Compensation Fund Audit Action Plan; DEL Quarter 1 2021/22 Performance

Meeting report

The Chairperson accepted the apology of the Minister who was attending a Cabinet meeting, and invited Deputy Minister of Employment and Labour to make opening remarks.

Opening remarks by the Deputy Minister
Deputy Minister Ms Boitumelo Moloi said that the Department of Employment and Labour (DEL) welcomed the Committee’s scrutiny of the Department and its entities. The Compensation Fund would present its audit action plan to address the causes of its recent disclaimer audit opinion. She noted that a plan was only as good as its implementation, so the presentation would report on progress made toward stated targets. The plan was firmly based on the findings of the Auditor-General of South Africa (AGSA), which had worked closely with DEL and Compensation Fund in its development and had recently acknowledged the cooperation of the DEL. AGSA was not just a financial policeman but also a mentor and advisor to public entities. The Department itself, meanwhile, had achieved incremental quarter-on-quarter improvements in its performance since the disastrous Quarter 1 of 2020/21. She reported that the Minister was currently presenting the draft National Labour Migration Policy (NLMP) to Cabinet.

Department of Employment and Labour (DEL) 2021/22 Quarter 1 Performance
Ms Marsha Bronkhorst, Chief Operating Officer (COO), DEL, reported that the Department had achieved 16 out of 22 performance targets. The Administration programme had achieved 5 out of 7 targets, Inspections and Enforcement Services (IES) 1 out of 4, Public Employment Services (PES) 5 out of 5 and Labour Policy and Industrial Relations (LP&IR) 5 out of 6 targets. She disaggregated the performance indicators by province and explained that PES had been shown to have achieved 100% of its targets despite the fact that it had achieved less than 100% in some provinces because other provinces had over-achieved. She provided further detail of the performance on each target per programme (see document). She noted the Department’s performance improvements over the previous two years but added that COVID-19 continued to hamper its work. The presentation on PES included considerable detail on demographic indicators and an action plan for the NLMP.

Discussion
Ms C Mkhonto (EFF) accepted that the Department was experiencing challenges and welcomed the improvements but maintained that its performance was still not quite good enough, particularly in the IES programme. She observed that the NLMP was of considerable public interest and that the Portfolio Committee was eagerly waiting to take it forward. DEL was advocating for the vaccination of labour inspectors against COVID-19 and she asked how much progress had been made. She asked for a clear programme for the Department’s “mega-blitz” inspection campaigns around the country such as the one in the hospitality industry. How many workplaces would be targeted?

Mr S Mdabe (ANC) said that the poor IES performance in Gauteng, Kwazulu-Natal and Western Cape which were the economic heart of the country, was cause for concern. He drew attention to slide 22 of the presentation where over 12 000 workplaces had been found to be non-compliant with employment law. Given the magnitude of the challenges facing the nation, DEL had a responsibility to ensure that people had confidence the state could ensure that their employment was consistent with the law. What had been done about these 12 000 workplaces? Social media was rife with complaints from the public. How best could DEL address these complaints and improve? At labour centres, people were exposed to harsh environmental conditions while they queued for services.

The Chairperson asked DEL to provide a breakdown of work placements according to economic sector, and if DEL had partnerships with Technical and Vocational Education and Training (TVET) colleges in particular and with the Department of Higher Education and Training (DHET). The government needed to put an end to its silo mentality. She recalled that in the 2019 State of the Nation Address the President had called for an end to experience requirements for entry-level public sector jobs. The government would be rightly accused of being toothless and incapable if it did not put this call into action. Had DEL done anything to implement it? She shared Mr Mdabe’s concern about non-compliant workplaces, and asked for clarity about DEL’s use of technology in connection with these workplaces. There was a partnership between labour, government, employers and community in the form of the National Economic Development and Labour Council (NEDLAC), and she found it hard to accept that workers and their employers were not coming together to address workplace problems such as insufficient health and safety measures. It was hard for government to intervene because it was not present on the factory floor. Workers and employers needed to sort things out between themselves.

Department response
Mr Thobile Lamati, DEL Director-General, said that DEL was asking Cabinet to allow it to begin public consultations on the NLMP, after which it would be discussed by the NEDLAC social partners. He confirmed that DEL advocated the vaccination of labour inspectors but that as a government department it had to follow the guidance of the Department of Public Service and Administration (DPSA), according to which vaccination was not mandatory. The Department did however encourage all officials to vaccinate themselves, and it hoped that recent rulings by the Council For Conciliation, Mediation and Arbitration (CCMA), which had found that employers may dismiss employees who refused to vaccinate themselves, would help the DPSA to develop its vaccination guidelines. He noted that labour centres had always had to deal with long queues but until COVID-19 the queues had been manageable. The present challenges had been caused by the backlog of people visiting labour centres after COVID-19 restrictions. The Department was developing a plan to address the problem and would share it with the Committee when the time was right. Lots had been done in December 2021 but some landlords were making it difficult for labour centres to provide extra shelter and emergency water supplies. Citizens sometimes wrote directly to the Minister, Deputy Minister and Director-General instead of approaching a labour centre. These matters had to be prioritised, to the disadvantage of the people queuing at labour centres, so he appealed to the public to approach a labour centre instead.

Mr Lamati drew attention to slide 58 where work placements were disaggregated according to economic sector. DEL had a good relationship with DHET and some TVET colleges, although there was still room for improvement. DEL was working with DHET to provide jobs for graduates, including from TVET colleges. He shared the view that experience requirements for entry-level government jobs should be relaxed and it was the policy of DEL that entry-level positions could only demand experience if they were in specialised areas of work such as occupational health and safety. There had been no relaxation of qualification requirements, however.

Ms Aggy Moiloa, DEL Deputy Director-General: IES, explained that inspection “mega-blitzes” were a long-standing component of the DEL strategy. They were conducted by national teams in local areas. This was done to pool resources and short-circuit the overfamiliarity that sometimes emerged between local inspectors and workplaces. A recent “mega-blitz” in November 2021 had targeted the road freight and logistics sector in the Eastern Cape. 67 workplace inspections and two roadblocks had been carried out. In the Western Cape, around 900 workplaces in the hospitality sector had been inspected. The next “mega-blitz” would take place from 7-11 February in Kwazulu-Natal and would target various sectors.

Ms Moiloa acknowledged that the IES target achievement of 25% was a cause for concern, but observed that the lockdowns in 2020 and 2021 had severely hampered the work of inspectors, and there had also been a high vacancy rate. DEL had introduced an electronic system to process its paperwork, and it was expected to increase efficiency. The Department had issued notices to the 12 598 non-compliant workplaces. Over 500 of those had remained non-compliant thereafter and had been referred for prosecution. The use of technology here referred to how DEL was trying to make the prosecution process less cumbersome such as avoiding the need to supply hard copies of documents to prosecuting authorities.

Ms Bronkhorst agreed that the performance of labour centres was a concern but it was easy to forget that, as workplaces themselves, they were also bound by COVID-19 protocols. These protocols had required them to be shut down regularly when cases were detected, leading to backlogs. There had also been a backlog in processing online applications for unemployment insurance benefits, but this backlog had been worked off after responsibility had been devolved to provinces. The situation was far from ideal, but staff were working very hard and DEL was doing what it could in difficult circumstances.

The Chairperson acknowledged the difficulties but said that it was not fair to suggest that the Committee had forgotten that labour centres were workplaces. The Committee was aware of the challenges, and accepted that officials were doing their best, but this did not mean that problems could be overlooked.

Mr Lamati accepted the point and assured the Chairperson that no disrespect had been intended. In response to the Chairperson’s earlier comments on health and safety measures in the workplace, he noted that during COVID-19, organised labour revived health and safety committees, required by the Occupational Health and Safety Act (OHSA) Act, that had become dysfunctional. In some cases, health and safety officials without the relevant qualifications had been appointed, in violation of the Act. The Compensation Fund Report had revealed that neither employers nor employees were doing enough to prevent health and safety incidents. The Department was currently amending the OHSA to enable employees to leave a workplace that did not comply with safety legislation. Through its Industrial Action Report DEL had also found that engagements between employers and employees were often undertaken seemingly for their own sake, rather than for the sake of resolving an issue. For example, organised labour would demand a wage increase of 5%, the employer would refuse, and a strike would be carried out, after which 4% or 5% or even 6% would be accepted. This raised the question of why the matter could not have been resolved without a strike. Without a social compact at workplaces, there would be no social compact in the nation as a whole.

Compensation Fund Clean Audit Action Plan Progress Report
Mr Thobile Lamati, DEL Director-General, said that one of the ways in which the Compensation Fund aimed to address its disclaimer audit findings was to increase its finance capacity. Challenges remained but DEL was optimistic that many would soon be resolved. He asked the Compensation Commissioner to present the report.

Mr Vuyo Mafata, Compensation Commissioner, explained that the Compensation Fund’s Clean Audit Action Plan addressed the key focus areas that had contributed to disclaimed audit opinions over a period of years. Of the 169 planned actions due by 31 December 2021, 138 had been completed, and 12 further actions were due by 31 March 2022. The presentation covered the complete and incomplete actions across 11 focus areas (see document):
A: Revenue and receivables from non-exchange transactions
B: Benefits
C: Provision for outstanding claims
D: Payables from non-exchange transactions
E: Consolidation of investment in associates
F: Investment in financial assets and associates
G: Prior period years
H: Contingencies
I: Irregular, fruitless and wasteful expenditure
J: Other important matters and administrative matters
K: Key considerations for improvement in the control environment

Discussion
Ms H Denner (FF+) drew attention to General Notice 615 in the Government Gazette of 19 October 2021 according to which the Compensation Fund was implementing an Account Verification System (AVS) to verify beneficiary bank accounts prior to the payment of benefits. There had been a call for public submissions on the system. How many submissions had been received and how much progress had the Compensation Fund made in vetting them? When could the Portfolio Committee expect a report on the matter? The Committee had received a letter about the AVS from Mr Gideon Nkadimeng, the company chairperson of COIDLink which provides compensation claim processing services to medical service providers. When would this letter be discussed by the Committee?

Ms Denner noted that the Compensation Fund still had outstanding employee relations cases. How many were there and when would they be finalised?

Ms Mkhonto asked when the 31 outstanding audit actions due by 31 December 2021 would be completed. The presentation had been unclear why these actions had not been completed on time. She hoped that the audit action plan would successfully address the audit findings, in particular the R86m irregular, fruitless and wasteful expenditure. The finance misconduct committee was going to be reconstructed. Who was to be responsible for this? The Compensation Fund could not be a referee and a player in financial misconduct matters. This committee should not be biased.

Dr M Cardo (DA) asked about the relationship between the Compensation Fund and the Public Investment Corporation (PIC). Why was it necessary to have prior notice of impairments, and how much did the Compensation Fund have invested in the PIC?

Compensation Fund response
Commissioner Mafata reported that the AVS had already been implemented. The notice Ms Denner referred to dealt with the attempt to ensure payments reached the beneficiaries by minimising exceptions that had to be processed manually and to prevent fraud and payment interception. The Compensation Fund was studying the feedback it had received, which included two substantive submissions from third-party service providers whose business had been affected. He expected that this would be completed by the end of February.

Commissioner Mafata explained that the reconstruction of the financial misconduct committee was intended to address exactly the problem Ms Mkhonto had identified. Its members would be appointed by the Director-General and they would be able to make recommendations objectively about cases.

Commissioner Mafata stressed that the Compensation Fund invested on behalf of workers. It was important to find out if an asset that it was thinking of investing in was impaired, so that it could ask the PIC to intervene proactively.

Mr Linda Kotta, Acting Chief Director: Practical Management, Compensation Fund, stated that as at 31 March 2021 the Compensation Fund had R80.5bn invested in the PIC, and as at 31 December 2021 it had around R85bn.

Ms Milly Ruiters, Chief Director: Medical Benefits, Compensation Fund, replied that the Compensation Fund had received 75 submissions on the AVS system and it was currently working through them with the assistance of Legal Services.

Ms Silindile Mhlungu, Director: Organisational Effectiveness, Compensation Fund, replied that five disciplinary cases were still outstanding. They would be finalised by the end of March 2022.

The Chairperson recalled that Mr Nkadimeng of COIDLink had questioned the processes in General Notice 615 and the Compensation for Occupational Injuries and Diseases Amendment Bill. Since the Portfolio Committee had adopted the Bill, its responsibility was now to refer the matter to the National Council of Provinces (NCOP), which would be holding public hearings on the Bill from 22 February 2022.

Mr Lamati replied that the Compensation Fund welcomed public comments on the changes it was implementing. However, it would not compromise the fundamental principle that the changes had been necessitated by the audit findings of the Auditor-General – even if this meant that certain stakeholders that transacted with the Fund were affected. The changes were being made for the benefit of the organisation itself and the people it served, not for the benefit of third-party service providers.

Committee Programme
The Chairperson recalled that the Committee had asked DEL for a briefing on the Employment part of its mandate. The Ministry had requested time to prepare the briefing and the date of the briefing would be 23 April 2022, and this date was set in stone. She noted that the oversight visit to Supported Employment Enterpises (SEE) workplaces from 28 March to 1 April would go ahead, pending approval from the Chief Whip and House Chairperson. The two sites were in East London and Gqeberha.

Ms Mkhonto recalled that the Committee had also discussed oversight to labour centres. She suggested choosing centres to visit based on complaints the Committee had received.

The Chairperson replied that the Committee would visit labour centres in East London and Gqeberha at the same time as it visited the SEE workplaces.

The Committee Programme was adopted and the meeting adjourned.