that South Africa did not have the large enough tracts of land needed to effect a successful land reform programme, because it only had small tracts of unirrigated land. It would thus probably make a difference from a small food security perspective, but the social grants would really make a much more significant impact on indigent households.

Dr Woolard stated that social security expenditure was already a rather large item in the budget, and certain funding choices would thus have to be made by government. It decided that the first port of call would be to address the vulnerable groups, which included children, people living with HIV/AIDS, the elderly and the disabled. The elderly and disabled were allocated grants because they had no other recourse as they clearly could not work. There was clear evidence that investment in the Child Support Grant (CSG) and early nutrition would have positive spinoffs for the economy in the long run. These were however hard choices that needed to be made.

Mr Zita asked the HSRC to indicate whether, in its opinion, the character of taxation in South Africa was progressive enough.

Dr Woolard replied that this was an under-researched area and no new studies have been done since approximately 1999. Some taxes were more progressive than others, such as the highly progressive personal income tax system as 5 or 6 million people were paying personal income tax out of a total population of 45 million South Africans. A large amount of tax revenue was thus coming from a very small group of employed people. Other taxes such as VAT and particularly excise duties were not nearly as progressive. This was clearly an area that needed more work.

Mr Zita asked whether the global debate about the end of work and the general decline of jobs was relevant to the South African context.

Dr Altman replied that she was very surprised to find that the private formal sector was growing in line with GDP. Although it was not sure whether it grow further in future it did indicate that South Africa was not at the end of work, except in so far as South Africa was entering into a global phenomenon which the jobs that were being created by and large yielded much less income for persons holding those jobs. The result was that the contribution to household welfare, knowing that wage income was one of the most important drivers of household income, was now adding less value than it used to.

She stated that 500 000 of the persons interviewed in compiling the figures provided in the submission do not actually earn any money, because only those persons who begged for money for a living were excluded from the definition of ''employed''. The figures could thus be misleading as they included people who did not earn money, but it did add up to about 500 000 of the total number of South Africans that were employed.

Dr Koornhof asked IDASA to indicate whether it had any idea of the current number of AIDS orphans in South Africa, and what this figure would grow to in the next four to five years.

Dr Woolard responded that the HSRC did not have figures on the number of AIDS orphans. The United Nations AIDS Programme had conducted some estimates and indicated that there might be as many as 500 000 AIDS orphans in South Africa by 2005. It was a very difficult thing to measure because orphans were by and large hard to identify in the first place, and attempts to quantify the number of AIDS would be even more difficult. The Department was attempting to establish a register of orphans in at least two provinces, and this would assist in identifying the location of orphans geographically and the kinds of households they were residing in. This was important because one of the biggest obstacles that faced a child living in a home that did not have any adult members was that that child could not access any grant funding, as there needed to be an adult caregiver who possessed a valid Identity Document. This was thus a focus of concern for the department.

Mr N Ndlovu, IDASA Researcher: HIV/AIDS, stated that he agreed with Dr Woolard that the exact figures were not certain, but it was clear that without the provision of Anti Retrovirals (ARV) the current number could be expected to decrease drastically. As ARV treatment would be rolled out from 2004, he was of the view that the current number of orphans would be reduced.

Dr P Rabie (DA) [NA] asked the HSRC to explain whether South Africa would be able to retain its current level of population growth if the current poverty dilemma was not addressed.

Dr Woolard responded that the population growth was slowing down to nearly zero yet the elderly population was growing by about 3,3%, which was incredibly high. The old age pensions would clearly have to funded out of a tax base which was focused on the younger age cohorts, which were in decline.

Ms Mahlangu asked IDASA to explain why it suggested that sufficient funds be allocated for the HIV/AIDS programmes through the provincial equitable share, when the submission indicated that its research showed that provinces did in fact not spend the funds on the purposes for which they were allocated.

Mr Ndlovu replied that IDASA had conducted much research on these two funding mechanisms, and IDASA would be launching its report on Friday 21 November 2003 which looked which of these two mechanisms were the most effective. Copies of that report could be made available to Members as of Monday 24 November 2003.

Ms Mahlangu requested Mr Ndlovu to inform the Committee during this meeting of the results of that report.

Mr Ndlovu responded that IDASA was of the view that there were advantages and disadvantages inherent in both mechanisms, but the disadvantages could somehow be dealt with. In the first two years in the provision of the national integrated plan for conditional grants for example, there was underspending, yet the expenditure figures for 2002 indicated that there was a significant improvement in spending on conditional grants. It was also understood that for the first time, in 2003, provinces had to address the problems with HIV/AIDS using the equitable share. There was under expenditure this year in that regard, but IDASA was of the view that if systems were put in place to ensure that those funds were tracked, the provinces would spend the money properly. Effort should also be made to ensure that provinces were aware of these funds because, in conducting its research, IDASA discovered that certain provincial departments were not even aware of the R1,1b that was allocated, and those that were aware did not have the necessary power to negotiate with the relevant provincial Treasuries to receive the funds.

IDASA was thus of the view that both mechanisms must be used, because conditional grants contained rules and regulations which ensured that the funds would be spent on the intended purpose. Yet the equitable share allocation could be spent on items that were not covered under the conditional grants, and provinces would thus be able to use the equitable share allocation if they were unable to spend the money on other projects that were not funded by the conditional grants.

Ms Mahlangu stated that her question was not being answered and she did not agree with the argument put forward by IDASA.

The Chair requested Ms Mahlangu to provide a written version of her question to IDASA so that it could apply its mind to the question and then in turn respond in writing to this Committee.

Ms Mahlangu requested IDASA to respond to a similar concern raised in its submission regarding its proposal that additional funds be granted to municipalities for the provision of basic services, because past experiences have shown that those municipalities that did not have a strong revenue base have used additional allocations intended for the provision of basic services to instead pay the salaries of municipal officials.

Dr Govender responded that this was not his area of expertise, but stated that the relevant portion in the IDASA submission referred to the equitable window which was part of the equitable share, but was not really the conditional grant. The question was thus whether that funding window would be used as a way out by local governments. IDASA raised for consideration was that there may be a complicated string of requirements and regulations that might be put into place in the conditional grant, which would in some cases make it much for difficult for local governments to cope within a highly complicated situation at that level.

IDASA contended that national government would have to seek more control and therefore move into the arena of micro-management to bring about more accountability, as this was one option which faced government. The other would be whether local government actually needed the kind of support and mechanisms to be put into place to be able to cope with the kinds of difficulties that they were encountering.

The Chair requested that Dr Govender refer this question to IDASA's experts on this matter, so that the question could be properly answered.

Dr Govender agreed.

Ms Tsheole stated that the HSRC submission indicated that the increase in unemployment was not due to private sector and that private sector in fact increased employment. The problem appeared to be that there were not people available to fill those jobs created by the private sector and, if this was the case, it could not be contended that sufficient people have been employed.

Secondly, Ms Tsheole asked the HSRC to indicate the extent to which the global trends regarding the relationship between the number of jobs that should be created by a government as against the private sector, and to provide its opinion on the extent to which government should create such jobs.

Dr Altman responded to these questions by stating that it was clearly not the role of government to be creating all of its shortfall jobs. But if it was a stated goal of government to reduce the unemployment rate, which it was, the HSRC was thus attempting to quantify exactly what that would mean. The submission presented a positive scenario under the shortfall it made reference to. Government's contribution to employment was quite small in South Africa, and contributed about 15% of the total employment. A country such as Sweden, because its government plays a large role in the drive to create employment, about 30% of the labour force worked in government structures. There was thus some form of social contract in which there would be a certain proportion of employment between government and the private sector, and this mechanism would then be one of that country's employment generators. Finland, Canada and all other mineral economies operated in the same manner, as it appeared that their governments assumed that their mineral economies would not create much employment and government would then have a role to play.

There was however much more know-how as to what the private sector could provide, and it must be remembered that the private sector here includes Community Based Organisations (CBO's), Non Governmental Organisations (NGO's) and not-for profit organisations. Social services do not therefore have to be rolled out by government departments, as these services could be provided by developing a large grouping of such organisations that were accredited and could provide a quality service. Their functioning would however have to be monitored.

The HSRC was of the view that the expansion of social services, especially around a para-professional workforce, would be a huge opportunity for job creation because of the need present in the market. The main source of growth over the last few years has taken place primarily in the service industry in the private sector, and currently accounted for about 65-70% of output and employment in the economy. South Africa could thus really be categorised as a services economy at the moment. Manufacturing has also been a source of growth over past years, but this did occur in small amounts and it was thus difficult to predict the future trends in that industry as much depended on the expanded exports, for example.

Ms J Streak, IDASA Senior Researcher: Children and Budgets, replied that the answer as to what exactly could be done by government to expedite the roll out of the CSG was that it would actually vary across the provinces. In some provinces the size of the allocation needed to be increased, because insufficient budgets have been undermining roll outs. In other provinces, and perhaps these two were linked, there might have been an allocation of an insufficient amount due to a fear of underspending of that allocation. In its submission IDASA aimed to highlight the need to provide a better understanding of the number of children that were currently eligible for the CSG, because this was important to allocate the appropriate amount of the resources.

She stated that if the Member asked what would have to be done to roll out the CSG to children who were not eligible at the moment, the decision would then rest with government to change its overall policy and IDASA would like to see this happen. As was mentioned earlier, it would also not be desirable to have a situation in which the overall policy was changed but government was unable to roll out the grant. Yet this appeared to be the current situation.

The meeting was adjourned.


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