Department of Labour Expenditure: briefing by National Treasury

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Employment and Labour

11 October 2005
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Meeting Summary

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Meeting report

11 October 2005


Chairperson: Ms O R Kasinyane

Documents handed out:

Briefing by the Treasury Department


The Committee was briefed by National Treasury about the Department's expenditure trends over the past financial year. The Department has accumulated large earmarked surpluses in the various public entities and has also exhibited under spending on personnel and capital works amounting to R133m in the 2004/05 financial year. The vacancy rate in the Department had increased from 17,7 percent in 2002/3 to 21,4 percent 2004/5. The Unemployment Insurance Fund turnaround strategy was noted as a success. The sheltered employment factories run by the Department that provided economic empowerment to mentally and physically challenged persons needed restructuring but the Department had not progressed in establishing a management committee to oversee them and an updated feasibility study was needed to highlight a way forward and indicate the appropriate institutional form that promotes the viability of these institutions. The Committee heard that the National Skills Fund needed to become a listed public entity to comply with the Public Finance Management Act. The National Skills Fund is not listed and the financial management of a R1 billion Fund resides at the level of a chief-director. Moreover, accountability, governance and reporting lines need to be improved. The Members raised concerns about the vacancy rate and the impact it had on service delivery as well as the current state of the sheltered employment factories.


Ms K Nicolaou (Director of Labour and Unemployment Insurance Fund: National Treasury) briefed the Committee on the Unemployment Insurance Fund, sheltered employment factories, the National Skills Fund and Departmental expenditure trends from 2003/4 to 2004/5.

She noted that the Department of Labour had about thirty public entities[Kathy Nicolaou] requiring greater oversight by the Department. The department is one of the few departments that reports to the National Treasury on public entities on a quarterly basis, however the quality and timeliness of the reports for some entities are problematic. The Department of Labour is a national department that provides services at a provincial and regional level. The Skills Development Levy is a statutory amount collected on behalf of the Department, by SARS. Employers pay a levy that is 1% of payroll to SARS which then transfers these amounts to the Department, who in turn transfers the funds to the NSF (20%) and the SETAs (80%) .

Ms Nicolaou noted that the Department had under spent on Capital Works and Personnel with the personnel vacancy rate increasing from 17,7 in 2002/03 to 21,4% in 2004/05 . The Department undertook about 8 000 inspections annually. She suggested that the Department should adopt a preventative and proactive strategy when conducting inspections.

The Unemployment Insurance Fund (UIF) is a listed Schedule 3A public entity and is in the process of being ring-fenced as a departmental agency . The UIF has about R8 billion in surpluses and this was projected to increase substantially over the medium term to amounts of about R18 billion. The UIF was paying out more money but to fewer beneficiaries. The UIF attributes the decline in the number of claims to voluntary resignation by workers . Ms. Nicolaou noted that there could be more to the decline in claims than just voluntary resignations which needs to be investigated. She noted that the 6-8 weeks waiting period for a claim to be paid was a very long time for an unemployed person.

She reported that the Sheltered Employment Factories did not have any legal status. There was a high vacancy rate at these factories running at 1 700 positions. She linked the vacancy rate in these factories with the uncertainty about their future and noted that the restructuring of these factories had been ongoing since 1998. Ms. Nicolaou reported that the Department of Laour should have appointed a transaction advisor on a PPP early last year but to date there has been no appointment made with the result that the National Treasury has terminated the PPP.

The National Skills Fund currently had no legal form. The Auditor General , in line with the PFMA, required the NSF to be a listed public entity. She reported poor accountability and no regular reporting by the NSF. The NSF had experienced a net deficit of R91,9 million in 2004/ 0 5 due to increased pressure on its funding.

Mr Mogale (ANC) enquired if the Department had not received a qualified report from the Auditor General for under spending.

The Director replied that the qualification was effected only if it was above five percent of its budget.

Mr Mshudulu (ANC) indicated that the amendment to the UIF Act had aimed at improving its service. He suggested that the waiting period for processing of claims had to be improved.

Mr Mzondeki (ANC) proposed that when businesses were inspected there should be developmental programmes aimed at assisting the business to be compliant. He raised a concern about the vacancy rate. He proposed that there should be learnerships for the training of inspectors.

The Chairperson recommended that the compensation for inspectors had to be improved and that they needed to be properly capacitated. The Members agreed that the sheltered factories should be made more viable and be run as business-like entities. There should be more people working in these factories.

Mr Mshudulu requested that a list of sheltered factories be provided so the Committee could visit them. He also suggested that an assessment questionnaire be developed to assist the visits by the Committee.

The meeting was adjourned.






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