Workshop: focus on core operations and functions of Productivity SA & Essential Services Commission; with Minister and Deputy Minister

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Employment and Labour

12 February 2021
Chairperson: Ms M Dunjwa (ANC)
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Meeting Summary

Video: PC on Employment and Labour, 12 February 2021

Members of the Portfolio Committee on Employment and Labour convened on a virtual platform for a two-day workshop aimed at enabling them to gain a deeper insight and understanding of the objectives and operations of Productivity South Africa and the Essential Services Commission (ESC).

After the Minister had opened the workshop with introductory comments, Productivity SA and the ESC made presentations covering their main spheres of operation.

Members suggested that Productivity SA needed to create more awareness of its work among the community, especially in rural areas. They asked if it was not duplicating activities, specifically those done by the Department of Public Enterprises (DPE), the Department of Small Businesses Development (DSBD) and the Department of Agriculture. Looking at productivity and growth performance trends, South Africa was not doing well, so what interventions did Productivity SA have to improve the current situation? The entity was also asked how best one should develop a balanced approach that would take into account localisation, because the case of the Russian economy proved that localisation was the cause of a stagnant economy, yet South Africa wanted to grow its economy.

Members asked what the ESC’s experience had been when they intervened in strikes? Had they told the trade unions and employers about the ‘do’s and don’ts’? How did the CCMA ensure that employers did not abuse the ESC when the employers were reluctant to meet the workers' demands?

The Deputy Minister advised the Committee that those in the funeral services were now designated as essential services, as stated by the Disaster Management Act.

 

Meeting report

The Chairperson welcomed the Members to their two-day workshop, which was intended to empower them. They should engage with the presentation and get to know more about the Productivity SA and the Essential Services Commission.

Minister’s introductory comments

Mr Thulas Nxesi, Minister of Employment and Labour, said there would never be stability in companies until the issues of workers were resolved. They may be those who welcomed the collective bargaining system, but they should be careful of what they were wishing for. It was this system that had provided relative stability in the labour market, as well as a dispute resolution mechanism. Rights such as the right to strike, to organise, to be represented and to negotiate salaries were basic rights that they had fought for.

He advised the Committee that people should not be shocked by the right to strike, as South Africa’s bargaining system could trace its origin from the legislation of the 1920s. The Labour Relations Act and Wage Act determined sector-related wage relations. These determinations were important, as they protected the low-paid workers -- farm workers, domestic servants, and those in the retail sector where workers were being exploited. The process of determination started with an investigation by the National Minimum Wage Commission into the conditions of the sector, which assessed the ability of employers to pay compensation, and then made a recommendation to the Minister who decide if it was legally enforceable.

The Department had a role to play in determining what the essential services were, in addition to the relevant legislation. There had to be limits to the right to strike so that no one was endangered, and this was spelled out clearly in the country’s legislation. He added that he had joined the workshop so that he could also learn and be empowered.

Productivity SA: Core Functions and Operations

Prof Mthunzi Mdwaba, Chairperson: Productivity SA, said South Africa’s overall productivity growth, which was a key driver of long-term competitiveness and economic performance, was low. With the decline in economic activity in 2020, this was expected to regress further during and beyond the COVID-19 pandemic. According to the recently released productivity statistics report for October 2020, SA had recorded a decline in productivity growth, with labour and capital Productivity registering a mild decline in 2019, while multi-factor Productivity recorded no growth in the same period. South Africa’s competitiveness ranking was 59 out of 63 countries – a regression in all of the four broad factors in competitiveness since 2010, when the country’s ranking was 40 out of 63, according to the International Institute for Management Development (IMD) World Competitive Yearbook (WCY) 2020. South Africa suffered from an under-skilled population, which was evident in its high unemployment rate, despite numerous job vacancies.

Previously known as the National Productivity Institute (NPI), it was formed in 1969 as a Section 21 company to promote and enhance productivity throughout South Africa. It had the expert authority to advise the Presidential Economic Advisory Council before 1994. Re-branded as Productivity South Africa (Productivity SA) in 2006/2007, it became a Schedule 3A public entity of the Department of Employment and Labour (DEL), established in terms of section 31 of the Employment Services Act, No. 4 of 2014. It was responsible for fulfilling the economic or social mandate of government, which was to promote employment growth and productivity, thereby contributing to South Africa's socio-economic development and competitiveness. Its vision was to lead and inspire a productive and competitive South Africa, and to improve productivity by diagnosing, advising, implementing, monitoring and evaluating solutions aimed at improving South Africa’s sustainable growth, development and employment through increased competitiveness.

The mandate of the DEL was to regulate the labour market through policies and programmes developed in consultation with social partners, which were aimed at:

  • Improved economic efficiency and productivity.
  • Creation of decent employment.
  • Promoting labour standards and fundamental rights at work.
  • Providing adequate social safety nets to protect vulnerable workers
  • Sound labor relations.
  • Eliminating inequality and discrimination in the workplace.
  • Enhancing occupational health.
  • Giving value to social dialogue in the formulation of sound and responsive legislation and policies to attain labour market flexibility for the competitiveness of enterprises, which was balanced by the promotion of decent employment

South Africa’s priorities for 2020 to 2025 include:

  • Priority 1: Economic transformation and job creation;
  • Priority 2: Education, skills and health;
  • Priority 3: Consolidating the social wage through reliable and quality basic services;
  • Priority 4: Spatial integration, human settlements and local government;
  • Priority 5: Social cohesion and safe communities;
  • Priority 6: A capable, ethical and developmental state; and
  • Priority 7: A better Africa and world.

The entity’s 2019/20 annual performance report had recorded a 100% achievement. Of the seven indicators reported, all were achieved.  It should be noted that since 2018, it had experienced funding challenges which resulted in the Board deciding to suspend the Turnaround Solutions (TAS) programme -- renamed the Business Turnaround and Recovery (BT&R) programme -- which decision was regrettable given the scale of retrenchments and job losses.

The funding challenges for the BT&R programme had been resolved with the allocation of R104m in the 2020/21 financial year.

Productivity SA’s highlights and key achievements were:

  • Developed a draft productivity module in collaboration with Business Unity South Africa (BUSA) and the Commission for Conciliation, Mediation and Arbitration (CCMA) as part of the BUSA/CCMA web tool to assist small businesses.
  • Continued participating in the Presidential Jobs Summit initiatives to implement interventions to preserve jobs and mitigate the retrenchment of workers, despite the suspension of the TAS programme.
  • Implementation of the International Labour Organisation’s (ILO’s) global Sustaining Competitive and Responsible Enterprises (SCORE) programme in the clothing and textile sector.
  • Signed a memorandum of understanding (MOU) with the ILO to advance inclusive growth and create an environment for entrepreneurship and sustainable enterprises.
  • A single adjudication committee for the Temporary Employer-Employee Relief Scheme (TERS) was in operation, and had recommended 22 enterprises with 4 101 employees, with the value of R145.2 million, for accessing benefits through the scheme.

Productivity awards were launched 42 years ago, in 1979, and were aimed at heightening awareness of the importance of productivity. They recognised enterprises that had shown productivity growth, employment growth, wealth and income growth, as well as social responsibility. It brought the Productivity SA slogan of “inspiring a competitive South Africa” to life. The awards were conferred in the categories of the emerging sector, co-operatives, the public sector and the corporate sector. The provincial winners vied for the top honors at the National Productivity Awards gala dinner, which was held in October annually as part of Productivity Month.

Productivity SA would contribute mainly to the following medium-term strategic framework (MTSF) priorities:

  • Priority 1: Economic transformation and job creation.
  • Priority 6: A capable, ethical and developmental state.

Among the key government interventions were to improve South Africa's ranking in the World Economic Forum’s (WEF’s) Global Competitiveness Index (GCI), with from 67th to 60th by 2024, and to contribute to the implementation of the reconstruction and recovery plan with a focus on industrialisation and localisation.

 Productivity SA had learned from the most competitive countries that economies that brought everyone together, investing in re-skilling the workforce and boosting infrastructure, would be best able to withstand global economic crises and/or recover quickly from the consequence of the COVID-19 crisis. These countries integrate productivity growth and competitiveness into their economic recovery policies and plans. The plans focus on boosting productivity in a focused and targeted manner, with clear and measurable productivity and competitiveness targets and outcomes, and ensure that the set outcomes are closely monitored, and the impact evaluated.

For South Africa to address its low productivity growth, competitiveness and economic performance, it should develop a national productivity-enhancing policy and strategy, and foster policy cohesion to expand the productive assets in its economy. The main thrust of the productivity and competitiveness framework should be the recognition of the vital role of productivity in promoting economic growth, employment creation, global competitiveness, improvement in standards of living, and overall national development and prosperity. The government should be committed to creating an environment conducive for entrepreneurship and sustainable enterprises, by assisting them to improve their innovation capacity and expertise through sector-specific productivity improvement master plans and stronger cross-sector support capacity. Its interventions and plans should highlight the need for productivity to be addressed holistically at all levels (national, sector, and enterprise) to ensure a systemic change across the economy, which was a departure from previous fragmented efforts to raise productivity.

South Africa should promote a productivity culture, and accountability for it, across all sectors and levels (national, sector, and enterprise-level). It should also invest in the skills of its people and in an environment where all firms, particularly small, medium and micro enterprises (SMMEs) across priority economic sectors have a chance to succeed. The interventions should support the sector master plans developed by the Department of Trade, Industry and Competition (DTIC). Subject experts on productivity were required to support the sector master plans and strategies. This approach had proven to be successful in countries like Singapore which had introduced industry transformation roadmaps. The one element that would boost South Africa into an enhanced economic recovery based on strategic and structured interventions was productivity growth, the outcome of which was sustained competitiveness and economic growth.

Discussion

Ms C Mkhonto (EFF) said that the presentation had been informative. She commented that very few people know about Productivity SA and its work and emphasised the need to do community awareness sessions, especially in rural areas, and to have people such as the Indunas know about it and its work so that they could inform their communities. She asked if it was not duplicating activities, specifically those done by the Department of Public Enterprises (DPE), the Department of Small Businesses Development (DSBD) and the Department of Agriculture. It had said it was busy with monitoring and evaluation, and after evaluation where could one get its report -- did the entity have a website? It had been right to say that when it came to employment creation, the country had failed dismally because from the information the Committee received from Stats SA, it was not looking good. Had Productivity SA ever checked what impact the tender system had in undermining all the things it was advocating? She had a strong feeling that the tender system had a hand in undermining all they had mentioned, as it fuelled corruption.

Dr N Nkabane (ANC) commended the entity for a comprehensive presentation and said that it had touched on all the substantive issues. She thanked it for simplifying the concept of productivity. It had listed some of the challenges it was facing and the requirements, as well as the recommendations for it to execute its responsibilities. She questioned whether its strategic objectives were SMART (Specific, Measurable, Achievable, Relevant and Time-bound) enough, and said one needed to check whether all the product definitions were linked to the country’s strategic objectives.

Looking at the productivity and growth performance trend, South Africa was not doing well. What were the interventions that Productivity SA had to improve the current situation? She also asked how best one should develop a balanced approach that would take into account localisation, because the case of the Russian economy proved that localisation was the cause of a stagnant economy, yet South Africa wanted to grow its economy.

Dr Nkabane also asked Productivity SA what they were doing to use information communication technology (ICT) to create jobs and grow the economy. On slide 10, which focused on its vision and mission, did the entity have enterprises from rural areas and townships that were led by the youth and women, and how was the entity advising and doing capacity building to be able to compete with global markets?

Mr S Mdabe (ANC) noted that before the new Productivity SA, how was the Productivity institute performing in relation to what it had been established for. He had raised this issue before and would repeat it today. One had an entity of government that had more power and resources to prevent what had happened in the state-owned enterprises (SOEs). Was there a forum of chairpersons of these SOEs where they shared experiences on such issues? This issue required a strategic intervention.

In informal economy, especially in black-majority areas of the country, there was an understanding that the mandate of Productivity SA did not include informal economy, so how were they going to help this sector? The strategic partnerships state that the entity is participating in the District Development Model (DDM) -- what was the strategy of partnering with Productivity SA and municipal entities as part of the economic initiatives?

The Chairperson asked how Productivity SA could work with the government or cooperate with other government entities and departments. The public sector had to be productive within the ambit of a developmental state. She wanted to thank the entity for reminding them that SA suffered from a skills shortage, and she would have loved it to have added that this was due to the educational system. They should be calling post-lockdown for this to be addressed. Had Productivity SA talked with the Departments of Higher Education and Training (DHET) and Basic Education (DBE) on the skills that were needed so that the country’s children could be trained in those skills? Have it looked into how it could go into high schools to check if they were being trained with the requisite technical skills needed by the country? She also observed that retention of skills, as well as the creation of jobs, was what was challenging South Africa.

Productivity SA’s response

Prof Mdwaba commented that the areas and examples they had listed in the presentation were just a sample of what Productivity SA did, as the presentation had been condensed so that it was not too long. He wanted all of the Members to be in a “productivity revolution” and be productivity ambassadors. This was a responsible revolution, he argued. There was a need to change the world.

He conceded that very few people know about Productivity SA, which was one of the challenges it was trying to address, to make sure it increased its visibility. It had resource constraints, and there was a need for people to know what it was before it went into communities.

He said they were not duplicating activities, as there was just a little nuance in their approach. All the departments should all work with them. Productivity was not a thing of labour, but labour was just a custodian of the entity. As Productivity SA, they diagnosed, advised and implemented, and they do this by monitoring and evaluation.

Referring to the Rand Water project, Productivity SA was asked to stay and finish the task while KPMG was sent away. This was enough proof to show how important the entity was. All those organisations like KPMG and Deloitte would come to Productivity SA and take its information and package it nicely as their own. Productivity SA was very capable.

They had not done and analysis on the tender system, but in the presentation one of the things referred to was its work on the issue of certification, and coming up with a model company to promote product quality and deliver the product on time and at a lesser cost.

Productivity SA had a website which covers a lot of issues, and he encouraged Members to visit it.

Comparing the National Productivity Institute vs. Productivity SA, he said the NPI had the full support of the government of the day. It was wired in the sense that they were on the side of the employer, and that was why workers had a negative attitude towards it. Productivity SA was different and transformative. It was focused on job creation and preservation. It was also working with local government and in the provinces, it was funding rural economies. It had signed an agreement with a KwaZulu-Natal company to also do some of this work in KZN. It wanted all provinces to be on board, and this one partnership was critical. It was focused on the District Development Models to make sure it supported all communities. It was spreading its services gradually, and hoped to implement them fully over time.

Prof Mdwaba said Productivity SA appreciated Members’ understanding of what it was going through and the support it needed to be very effective. In the presentation, they could see all four core strategic objectives, which were key performance indicators that showed the “smartness” of its objectives as an entity.

Responding to questions on SMMEs, he said Productivity SA did embrace companies that were comprised of the youth and rural women. They had assisted over 25 000, and most of them were coming from cooperatives that had a link with rural areas and townships.

Regarding South African Airways (SAA), it had tried to get in but the doors had been closed, and it was sad that an entity of government that was led up to the highest level by people with expertise could just fail like that. Productivity SA had some qualified people who could have rescued SAA. It had approached SAA with the former CEO, who was working with them till decided not to come. However, if one was to go to Mango Airline, one would see they had worked with them and it had worked.

The entity was working with the education departments, and they had shown an interest in working with them. They had a partnership with the University of the Western Cape and Tshwane University, where they were working on giving productivity skills. The country had to do a lot to change attitudes so that vocational and university institutions both had the same status, to ensure there was no stigmatization.

Ms Boitumelo Moloi, Deputy Minister of Employment and Labour, thanked Productivity SA and Prof Mdwaba for being patriotic and passionate about South Africa. She said Prof Mdwaba had been nominated for the position of Vice President of the ILO, and this was a first for Africa in over 100 years. The entity was led by able men and women, and she encouraged the Members to embrace it. The Committee needed to look at the founding documents of Productivity SA, as a lot had changed, and there was a need to re-look at it, as it contributed immensely to the economy.

Essential Services Commission (ESC)

Mr Cameron Morajane, Director: CCMA, said he had been motivated by what the Deputy Minister had said about an entity not losing touch with its founding documents, and had found that appealing.

The Essential Service Commission (ESC) was a committee established by the Minister, in line with the Labor Relations Act. Before the amendment of 2015, the committee had just a chairperson and two members of the social partner but after the amendment, a deputy chairperson was added. The jurisdiction of the ESC was with the government, and it operated throughout the country.  CCMA director had been appointed as the accounting officer of the ESC, and they had worked well together. The ESC also had regulations.

Mr Morajane said that one major problem one encountered with the ESC was not to understand it in terms of the culture and environment in which they were operating. It was not established by the CCMA, but by a statute. Unless one fully appreciated its environment, it was difficult to judge its effectiveness, and anyone who did this would misdiagnose it. The ESC’s powers were limited, but it was the framework of the law that guided how far it could go. There were contradicting laws that needed a statutory and a policy solution. They were ensuring that the dispute resolution mechanism of the CCMA should also be in tandem with the dispute resolution of the ESC.

Discussion

The Chairperson asked about the support services in the health sector, and which of those they were classifying as support services. When they said there was no consequence management, who was to take responsibility in terms of unprotected strikes? What had been the ESC’s experience when they intervened in strikes? Had they told trade unions and employers about the ‘do’s and don’ts’?

Ms Mkhonto asked how the CCMA ensured that employers did not abuse the ESC when they became reluctant to meet the workers' demands. If the CCMA gave a ruling against employers, and they did not implement it, the workers were left stranded. This needed to be discussed beyond this meeting. Were those in the funeral services also classified as essential services?

ESC’s response

The ESC responded on the support services, and said the other areas they were mentioning as part of the list were catering, security, reception staff, pharmaceutical, forensic, laundry and hospital engineering. They had a mentoring and evaluation tool that they used to check on what to do when a similar incident happened. Some of the parties knew they should have a minimum service agreement if they were to strike in an essential service. The ESC had realised that in most cases, the employer would be on the wrong side.

Deputy Minister Moloi added that those in the funeral services were now designated as essential services, as stated by the Disaster Management Act. On the reluctance of employers to implement rulings, the employees were not left without a remedy when there was a minimum service agreement. This gave them a chance to put pressure on the employer. Employees also had a right to send the matter to an independent arbitrator if they reached a stalemate.

The Chairperson thanked the Members for attending the workshop, and advised them to meet again the following day for their last session.

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