A complaint was raised during the NCOP public participation on the COID Amendment Bill that the Compensation Commissioner had published draft regulations on 19 October 2021 that reinstated through regulations the purpose of Clause 43 which the Portfolio Committee had rejected on 31 August 2021 when it voted on the Bill. Clause 43 wanted to prohibit the cession of medical invoices by medical service providers to third-party administrators. The Portfolio Committee had amended this to permit third-party administrators.
The Compensation Commissioner indicated that over the last 10 years, its internal controls had been found ineffective by the Auditor General which resulted in audit disclaimers. Therefore, the Fund has developed a new claims management system with the implementation of the Account Verification System (AVS). This is an integrated interface with banks for real-time processing of bank account details of individuals, employers, employees and medical service providers.
Committee Members asked if there were any contradictions between what is now in the COIDA Bill and these regulations. If the Bill was passed, would it have an impact on the gazetted regulations? What impact will these regulations have on medical service providers and pre-funders in future? Has the Commissioner undertaken a study of how the regulations will impact business, especially job losses? Why the banking regulations were necessary if third parties would still be able to register with the Fund according to the COIDA Bill currently in Parliament. Had a cost-benefit analysis been done for the AVS implementation. A request was made for the amount paid to incorrect beneficiaries by the Fund for the past three years.
The Department of Employment and Labour had an overall performance of 66% in 2020/21 with an underspend of 5.9% and it received an unqualified audit opinion from the Auditor-General.
The Supported Employment Enterprises sale of goods nose-dived due to the impact of COVID-19.
The National Labour Migration Policy aims to allow safe, orderly and regular migration for employment of highly skilled, semi-skilled, and low-skilled workers to and from South Africa in pursuit of the country's priorities. The Policy and the accompanying Employment Services Amendment Bill were out for public comment.
Committee Members questioned if the policy met constitutional muster and the obligations set by international conventions; attitudes of other countries to this policy and to South Africans working elsewhere; and if critical skills will come if this policy is in place. The concern was the policy sparking xenophobia in the country due to employment quotas.
The Committee adopted its Committee Reports on the adoption of both the Employment Equity Amendment Bill [B14B 2020] without amendment and the COIDA Bill with proposed amendments.
The Chairperson indicated that the Committee received a complaint during the public hearings on the COID Amendment Bill about the Compensation Commissioner publishing regulations in the Government Gazette. The complaint stated that the regulations were undermining the COIDA Bill, especially the amendment made by the Portfolio Committee. The Select Committee had decided in a resolution to allow the Compensation Fund to respond to the matter. The Parliamentary Legal Advisor had advised the Committee on the matter.
Mr Vuyo Mafata, Compensation Commissioner, said that over the last ten years, the Compensation Fund’s internal control environment has been found ineffective by the Auditor-General of South Arica (AGSA) which has resulted in disclaimed audit opinions. These weaknesses in internal controls have also led to opportunities for fraud where money gets diverted to fraudulent bank accounts. To respond to these challenges, the Fund has developed a new claims management system with adequate systems for internal control including the implementation of the Account Verification System (AVS). The AVS is an integrated interface with banks for real-time processing of bank account details of individuals, employers, employees, and medical service providers.
Mr Mafata said that the notice was issued by the Compensation Commissioner in terms of Section 6A(b) of the Compensation for Occupational Injuries and Diseases Act in the Government Gazette on 19 October 2021 requesting comments from the stakeholders on the implementation and enforcement of the bank verification process. The interested and affected parties were given 60 days to comment on the regulations that the Fund intended paying funds directly into the beneficiary bank account and the public comments are being evaluated by the Legal and Claims teams with further consultations where necessary.
Mr T Apleni (EFF, Eastern Cape) asked the Commissioner of the Compensation Fund to use simpler terms to explain the presentation. Has the Commissioner undertaken a study on how the regulations will impact business, especially job losses.
Ms H Boshoff (DA, Mpumalanga) asked why the banking regulations were not introduced as part of the COIDA Bill.
She did not think that there was a problem with the verification of banking details. However, the problem is that a lot of documentation is required by the Compensation Fund to change or register a bank account with the Fund. Therefore, she asked why the banking regulations were necessary if third parties would still be able to register with the Fund according to the COIDA Bill currently in Parliament.
Ms Boshoff was keen to know if the banking regulations will specifically aim at medical claims. She asked for the actual and/or estimated value of payments made to incorrect beneficiaries of the Compensation Fund for the past three financial years.
She asked if the Fund has conducted a cost-benefit analysis for the AVS implementation. If so, she requested a report be made available to the Committee.
Ms Boshoff asked for Mr Mafata’s view on how he believes these regulations will impact medical service providers and pre-funders in the future.
She said to the Committee that it was important to have a fully-fledged meeting with the Compensation Fund, especially in light of the Auditor-General findings and the forensic investigation into alleged corruption in the Fund.
Mr M Dangor (ANC, Gauteng) said that the regulations are clear in excluding third parties as there was no need for third parties. He asked about the profit margins made by the third parties. Introducing a third party is an additional cost.
He asked if debt collectors are included in the definition of the 'financial services industry'.
Mr M Mmoiemang (ANC, Northern Cape) appreciated the fact that the regulations were mainly aimed at dealing with the AVS.
He asked why the Commissioner had to wait for the National Assembly to pass the Bill and thereafter published the notice in the Government Gazette about the regulations.
The Chairperson asked if there were any contradictions between what is now in the COIDA Bill and the regulations. If the Bill was passed, would it have an impact on the gazetted regulations.
Compensation Commissioner response
Mr Mafata replied that the regulations notice was issued with no aim to interrupt the functionalities of other stakeholders. However, as officials of the public entity, there is a responsibility to safeguard the assets of the state including the money paid to beneficiaries.
There was no need to undertake any study on the impact on the system as this is all about administering payments to beneficiaries. The Fund cannot wait until the Bill is completed as the Fund is operational with a requirement to ensure that everything done is compliant with the law.
The weaknesses in the Fund’s control environment have led to the audit outcomes with all the activities aimed at correcting those weaknesses.
On why the notice was not published as part of the COID Amendment Bill, there are several clauses in the principal Act which are not being changed in the COIDA Bill. The only changes are the responsibilities of the Director-General have become the responsibilities of the Commissioner. The responsibility of the Commissioner to make regulations in Section 6(a) has no amendments. Therefore, there are no contradictions. Once the COIDA Bill is passed into law, there will be no impact on the administrative process of verifying banking details.
The notice will not be withdrawn as the Fund has allowed stakeholders to offer their views in a consultation process and this is being assessed which will allow the Fund to make a final decision on the matter.
The information about incorrect payments to beneficiaries would be made available to the Committee.
Mr Mafata did not have any knowledge if debt collectors were part of that definition.
Mr Mafata said that the Fund did not wait for the passing of the Bill to make the regulations notice because this deals with the current Act as it stands. Therefore, whether the Fund waited for the Amendment Bill or not, there was a responsibility to ensure that controls are implemented.
Department of Employment and Labour (DEL) Annual Report 2020/21
Ms Marsha Bronkhorst, DEL Chief Operations Officer (COO), said that in the first quarter performance, 25% of the Department’s targets were achieved. In the second quarter, it was 48%; third quarter was 64% and in the fourth quarter, 67% of the targets were achieved. The annual overall performance was 66%.
Mr Bheki Maduna, DEL CFO, said that the Department’s expenditure was R3.1 billion with the Administration spending 92.1%, Inspection and Enforcement Services spending 84.9%, Public Employment Services spending 97.5%, and Labour Policy and Industrial Relations spending 98.4% of their allocated budget with an overall departmental spend of 94.1%.
the Department received an unqualified audit opinion from the Office of the Auditor-General. The emphasis of matter in the audit was a restatement of the corresponding figures in Note 33 to the Annual Financial Statements due to a prior-year error. The audit also highlighted the material budget underspend for Programme 2: Inspection and Enforcement Services of R89 million.
Supported Employment Enterprises
The Chief Executive Officer of the Supported Employment Enterprises (SEE), Mr Sibusiso Phakathi, said that 2020/21 was a difficult year for SEE because of the impact of COVID-19. However, SEE was able to meet the planned target of 25 people with disabilities employed by SEE by end of December 2020.
Sales of goods saw a sharp decline of 67% due to the severe impact of COVID-19. However, some measures have been put in place to respond to these challenges. SEE had planned to achieve three customer agreements but was able to enter into only two.
Ms Malebo Sebaka, SEE CFO, added that the SEE budget comprises a grant from National Treasury and income generated from the sale of goods manufactured across all factories. SEE was bailed out by R25 million for salary payments and R17.5 million for ICT infrastructure enhancement which was outdated.
Ms Sebaka said that due to financial constraints SEE could not expand to Mpumalanga. The expansion has been placed in abeyance.
The highest expenditure that SEE incurred is salary costs for both factory workers and administrative officials including the expenditure for manufacturing costs and overheads.
The factory salaries were underspent due to reduced targets for additional employment of persons with disabilities. The admin support salaries reflect overspending because factory salaries were accounted for under Administration as per Generally Recognised Accounting Practice (GRAP) requirements. However, the overall salary budget was not overspent.
On irregular and fruitless and wasteful expenditure, municipal accounts had interest incurred. The buildings belong to private landlords and SEE receives the monthly municipal accounts late thus incurring interest. However, SEE has put measures in place including registering on the online platforms of municipalities to ensure that statements are received on time.
SEE incurred a South African Revenue Service (SARS) penalty and interest due to the 2019/20 acquisition of factory assets that were not under its name thus the VAT return was challenged by SARS and a penalty imposed. In 2020/21, SEE was not able to file VAT returns on time because of challenges faced in the factory.
Ms Boshoff noted the poor target achievement for vacant posts in Quarter 1 of 2020/21. The reason given was there were no resources to capture applications. It was incomprehensible as DEL knew that an email application was to be introduced. Therefore, everything should have been in place to meet the demands for this.
She expressed her concern that DEL does not have a sexual harassment policy in place considering the high rate of gender-based violence in South Africa. She asked the Chairperson that DEL is given a timeframe to finalise this as it is not sending a good message to its employees.
She said that people should be held to account for their corruption.
She asked for an explanation for irregular expenditure and fruitless and wasteful expenditure as there seems to be no consequence management in place.
On SEE, she asked if an agreement or discussion has been entered into to ensure government departments procure from SEE.
She pointed out her concern that the SEE in Mpumalanga has been put in abeyance despite the high unemployment rate among people living with disabilities in that province.
Ms Boshoff asked that DEL provide the Committee with a report on the progress of the investigations.
She asked for the number of people with disabilities employed by SEE. She asked if SEE has a stock register for monthly stock taking to ensure the stock remains where it should be.
Mr Mmoiemang welcomed the report. DEL should have been clear about the advent of COVID-19 and the adjustments to the budget. He asked for its impact on DEL targets.
He asked about ICT system challenges and its functionalities.
The Chairperson said that DEL should be clearer on the measures put in place to respond to unmet targets.
He requested a detailed breakdown of the 5.9% underspending.
He asked about the progress made on the target for gender-responsive recruitment.
The Chairperson asked about the prosecution outcomes for non-compliant employers. He asked if these cases could be broken down into the relevant employment laws such as employment equity, occupational health and safety, and basic conditions of employment.
DEL and SEE response
Ms Bahumi Matebesi, DEL Deputy Director-General: Corporate Services, replied that the target for filling vacant posts was during the early days of COVID-19 in the hard lockdown of 2020. Therefore, there was no recruitment in the first quarter. While finding a new way to work amidst COVID-19, it was decided that DEL would opt for email applications in quarter two. These applications came in large numbers with insufficient computers for such a task. This, therefore, caused delays.
On the sexual harassment policy, the national lockdown due to COVID-19 made the availability of DEL’s main stakeholders hard, mainly the Department Bargaining Chamber (DBC) which had to sit and discuss the introductory policies, among those was the sexual harassment policy. The policy has now been introduced to the DBC workshop with some discussions on the draft of the policy. After getting inputs from the DBC, DEL has started working on a final draft which will be taken to the DBC for formal adoption. DEL plans to have the policy in place in quarter two of 2022/23.
Ms Matebesi added that the Ethics Management Strategy was also affected by the lockdown. It has been drawn up and the different phases of the strategy are being implemented. A plan to look at lifestyle audits has been done which is a collaborative effort between the Ethics Unit and Risk Management Unit in DEL.
Most of the corruption cases had been delayed as DEL refers them to external law enforcement agencies if they are very complex. Some cannot be resolved within the 90-day standard.
On the number of people with disabilities employed in DEL, the Department of Public Service and Administration target is 2.2%. DEL has exceeded that target with 2.5% people with disabilities employed by DEL.
Gender-responsive recruitment as a target was introduced in 2021/22 which has been carried through to 2022/23 in place of the sexual harassment policy. This does not mean that DEL has deserted the sexual harassment policy, but it is being worked with at a work plan level.
DEL had a delay as the ICT system did not go live which was caused by the service provider. However, DEL met with the service provider and agreed on a revised project plan which will consider new dates and realistic targets
CFO Maduna replied that the major contributor to the fruitless and wasteful expenditure was damage to rented vehicles. The other contributor was no-shows for booked accommodation and flights by officials. The process is now being revamped to subject it to the Loss Control Committee as a control measure.
The Chairperson asked for a response in writing on the outstanding matters within seven days.
Labour Migration Policy
Mr Sam Morotoba, Deputy Director-General: Public Employment Service, said that the policy is attempting to achieve a balance between the expectations of the South African population for employment accessibility and providing the South African labour market with critical skills not locally available while protecting migrant worker rights under international standards and guidelines.
The vision of the National Labour Migration Policy is to give rise to efficient and effective government leadership supported by social partners and major stakeholders to allow safe, orderly, and regular migration for employment of highly skilled, semi-skilled, and low-skilled workers to and from South Africa in pursuit of the country’s priorities.
He outlined the areas dealing with labour migration governance and management, data monitoring and evaluation, labour migrants to South Africa, and labour migration from SA (see document).
Ms Boshoff asked if the National Labour Migration Policy was not implicitly suggesting that foreign nationals are the reason for the rising unemployment rate in South Africa. This blames foreign nationals. She thus suggested a review of the South African education system and the Department of Home Affairs instead of blaming foreign nationals.
She raised her concern that this policy would grant the Minister power to decide the number of foreign nationals that can be employed in the South African labour market, indicating that this could spark xenophobic sentiments in the country. Statutory employment quotas could not be condoned as this was an unconstitutional act.
She asked what the impact of the policy would be on South Africa’s trade with other countries.
She asked how South Africa would attract critical skills from other countries if this policy was enacted.
Ms Boshoff expressed her concern about the involvement of stakeholders such as Statistics South Africa (StatsSA). She was unsure how StatsSA would be of assistance to DEL in the future in terms of the National Labour Migration Policy.
She asked for the safety measures DEL will put in place to ensure that foreign nationals enter South Africa's labour market due to their critical skills. She asked what will be done about foreign nationals who currently have businesses and employ South Africans.
Ms Boshoff asked about the implications of the policy on South African employees in foreign countries.
Mr Mmoiemang added that there are international agreements that must be taken into account by this policy as the policy would shift how South Africa relates with other countries.
He asked if there have been engagements with the Department of Transport when the regulations were drafted, especially the limitations placed on foreign truck drivers.
Mr Dangor suggested that DEL should look at countries that actively export labour and how they deal with this matter.
The Chairperson asked the extent to which other departments' regulations may contradict this Labour Migration Policy.
The Chairperson asked if the National Labour Migration Policy accounts for Sections 9 and 23 of the Constitution which protects workers irrespective of their country of origin. Does the National Labour Migration Policy take into consideration the international agreements that have been ratified by South Africa?
Mr Morotoba replied that DEL is aware of the regulations for cross-border trucks. However, there are continuing engagements with the truck drivers’ association.
There are no contradictions with other departments. DEL is working with other departments to ensure the harmony of the policy.
He assured the Committee that this was a work in progress and DEL will update the Committee on the progress made.
DEL is aware of Section 9 and Section 23 of the Constitution. He referred to Section 36 of the Constitution which allows limitation of such provisions, especially if it is justified. Pre-certification from the State Law Advisors that the Draft Employment Services Amendment Bill is aligned with the Constitution has been granted.
Mr Morotoba replied that the National Labour Migration Policy is not aimed at promoting xenophobia as it makes provision for the protection of migrants.
In closing, Ms Bronkhorst said that she had noted all the comments made by the Committee. DEL will provide written responses to the unanswered questions.
Committee Report on COID Amendment Bill
The report on the Compensation for Occupational Injuries and Diseases Amendment Bill [B21B – 2020] was adopted with proposed amendments.
Committee Report on Employment Equity Amendment Bill
The Committee adopted the Employment Equity Amendment Bill [B14B - 2020] without amendment.
Committee Report on Public Hearings and Department response
The report on the public hearings on both Bills and the Department response to submissions was adopted.
The Committee adopted the minutes of 30 November and 07 December 2021; 22 February, 8 and 15 March 2022.
The Chairperson adjourned the meeting.
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