National Productivity Institute, Umsobomvu Youth Fund; Compensation Fund: input on Budget

Meeting report

LABOUR PORTFOLIO COMMITTEE
18 March 2005
NATIONAL PRODUCTIVITY INSTITUTE, UMSOBOMVU YOUTH FUND; COMPENSATION FUND: INPUT ON BUDGET

Chairperson: Ms O Kasienyane (ANC)

Documents handed out:
Assessing Public Sector Performance, Productivity and Service Delivery in South Africa: a synthesis report by NPI (November 2004)
National Productivity Institute (NPI) Strategy 2005-2008: PowerPoint Presentation
Umsobomvu Youth Fund (UYF) presentation document
Compensation Fund Annual Budget: PowerPoint Presentation

Umsobomvu Youth Fund website
National Productivity website
Compensation Board website

SUMMARY
The National Productivity Institute presented its strategic plan for 2005 to 2008, highlighted its strengths and weaknesses, outlined its projects such as the one where they would be making productivity interventions in companies which were in financial difficulty. The NPI budget for 2005/6 would be R92 million increasing to R108 million by 2007/8. Questions were asked about its 2004/5 budget; its relationship with the National Economic Development and Labour Council (NEDLAC); the Social Plans it implemented in companies; its role in the Expanded Public Works Programme (EPWP); and the productivity research that it conducted.

The Umsobomvu Youth Fund discussed the projects that they would be undertaking this which would provide advice, support and training to the youth, with regards to entrepreneurship skills and work opportunities. It was highlighted that the UYF would also be involved in helping young entrepreneurs source funding for their businesses. In the discussion that followed, questions were asked about the racial breakdown of the youth that the UYF was targeting; whether the UYF was aiding youths that had been released from correctional facilities; where the Youth Advisory Centres of the UYF were situated, its achievements in 2004/5; and the UYF’s relationship, and possible merger, with the National Youth Commission.

The Compensation Fund presented an overview of the past year and highlighted its problems, the biggest of which was the claims backlog. It explained the plans that had been devised to make the Fund more efficient which included improving internal and external communications and decentralising some of the Fund’s operations. The planned income of the Fund for 2005/6 would be R 3.4 billion while its expenditure would be approximately R 2.4 billion. The Committee asked questions about the claims  backlog, the Fund’s profile in rural areas, its relationship to the Occupational Health and Safety directorate in the Labour Department, its poor customer service and its financial reserves.

MINUTES
National Productivity Institute Strategy and Budget 2005-2008: briefing
Dr Y Dladla (NPI: Executive Director) highlighted the strengths and weaknesses of the NPI. The strengths were its interventions had led to sustainable improvement in companies; it had a government mandate to enhance productivity and it was viewed as a neutral entity by the social partners, which were government, labour and business. Its weaknesses were a lack of funding and adequate resources and a weak alignment with its social partners.

The NPI’s strategies and goals were explained. Its main focus would be on productivity interventions, which aimed to help ailing companies improve their performance and avoid job retrenchments. In order achieve its goals, the NPI would be working with government, big business, labour, civil society, educators, micro-businesses, learners and other individuals. Its success would depend on the amount of funding it received, the extent of the collaboration offered by the social partners, and the extent that workplaces were transformed between 2005 and 2008.

Mr B Coka (NPI: Chief Financial Officer) discussed the proposed NPI budgets for the following three years which would be R92 470 250 for 2005/6, R97 577 005 for 2006/7 and R108 018 080 for 2007/8. Most of the funding would come from the Department of Labour, the Department of Trade and Industry and other government sources. NPI would also be finding funds from other entities. If the NPI received more funding, its impact on productivity in the economy could be increased. The bulk of these budgets would be spent on productivity interventions (see document).

Discussion
Mr M Mzondeki (ANC) stated that the NPI did excellent work, but few people were aware of it. He enquired how the NPI planned to raise its public profile.

Mr I Sathekge (NPI Programme Head: Promotion) acknowledge that there was a problem with the NPI’s public profile. This was partially related to a lack of resources. In the next three years, however, the NPI planned to co-operate with strategic partners to publicise its work. Specifically, the NPI was considering how it could interact with broadcasters to create educational programmes on productivity.

Mr Mzondeki asked for the details of the projects that the NPI was undertaking with civil society.

Dr Dladla replied that the NPI would forward information on the NPI’s projects with civil society to the Committee.

Mr Mzondeki asked from where, besides government, would the NPI receive its funding?

Mr Coka responded that the NPI generated income through the project management that it undertook for the Department of Labour and the Department of Trade and Industry. It also received consulting fees from companies for implementing Social Plans and change facilitation. In the past, the NPI had also received funding from donors such as Gold Fields Limited.

Mr Mzondeki asked what role the NPI was playing in the Expanded Public Works Programme (EPWP).

Dr Dladla responded that the NPI was not fully engaged in the EPWP, but in 2005/6 it would be focusing on altering this.

Mr Mzondeki observed that the NPI had stated that it had insufficient funding. He enquired how much funding would be required to make the NPI budget sufficient.

Mr Coka noted that an extra R33 million, over the next three years, would be sufficient funding.

Mr L Maduna (ANC) and Mr S Mshudulu (ANC) asked whether the NPI had achieved its targets in 2004/5. Mr Mshudulu also enquired how the NPI had spent its budget in 2004/5. He noted that such information would be useful to the Committee in allowing it to take a decision on the NPI’s future budgets.

Mr Coka replied that the NPI had spent its 2004/5 budget ,and there would be no rollovers. Indeed, the NPI had to source 33% of its funding itself, as the government grants had not covered the full budget. Dr Dladla added that the NPI would send the full details of its past achievements to the Committee.

Mr Mshudulu noted that there were problems around the definition of productivity. Had the NPI interviewed lower level employees when it undertook productivity research? If NPI only interviewed management it would not gain a full understanding of the situation.

Mr S Mosai (NPI Programme Head: Research) responded that the NPI was shifting the way it conducted research. It was no longer looking only at labour productivity but total productivity, which included the productivity of capital, technology and management input. The data collection processes were also being altered; surveys were conducted amongst managers and directors across the spectrum. This was improving the quality of the NPI’s productivity and competitive reports. The NPI was also undertaking productivity research into the Public Sector.

The Chairperson and Mr Mshudulu noted that the NPI needed to conduct relevant research. It could not merely survey and conduct research amongst executives and board members. They asked the NPI to elaborate on the type of research that it was conducting. Mr O Mogale (ANC) also enquired when the NPI would make the Public Sector productivity reports available to the Committee.

Mr Mosai replied that the Public Sector productivity reports would be produced annually. The first report would be available in January 2006. Research into local government was also being planned. The NPI was undertaking research into the impact that labour policies and the Commission for Conciliation, Mediation and Arbitration (CCMA) had on productivity. The aim was to provide concrete statistics and information that could be used in evaluating whether labour legislation should be reviewed.

A member asked how the Social Plan was funded. He also asked how successful it had been.

Ms V Toyi (NPI Programme Head: Jobs) noted that the Social Plan was funded by the Department of Labour. The NPI had been successful in implementing the Social Plan within companies: it had created 120 forums and impacted on 8 000 jobs. There were, however, a number of problems with the Social Plan. One problem was that the implementation of the Social Plan was voluntary for companies. The mining industry had, however, already implemented the Social Plan. She felt that other industries would follow its example. Another problem with the Social Plan was a lack adequate funding. Due to this, the implementation had been sporadic.

Mr Mshudulu noted that the NPI had not presented information on its relationship with NEDLAC. He felt that the NPI needed to have an influence in NEDLAC.

Mr Mosai replied the NPI did have a relationship with NEDLAC. For example, it was ensuring that the productivity accords were being revived within NEDLAC.

Mr Mshudulu asked how the NPI was linking the productivity accords to the Growth and Development Strategy.

Mr Mosai replied that the NPI was researching how the productivity accords could advance the targets of the Growth and Development Strategy.

Mr Mzondeki asked who was responsible for the costs when the NPI assisted a company?

Ms Toyi replied that the companies that the NPI assisted were in financial distress. They, therefore, did not pay the NPI for its assistance and advice.

Mr Mshudulu enquired about the Workplace Challenge programme.

Dr Dladla replied that the NPI had been project managing the programme for the Department of Trade and Industry. Mr Sathekge added that the programme aimed to implement workplace democratisation. Over 120 companies had taken part and 98% of these gave the NPI positive feedback on the programme. The programme had also led to improved communications and competitiveness in the majority of the companies that had participated.

The Chairperson noted that the NPI had stated that its resources were not adequate. She asked the delegation to expand on this.

Dr Dladla noted that the NPI had a staff of 84 professional people. It was difficult for them to cover the entire country. The NPI, therefore, used partners to help with its service delivery. However, the NPI needed more resources.

Mr Mogale asked how the NPI planned to facilitate the entry of marginalised groups into the mainstream economy.

Ms Toyi replied that the NPI had undertaken a number of initiatives amongst marginalised groups. For example, the NPI was working on a system to consolidate the micro-enterprises with which it worked into co-operatives. This allowed them to have access to greater resources, improved buying power and improved marketing resources. The NPI aided these companies to establish efficient internal operating systems and helped people from marginalised communities to develop business proposals and find funding for their businesses.

Mr Mogale noted that one of the goals of the NPI was to create a pool of productivity experts, specifically amongst learners. He asked how far the NPI had progressed in achieving this goal.

Dr Dladla replied that the NPI was ensuring that productivity concepts were included in school syllabuses.

Mr G Anthony (ANC) remarked that in the past two years, small scale mines in the diamond industry had been closing and retrenching employees. He asked whether the NPI was intervening in this.

Ms Toyi answered that the NPI had interacted with some of the mines. However, it was difficult to establish whether mines had insufficient ore reserves to remain open. The NPI simply did not have the kind of funds to undertake such an investigation.

Umsobomvu Youth Fund: briefing
Mr M Kekana (UYF Chief Executive Officer) noted that UYF mandate was to create jobs and training opportunities for the youth. The UYF had undertaken the following projects:

· Contact, Information and Counselling project. This involved establishing a youth call centre; youth advisory centres; a website where the youth could connect with the Jobs and Opportunities Seekers Database (JOBS); a Youth Card, which could be used to access specials offered by companies. Through these initiatives, the youth could gain information about employment opportunities, skills development and training possibilities. They could also advertise their Curriculum Vitaes on JOBS. It was planned that the UYF would reach 3.4 million young people in 2005/6 through this project.
· Skills Development and Transfer project. This project offered on-the-job training, and skills development training, to young people. This project also included the School to Work programme. Through this programme 3 260 young people would be trained and provided with scarce skills in 2005/6. Another programme that fell within Skills Development and Transfer project was the National Youth Service. It was planned that 10 000 young people would receive training in 2005/6 in skills that would be useful to their communities. In order to achieve the aims of the  Skills Development and Transfer project, the UYF would be working with 90 Further Education and Training (FET) Colleges by the end of 2005/6.
· Business Development Support project which aimed to foster a culture of entrepreneurship amongst young people. It had two programmes:
- The Entrepreneurship Education programme offered young people entrepreneurship training and education. It was planned that 7 200 participants would be involved in this programme in 2005/6. Through this, it was also planned that 1 100 businesses would be started and 1 650 jobs would be created.
- The Business Development Voucher programme offered business development services to small businesses and young people. It was planned that in 2005/6, 13 325 young entrepreneurs would be assisted through this programme. Added to this, 1 235 young people would be mentored.

Mr Kekana noted that the UYF also helped young entrepreneurs, who owned small and micro-businesses, access finance. In order to do this, the UYF had established Private Public Partnerships with firms such as First National Bank. In this way, Funds had been established, which made finance available to young entrepreneurs. It was planned that through these Funds, 100 small and medium sized enterprises would be financed in 2005/6.

Its strategic  targets for this year were:
- to have funding fully committed by July 2005;
- to increase access to UYF services through a presence at labour centres and multi-purpose community centres (MPCCs);
- to increase the profile of the UYF; and
- to increase the partnerships that it had with other entities and government departments.

Discussion
Mr Maduna noted that the UYF had received a mandate to undertake a skills audit amongst graduates to assess their employability. He enquired about the progress that UYF had made in this area.

Mr Kekana answered that the UYF had established the JOBS database to link unemployed graduates with work opportunities. The UYF also extended the definition of graduates to include people who had completed Grade 12. Through JOBS, 70 young people had already been placed in employment. The South African Qualifications Authority (SAQA) also had information on all the graduates throughout the country, but they did not have information on whether these people were employed.

Mr Maduna noted that opposition political parties perceived the UYF as only aiding black youth. He enquired about the racial breakdown of youth that were being aided by the UYF. Was the UYF also aiding white youth who needed assistance?

Mr Kekana responded that the mandate of the UYF had been to target historically disadvantaged youth. Many white youths did not face the difficulties that historically disadvantaged youth faced in accessing finances. However, if there was a need to help poor white youths to access training and funds in the future, the UYF would consider doing so. Presently, all races had access to the Youth Card.

Mr Maduna commented that youths in prisons were often given skills training by Correctional Services. He asked if the UYF was helping these youths to establish businesses once they had left correctional facilities.

Mr Kekana replied that the National Institute for Crime Prevention and Reintegration of Offenders (NICRO) helped young persons, released from correctional facilities, to find funds to start up businesses. At present the UYF did not specifically target these youths. If they wished, however, they could apply for help from the UYF.

Mr Maduna asked if the UYF was involved in training young women in the construction sector.

Mr Kekana replied that the UYF was undertaking a project in Ivory Park where 100 young people were building houses. The majority of these people were young women.

Ms L Moss (ANC) enquired where the Youth Advisory Centres were situated.

Mr Kekana replied that there were Youth Advisory Centres at 19 of the FET Colleges. There were also a further 20 Youth Advisory Centres in various cities and towns throughout the country. It was planned that by the end of the year there would be 120 Youth Advisory Centres throughout the country.

Ms Moss asked how the UYF was helping historically disadvantaged youth produce business plans. This was important because many people were denied finance because their business plans were deemed inadequate.

Mr Kekana replied that many young people who applied for funding from the UYF had little experience. They would often bring a business plan that was not workable. The UYF could not finance these people. Rather, the UYF offered these young people training opportunities so that they could gain knowledge. Once they had knowledge, they could then reapply for funding from the UYF.

Ms Moss enquired whether the UYF monitored the Business Development Voucher programme.

Mr Kekana responded that the UYF was monitoring the Voucher programme.

Mr Mshudulu asked for details on how the UYF spent its 2004/5 budget and whether it had met its targets.

Mr Kekana replied that the UYF had received a once-off payment of R855 million from government in 2001. This money was intended to last the UYF for a period of five to seven years. In 2004/5, the UYF had committed R501 million, of which it had spent R305 million. In 2005/6 it would be allocating R322.7 million, and was planning to spend R304.5 million.

Mr Mshudulu asked if there was going to be a merger between the National Youth Commission and the UYF.

Mr Kekana responded that the UYF did not have an official response to the planned merger of the UYF and the NYC. He also stated  that they had not had any contact with the NYC on the matter. The NYC and the UYF also had very different mandates. The UYF would examine the feasibility and appropriateness of the possible merger.

The Chairperson noted that the problem with the NYC was that it lacked funds. The youth expected the UYF to help the NYC. Mr G Oliphant (ANC) added that the UYF should contact the NYC about the possible merger.

Mr Oliphant commented that the UYF needed to strengthen its media campaign.

Mr Kekana replied that the UYF did need to improve its media campaign, especially in informing the youth how to access the UYF.

Mr Oliphant noted that the Auditor General had stated that the UYF’s Annual Report had been seven months late. This needed to be rectified.

Mr Kekana responded that the UYF had incurred a problem in compiling its annual report. The Auditor General required the UYF to audit all the businesses to which it had lent money. An audit cost between R300 000 to 400 000. The UYF would have to audit approximately 1 000 entities, which would take a great deal of time and money. This was the primary reason why the annual report was late.

Mr Mshudulu highlighted that young people often visited the Parliamentary Constituency Offices seeking advice on how to produce business plans. He enquired whether the UYF would train parliamentary members and Constituency Office staff to help these young people develop business plans.

Mr Kekana answered that the UYF had undertaken work with some of the Constituency Offices. They were welcome to contact the UYF for help. He added that by the end of the year, the UYF would have train the staff of 60 Constituency Offices to aid the youth that visited them for help .

The Chairperson asked if the UYF had a relationship with Community Development Workers (CDWs).

Mr Kekana answered that UYF was training 100 CDWs to be placed at MPCCs throughout the country.

Compensation Fund Annual Budget: briefing
Ms N Kahn (Compensation Fund, Acting Commissioner) explained that the Compensation Fund compensated employees who had been injured in the process of performing their occupation. It paid out medical expenses, that were deemed reasonable, for workers that had been injured. It also paid death benefits to the families of employees who had died whilst performing their job.

Ms N Kahn pointed out that the Compensation Fund had a major backlog. Teams were being established to deal with these old claims. The Compensation Fund had received 222 725 claims in 2004/5. Of these claims, 22% had been finalised within 90 days.

Ms Kahn highlighted the Compensation Fund’s plan to decentralise some of its functions in order to improve the efficiency of the Fund. There was also a business process re-engineering underway to ensure that claiming from the Fund was streamlined. The Compensation Fund was also working to improve its internal and external communication. The Fund was also discussing future new policies such as health workers claims who had acquired HIV/AIDS through occupational accidents such as needle pricks.

Mr G Dreyer (Chief Financial Officer) presented an expenditure report for 2004/5. It was noted that it had spent R1 676 160 000 on claims in 2004/5: R736 558 000 (compensation claims) and R939 602 000 (medical claims). In the proposed budget of 2005/6, out of an income of R3 462 838 000. It expected to spend R2 070 650 000 on claims: R870 051 000 (compensation claims) and R1 200 599 000 (medical claims).

Discussion
Mr Maduna and Ms D Ngcengwane (ANC) stated that they were aware of workers who had received compensation from the Fund. However, they had ended up spending all the money that they had received on medical expenses. They enquired how the Compensation Fund ensured that all the compensation money paid out to claimants did not only go to paying costly medical expenses.

Mr Kahn noted that the Fund had a separate section that dealt with medical claims and assessments. Doctors often charged tariffs that were above the Occupational and Health Safety tariffs. She suggested that claimants should attempt to visit doctors who were willing to charge Occupational Health and Safety tariffs. This would reduce their medical expenses.

Mr Mshudulu noted that the Compensation Fund had undertaken a joint media campaign with the SABC. He asked for the report  that had been compiled on the campaign.

Ms Kahn noted that she would ensure that the report on the campaign was sent to the Committee.

Mr Mshudulu noted that there was still a problem with the process of lodging claims at the Compensation Fund. He noted that the onus of completing and submitting the claims for injured workers fell on employers. Sometimes employers would falsely claim that an injured worker was not injured whilst working. This was a problem.

Ms Kahn agreed that there a strong onus on employers to submit and complete the claims, and this needed to be re-examined. Inspectors also had a mandate to follow up on cases where the claims had been problematic.

Ms D Ngcengwane (ANC), Mr N Godi (PAC) and Mr Mzondeki asked for details about the measures that the Compensation Fund had taken to reduce the claims backlog.

Ms Kahn replied that a new project would be initiated which comprised of a team dedicated to addressing the problem of backlogs.

Ms Ngcengwane enquired how the Compensation Fund planned to improve its profile in the rural areas.

Ms Kahn noted that the Minister’s Imbizo tours to rural areas included staff members of the Compensation Fund. Mobile units were also being established to service rural areas. These measures would improve the profile of the Compensation Fund in the rural areas.

Ms Ngcengwane asked about the relationship between the Compensation Fund and the Occupational, Health and Safety directorate in the Department.

Ms Kahn responded that Compensation Fund was the ‘end point’ of Occupational, Health and Safety.  The Occupational, Health and Safety directorate undertook inspections in order to prevent occupational accidents. The Compensation Fund was where workers received compensation due to workplace injuries. However, there were plans to consolidate the two into one National Occupational, Health and Safety Authority.

Mr Oliphant enquired about the financial reserves of the Fund

Mr Dreyer responded the Fund had built up a total reserve of R10.8 billion. Of this, R6.3 billion was reserved for pensioners. This meant that R4.5 billion was available in the Fund’s reserves for paying possible claims. Of this, R2.7 billion had been put aside to pay the backlog claims.

Mr Mzondeki commented that the Compensation Fund needed to improve its customer service.

Ms Kahn acknowledged this point. Part of the problem related to the Fund’s aging telephone system. The telephone system, however, would be upgraded, and a temporary call centre would be established to improve customer service.

The Chairperson and the Committee requested that the NPI, the UYF and the Compensation Fund return later in the year to provide more detailed information on the work that they were undertaking.

The meeting was adjourned.