Department Annual Report 2004/05: briefing

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Employment and Labour

11 October 2005
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Meeting report

LABOUR PORTFOLIO COMMITTEE
12 October 2005
DEPARTMENT ANNUAL REPORT 2004/05: BRIEFING

Chairperson:

Ms O Kasienyane (ANC)

Documents handed out:

Department Annual Report 2004/05 PowerPoint Presentation
Department Annual Report 2004/05 (shortly available at
www.labour.gov.za)

SUMMARY
The Department began by highlighting some of the achievements of its main divisions. These achievements included improving the rate of Unemployment Insurance payouts; improving its overall Information and Technology (IT) systems; rolling out mobile units; and implementing a Memorandum of Understanding with the Sector Education and Training Authorities (SETAs). The delegation then provided the details of its income and expenditure figures for 2004/05. It was noted that the Department had under-spent by R133 million. The main areas where the Department had under-spent were in the Administration and Service Delivery divisions.

In the ensuing discussion, Members asked:
- why there had been an under-spend of R133 million;
- whether this under-spend was affecting service delivery
- whether the Department’s high vacancy levels were affecting service delivery;
- whether the Department was reaching rural areas;
- whether the SETAs were actually performing well;
- whether the problems around the payment of Unemployment Insurance Fund (UIF) claims were being addressed;
- whether the Department had implemented a strategy to retain its inspectors;
- whether the inspectors were being properly monitored;
- whether the problems in the sheltered employment factories were being addressed
- whether the Department was undertaking a thorough investigation of the SASOL accidents;
- and whether the Department was working closely with the Parliamentary Constituency Offices (PCOs).

Members also had a discussion with the Department around whether the Growth and Development Summit (GDS) Agreement targets were being met. It seemed as though the government/private sector felt that progress was being made towards meeting the GDS targets, including employment creation. The Congress of South African Trade Unions (COSATU), on the other hand, seemed to believe that employment was not being created and that job losses were still occurring. It was decided that the Committee needed to meet with all the social partners in order to establish what the situation was.

MINUTES

Department Annual Report 2004/05: Briefing
Mr L Kettledas (Department of Labour Deputy Director-General: Labour Policy) began by outlining the achievements of the Department’s main divisions during 2004/05. They were:

- Administration Division. This division had successfully implemented a branding strategy for its publications; it had aligned human resource policies with the relevant legislative frameworks; it had ensured that there was proper co-ordination of labour relations in the Department; it had successfully implemented Information and Technology (IT) programmes such as e-Claims and Siyaya; it had implemented new control measures to ensure that there was compliance with the Public Finance Management Act (PFMA); and it had drafted a black economic empowerment policy.

- Service Delivery Division. The achievements of this division included finalising 90% of Unemployment Insurance claims within 90 days of the submission of all relevant documentation; implementing a programme to eradicate silicosis; undertaking a client satisfaction survey; updating information brochures; and drafting the National Occupational Health and Safety (OHS) Policy.

- Employment and Skills Development Service Division. Some of the achievements of this division included: concluding a memorandum of understanding with all the SETAs; implementing pilot projects to train learners as part of the Indlela transformation initiative; and producing integrated reports on the implementation of the National Skills Development Strategy (NSDS).

- Labour Policy and Labour Market Programmes Division. In 2004/05, this division successfully published minimum wage conditions of employment for the contract cleaning sector; it finalised the Child Labour Action Programme; it tabled two reports on the GDS Agreement at the Presidential Joint Working Group; and it completed the 2003 annual report on industrial action.

- Social Insurance Division. This division contributed to the Unemployment Insurance Fund (UIF) and provided compensation, through the Compensation Fund, to public servants that had been injured whilst performing their work.

Mr C Van Der Merwe (Department of Labour Chief Financial Officer) presented details of the Department’s expenditure during the 2004/05 financial year. He noted that the Department had been allocated a total budget of R5 954 093 000 in 2004/05, which included R4 725 396 000 for the SETAs and the NSF. He noted that of this total, the Department spent R5 820 744 000 in 2004/05. This meant that there was an under-spend of R133 349 000 in 2004/05: the main areas where the Department had under-spent were in the Administration and Service Delivery divisions. He also provided a breakdown of the Department’s expenditure using the Government Financial Statistics (GFS) classification. This breakdown indicated that the Department had under-spent its employee compensation budget; its goods and services budget; its payments for capital assets budget; and its transfers and subsidies budget.

Discussion
The Chairperson asked why the Department had under-spent its 2004/05 budget by R133 million. Mr Van Der Merwe replied that the Department had under-spent its employee compensation budget by R28 million and its goods and services budget by R22 million. These two budgets were related and if there were an under-spend in one of them, there would automatically be an under-spend in the other. For example, there was an under-spend of the employee compensation budget because of staff vacancies. Due to these staff vacancies, there was automatically an under-spend in the goods and services budget. In addition, the Department had under-spent on service delivery. Again this was the result of staff vacancies in the service delivery division. Mr Van Der Merwe added that the Department had also under-spent its transfers and subsidies budget by R63 million. This was partially the result of an unspent rollover of R7 million, which had been allocated to the UIF. This R7 million had not been transferred to the UIF, as the UIF already had reserves of over R10 billion. Added to this, the Department had budgeted incrementally for possible compensation claims; but the compensation claims it had received were far lower than the compensation budget. As a result, the Department would be reducing its future compensation claims budgets.

Ms M Xaba (Department of Labour Deputy Director-General: Corporate Services) commented that the Department had also under-spent its capital assets budget. She explained that part of the capital assets budget had been allocated for the maintenance and upgrading of the Department’s buildings. The Department could not undertake the maintenance work itself, as it was the responsibility of the Department of Public Works. The problem was that Public Works had failed to undertake this work and, as a result, part of the Department’s capital assets budget was not spent.

The Chairperson enquired whether the Department was making progress in addressing the problems that it had experienced with Public Works. Ms Xaba responded that the Department had recently met with the Director-General of Public Works. At this meeting, it was agreed that a task team would be established to address the problems that the Department had experienced with Public Works.

Mr S Mshudulu (ANC) commented that the Minister had stated that the bureaucracy that surrounded the maintenance and upgrading of the Department’s buildings was frustrating. In the light of this, Mr Mshudulu asked whether it was possible for Public Works to transfer the responsibility of the upkeep of the Department’s buildings to the Department itself. He added that certain of the Department’s buildings needed urgent alterations to make them more accessible for disabled people.

The Chairperson questioned whether the Department’s high staff vacancy rate was affecting its service delivery. Mr Mshudulu and Mr L Maduna (ANC) added that, logically, the under-spend in the personnel/good and services budgets would impact negatively on service delivery. The Department’s high staff vacancy level was an ongoing problem, and it needed to be addressed. Mr O Mogale (ANC) highlighted that in 2004, the Department’s vacancy level was at 17.7%. In 2005 the vacancy level was 21.4%. In the light of these figures, it seemed as if the Department’s vacancy levels were getting worse

Ms Xaba replied that the Department had established a task team to address its high staff vacancy levels. This task team had examined a number of models from other Departments which could be used to reduce the vacancy levels. She explained that the Department had experienced problems with staff retention. This had arisen because of the relatively low salaries that the Department offered when compared to the market place. In order to address this, the task team was working on a system to match payment with output. As a result, the Department had examined the possibility of starting employees at SR Level 5 instead of SR Level 3. This would mean that new employees would receive a higher salary than in the past. Ms Xaba added that in order to improve service delivery, experienced staff members would be used as frontline service providers. New recruits, many of whom would have only recently matriculated, would be used as support staff to the frontline staff. These experienced frontline staff members would then receive better remuneration: they would be remunerated at SR Level 7. This would possibly ensure that the Department retained these experienced staff members.

The Department had also undertaken an integrated business strategy workshop in order to improve service delivery at the labour centres. The National Productivity Institute (NPI) had been invited to assist the Department in improving its productivity and service delivery. In addition, the IT capabilities of the Department would be strengthened through its contract with Siemens. Indeed, IT automation would ensure that the Department’s service delivery was improved.

The Chairperson asked the delegation to define and explain the term "automation". Ms Xaba responded that "automation" referred to a situation whereby the Department’s IT infrastructure would drive its service delivery function and overall strategy.

Mr Maduna questioned whether the Department’s IT system would reach people in the rural areas. Mr Kettledas replied that the Department had 127 labour centres throughout the country. Added to this, the Department had 20 mobile units that had been deployed in order to reach remote rural areas. People could use these mobile units to access UIF and other services that were offered by the Department.

Mr Mshudulu asked how much the mobile units cost. Mr Maduna asked whether the Department was marketing it mobile units. Were the visits by the mobile units advertised in all the official languages? Ms Xaba replied that the regional offices were responsible for marketing the mobile units. The Department also used regional radio stations and newspapers to market the routes that the mobile units followed. She noted that the mobile units carried information, and provided services, in the official languages. However, the languages that were used depended on the regions in which the mobile units operated. For example, in KwaZulu-Natal the mobile units offered information and services in English and Zulu. All of the mobile units carried information, and provided services, in at least two languages.

Mr Mshudulu commented that during the apartheid era the government budgeted incrementally. Since 1994, the post-apartheid government had not used incremental budgets. Instead the government had focused on spending all the money, which it had been allocated, to improve the lives of South Africans. He, therefore, questioned why the Department had budgeted incrementally.

Mr Van Der Merwe replied that the Department had only used incremental budgeting around the expected payments to the Compensation Commissioner. This did not mean that the Department’s entire budget was done on an incremental basis. He added that the Department had taken steps to address its problem of under-spending. For example, it would not be requesting additional funding, above its base line, from Treasury for 2006/07.

Mr Mshudulu asked what criteria the Department had used when it allocated its internal budgets to the various divisions and programmes, such as the Compensation Fund and the UIF. Added to this, what criteria did the Department use when allocating budgets and resources to the various labour centres? Mr Van Der Merwe replied that Departmental, Compensation Fund and UIF officials visited selected labour centres to undertake work study exercises. This allowed these officials to gain an understanding of the range of activities that were undertaken at these centres. This information was then used to decide upon the funding allocations that each of the Department’s divisions and programmes would receive. This process was undertaken every three years to ensure that the Department’s budget allocations addressed the trends that were being experienced at the labour centres.

Mr Maduna noted that one of the Department’s core functions was to facilitate employment creation through such initiatives as skills development. He was, therefore, concerned that the Department had under-spent its Employment and Skills Development Services budget by R23.4 million. The Department needed to be an example, in terms of employment creation, to other government departments and the business sector. The Department’s job creation initiatives had to succeed: failure was not an option. Mr S Morotoba (Department of Labour Acting Deputy Director-General: Employment and Skills Development Services) replied that the R23.4 million under-spend was a result of high vacancy levels in the Employment and Skills Development Services Division. The R23.4 million was, therefore, not money which had been directly allocated for skills training initiatives. The Department had disbursed all the funds that had been allocated for skills training to the various SETAs and the NSF.

Mr Maduna asked whether progress was being made towards achieving the GDS Agreement targets. Mr Kettledas responded that the National Economic Development and Labour Council (NEDLAC) had established a GDS Implementation Committee, which was responsible for monitoring the progress that had been made towards meeting the targets of the GDS Agreement. Mr Kettledas proceeded to outline a number of examples of how the social partners had made progress towards meeting the GDS Agreement targets. For example, government had created 200 000 jobs through the Expanded Public Works Programme (EPWP); the Mzansi Account had been launched; progress had been made in terms of employment equity; and the GDS Agreement targets for learnerships had already been exceeded. He noted that progress had been made towards meeting all of the four main aspects of the Agreement. Nonetheless, more work was needed if the goal of halving unemployment by 2014 was to be reached.

Mr N Godi (PAC) and Mr Maduna questioned the quality and the sustainability of the 200 000 jobs that the EPWP had created. They noted that most of the EPWP jobs were temporary and failed to make an impact on the material conditions of people’s lives.

Mr Godi asked whether the private sector was meeting the GDS Agreement targets. If the private sector was making progress towards creating employment, and meeting the GDS Agreement targets, why was it necessary for COSATU to undertake its recent strike? He noted that there was a disjuncture between the view of the government/private sector and COSATU over whether progress was being made towards employment creation and the GDS Agreement targets. He stated that it seemed as though the plight of workers and the unemployed was becoming more desperate. Mr Maduna added that the public had a perception that government was not addressing the unemployment problem. This was the reason why COSATU, and other workers, had embarked on strike action. Mr Maduna commented that if government and the private sector were creating employment opportunities, the Department should have met with COSATU in order to explain this to them.

Mr Kettledas responded that the private sector had made progress in meeting the GDS Agreement targets. For example, various business sectors were making progress towards meeting the investment targets that were agreed to at the GDS. Nonetheless, the private sector could do more to ensure that employment was created. Many businesses, which were participants in the GDS Agreement, were retrenching workers. They could, as a commitment to employment creation, stop these retrenchments. Indeed, a mechanism was needed to ensure that there was job retention in South Africa. Presently, jobs were being created, but others were being lost. One first needed job retention before one could have a net positive impact on unemployment.

Mr Kettledas added that COSATU was a member of the GDS Committee and was, therefore, involved in examining the progress that had been made towards meeting the GDS Agreement targets. The Department was also involved in ongoing discussions with COSATU around employment creation. COSATU’s recent strike action was the result of it initiating a Section 77 Notice in NEDLAC, which allowed the federation to legally engage in protest action around socio-economic issues, such as unemployment and the value of the Rand. This had come about because no solution had been found regarding the value of the Rand. Nonetheless, discussions around the Rand’s value and the problem of unemployment were continuing through NEDLAC.

Mr Godi commented that the Committee perhaps needed to meet with COSATU. COSATU could then present their view on whether jobs were being created to the Committee.

Mr Mshudulu commented that all the social partners seemed to be committed to creating employment. However, the government perhaps needed a mechanism to establish whether employment was being created. He added that Business Unity South Africa (BUSA), when they visited Parliament, had assured the Committee that employment was being created. However, COSATU had an opposite view. The Committee perhaps needed to meet with all the social partners, through NEDLAC, to establish the facts. Indeed, the Committee needed to play an active role in monitoring the situation at NEDLAC.

Mr Maduna and the Chairperson noted that the Department had stated that 23 of the 25 SETAs were performing well. Mr Maduna observed that many members of the public had complained about the SETAs. He, therefore, questioned whether all of the 23 SETAs were performing well. Mr Morotoba acknowledged that some of the SETAs had a poor public image. However, there were some SETAs that were performing very well. Indeed, the SETAs had already exceeded the NSDS targets for learnerships. Nonetheless, a number of the SETAs faced various challenges. One problem that all SETAs faced was that there was an enormous demand for skills development. The SETAs could not provide skills to everybody; Universities and Technikons also needed to contribute towards skills development.

Added to this, certain people often expected the SETAs to provide services that were not part of their mandates. This often caused frustration amongst people who did not understand why the SETAs could not deliver these services. SETAs faced various other constraints, for example, capacity problems. Some of the SETAs were geared only towards meeting the needs of the levy payers. This was specifically a problem in SETAs that did not have representatives from the Department as members of their Boards. In order to address such issues, the Department had signed a Memorandum of Understanding with the SETAs. The Memorandum of Understanding also spelt out performance criteria that the SETAs were expected to meet. Mr Morotoba added that the Committee would have an opportunity to measure the performance of the SETAs when they visited Parliament.

Mr Maduna was concerned that some of the SETAs seemed to believe that they were not accountable to government. The Department and the Committee needed to stress that they were accountable to government; not only to the levy payers or the trade unions. The SETAs had a responsibility to assist government in transforming society. Mr Morotoba replied that the Skills Development Act stipulated that all SETAs were accountable to the Minister of Labour.

Mr Maduna and the Chairperson asked the Department to attend the meetings that the Committee would be having with the SETAs. Mr Morotoba replied that a Departmental representative would be attending these meetings.

Mr Mogale commented that in many areas, such as East London and Germiston, there was a problem with the payment of UIF. He asked whether these problems had been solved. Indeed, these problems should have been solved because the UIF had reported a net surplus of R10 billion. Added to this, why was it still taking 90 days for UIF claims to be processed? Mr Kettledas responded that the Department had made progress in addressing the challenges around the payment of UIF claims. In the past, the Department was processing 90% of UIF claims within six weeks. It was now able to process 90% of the claims within four weeks. The information of employees that had contributed to the UIF had been placed on a database. The Department had also introduced new systems, such as electronic bank transfers. This had led to improvements in the UIF claims payment system. Indeed, the introduction of the Siyaya IT system would improve the rate of claim payments even further.

Ms K Nicolaou (National Treasury Director: Labour and Unemployment Insurance Fund) stated that the number of people claiming UIF had declined since 1999. The Department had attributed this decline to a rise in voluntary resignations. She, however, questioned whether an increase in voluntary resignations could explain the drastic decrease in the number of UIF claimants. She asked the Department to provide an explanation for the decrease in UIF claimants. Mr Kettledas replied that claimants were entitled to benefits according to the number of credits they had accumulated. Once a claimant had exhausted their credits, they would no longer receive UIF benefits. As a result, they would exit the UIF system. This, along with voluntary resignations, accounted for the decline.

Mr Maduna observed that people who had been unemployed for a long time could not get access to UIF credits. This meant that they would not receive any UIF benefits, and would have no source of income. Only employment creation could address this. Mr Kettledas responded that when an unemployed person approached the Department for assistance, they would be registered as work seekers. The Department would then attempt to place that person in another job through its employment services. If this were not possible, the Department would direct that person to training programmes or would attempt to assist the person to become self-employed. Unemployed people could not simply be viewed as UIF beneficiaries.

The Chairperson asked how the Department had addressed the problem of its inspectors being poached by the private sector or by other government departments. Mr G Tsengiwe (Department of Labour: Senior Executive in the Office of the Director-General) replied that the Department had increased the number of inspections that it undertook. Inspectors were now expected to spend 80% of their time doing inspections and 20% of their time in the Department’s offices. However, its inspectors were poached by other government departments and the private sector. In order to address this, the Department was examining the possibility of upgrading the remuneration levels of the inspectors. Nonetheless, inspectors were provided with transport and cell phones.

The Chairperson asked how the Department monitored whether the inspectors were performing their duties properly. Mr Tsengiwe responded that inspectors worked in teams and were required to report to a team leader. Added to this, the inspectors were provided with a schedule and were required to conduct a certain number of inspections per week. The Department would take disciplinary action against any inspector that did not perform their duties properly.

Ms Nicolaou noted that the PFMA, and the Auditor-General, had stipulated that the NSF needed to be listed as a public entity. The National Treasury had met with the Department around this issue. The Department should have drawn up a business plan, which needed to be submitted to the National Treasury, so that the NSF could be listed by December. She asked whether the Department had made progress towards drafting this business plan.

Mr Morotoba questioned whether the listing of the NSF was stipulated in the PFMA. Various problems and challenges would also arise if the NSF were listed. For example, a new Board would have to be established in order to oversee the NSF. This would mean that Parliament would have to define the role of this Board. The Department believed that strengthening certain systems around the NSF could address the problems that it had experienced. This would mean that it would not be necessary to list the NSF.

Ms Nicolaou replied that it would be a contravention of the PFMA not to list the NSF. Added to this, even if the NSF was listed, it could continue to remain under the control of the Department. It was not necessary for the NSF to have a Board: the listing would simply be a technical listing.

Mr Mshudulu and Mr Kettledas commented that the Committee meeting was not the best forum to raise issues around the listing of the NSF. The Department should rather meet with the National Treasury about the NSF matter.

Mr Mshudulu and the Chairperson enquired about the status of sheltered employment factories. Mr Mogale added that there appeared to be a number of problems in sheltered employment factories. For example, the Department’s Annual Report highlighted that some people employed at the factories were not disabled or mentally challenged, some of the factories did not have proper asset registers, some people at the factories were signing cheques without authorisation, and assets were being abused. He asked how the Department was addressing this situation.

Mr Van Der Merwe acknowledged that there were some problems at certain of the sheltered employment workplaces. The Auditor-General had only identified these problems in 2004/05. These problems, however, had a longer history and could not have arisen within the space of one year. Three years ago, some of the assets at a sheltered employment factory had been stolen. However, the Auditor-General had not reported on this. Mr Van Der Merwe added that in April 2005, due to the intervention of a whistle-blower, a forensic audit was undertaken in one of the sheltered employment factories. It was discovered that the factory manager and a staff member of the Auditor-General had been involved in certain irregularities. Indeed, there had been a misappropriation of funds, which could have amounted to as much as R25 million.

Mr Van Der Merwe noted that a total of 1 300 people were employed at the sheltered employment factories. He noted that 20% of these people were physically disabled, 70% were mentally challenged, and 10% were not disabled.

Mr Van Der Merwe added that the Department did not possess the skills to manage the production at the sheltered employment factories. As a result, the Department had contacted BUSA for assistance. They had stated that they would source an experienced manager to run the sheltered employment factories on behalf of the Department. A Committee would also be established to oversee the operations of the factories. Mr Kettledas added that the Department was reviewing the role and functions of these factories. These factories would perhaps be re-orientated. The Department would report back to the Committee on this process.

Mr Mshudulu asked whether the Department’s inspectors would be working with inspectors from the Department of Minerals and Energy around the issue of OHS.

Mr Godi noted that the Department was investigating the SASOL accidents. He hoped that these investigations would be thorough, speedy and provide concrete recommendations regarding how SASOL could improve its OHS. Mr Kettledas replied that the Department would be undertaking a thorough investigation. It seemed as though SASOL’s safety standards needed to be improved. The Department needed to investigate whether there was a fundamental problem with the SASOL’s OHS management system. If their system was flawed, the Department needed to recommend ways in which it could be fixed. The hazards in SASOL’s operations also had to be clearly identified to ensure that accidents were avoided.

Mr Mshudulu noted that many people, who had no formal qualifications, had acquired skills whilst working. These people needed to convert their work experience, and knowledge, into formal qualifications. He felt that labour centres should work with the PCOs to identify such people. These people could then formalise their skills through the Recognition of Prior Learning Programme. Mr Morotoba replied that the Department had a programme to convert people’s experience into formal qualifications. People would need to compile a portfolio of evidence in order to convert their experience/skills into formal qualifications. They would then be assessed and if they passed they would be provided with formal qualifications. However, the Department currently only rendered this service for trades, such as welding and building. Nonetheless, the Department was looking at expanding this system.

Mr Maduna commented that the Department should place information material in PCOs. This would improve the extent of Department’s public outreach. Mr Kettledas answered that the Department did have a working relationship with a number of PCOs. Nonetheless, the Department wanted to expand such relationships even further.

Mr Mshudulu stated that the Department needed to outline specific timeframes for addressing the challenges that had been identified in the Annual Report. This would allow one to monitor the progress that was being made towards addressing these challenges. Mr Kettledas responded that the challenges, which were identified, needed to be worked into the Department’s plans for the present year. The Department would then undertake quarterly monitoring reports. These would be used to monitor the progress that had been made towards addressing the challenges.

Mr Mshudulu noted that the Department only paid compensation to injured workers that it could find. Many people moved around, which created certain problems. Perhaps the Department needed to use the media to advertise the names of the people, which it could not find, to inform them that they were eligible for payment by the Compensation Fund. Mr Kettledas replied that in the past, the Department had advertised the names of people that had failed to collect payments. The problem was that this system was centralised in Pretoria. Mr Kettledas added that perhaps such an advertising system could be reinstated. However, it would need to be decentralised to the local labour centres and the mobile units. This would allow members of the public to visit these centres to make enquiries about the status of their compensation payouts. The Department needed to ensure that everyone who was eligible for a payment received the payment.

Mr Mshudulu enquired whether the Social Plan had been linked to the NPI. Mr Morotoba replied that the NPI was funded through the Department. Its main focus was on improving productivity. However, it also had a number of other programmes, which included the Social Plan. NEDLAC had approached the NPI to be involved in the Social Plan on an ad hoc basis. The Department was considering how this could be made more permanent, which included considering how the programme could be funded.

The meeting was adjourned.

 

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