Department of Labour 2006/07 Budget: briefing

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Employment and Labour

07 March 2006
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Meeting Summary

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Meeting report

7 March 2006

Chairperson: Ms O Kasienyane (ANC)

Documents handed out:
Budget Analysis Vote 17: Labour

The Parliamentary Research Unit provided Members with an analysis of the Department of Labour’s 2006/07 Budget. Members raised concerns about the infrastructure needed to implement the Accelerated Shared Growth Initiative for South Africa. Key objectives and goals set out by the Department were outlined. Members were told that the 2006 State of the Nation Address emphasised the need for a balance between economic growth and development issues with a strong emphasis on the developmental aspects of economic growth.


Parliamentary Research Unit briefing
Parliamentary Researcher, Ms J. Watkins told Members that the President’s State of the Nation address raised strategic objectives that impact on the labour sector. She said that although the South African economy has shown more than five years of sustained growth there is a need to make the necessary interventions in the first economy to accelerate progress towards the achievement of higher levels of economic growth and development.

She said that it is the government’s objective to halve poverty and unemployment by 2014. She said that the Accelerated Shared Growth Initiative for South Africa (ASGISA), which consists of a limited set of interventions, was intended to serve as a catalyst to accelerated and shared growth and development. The task of registering unemployed graduates had been completed by last year. Special attention would be paid to the issue of scarce skills. She said that ASGISA recognises the need to expand small, medium and micro enterprises (SMMEs), with specific focus on Broad Based Black Economic Empowerment and the development of women and youth.

In developing the SMME sector, attention will be paid to issues of access to capital, entrepreneurial training, assistance with marketing and the development of cooperatives.

Analysis of the Department’s 2006/07 Budget
Parliamentary Researcher, Ms B Biutiwileng told Members that the Service Delivery, Labour Policy and Labour Market programme received the bulk of the Department’s Budget. The allocation to the Employment and Skills Development Services programme increased marginally by 2.1% in the 2006/07 financial year. She said that the Administration programme conducts the overall management of the Department and provides centralised support services. The Administration programme consists of 22.23% of the programme budget, most of which goes to the Corporate Services subprogramme.

All programme budgets have increased in nominal terms. The Capital Works programme has not been budgeted for as was the case in 2005/06. She said that the programme is expected to grow at a cumulative growth rate of 1.5% over the Medium-Term Expenditure Framework (MTEF) period. The Service Delivery programme ensures that the Department of Labour’s legislation and policies are catered for. She said that the Department only gives them the service delivery objectives but did not tell them how they intended to achieve the goals. She said that this would become evident throughout the document. Members needed to know how the Department would be monitoring certain programmes. The Social Insurance Programme contributes to the Unemployment Insurance Fund (UIF) and funds the Compensation Fund, which compensates civil servants for accidents or illness while on duty. The Compensation Fund subprogramme receives 99.9% of the programme budget, while the UIF subprogramme receives 0.1% of the budget. The UIF subprogramme has decreased by 4.9% in nominal terms, while it has increased by 0.3% in real terms.

The Chairperson commented that the Researchers were only there to assist the Members in understanding the budget allocation and may not be able to answer all of their questions.

Prince N Zulu (IFP) commented that he was grateful that the researchers had been brought in to help them understand the budget. He wanted to know if the researchers were independent.

The Chairperson replied that they were not independent. They were from the Research Unit at Parliament and assisted other committees as well.

Prince Zulu wanted to know the difference between real and nominal increases and said that he is concerned about the decline in the UIF budget allocation.

Ms Biutiwileng explained that a nominal increase means that inflation has not been taken into account whereas real increases took inflation into account and would therefore be less than the nominal increase.

Mr E Jawoodeen (Parliamentary Researcher) said that the Department would soon restructure the National Qualifications Framework (NQF). He said that the Committee could possibly ask the Department for more information about this and find out if there is a problem with the rolling out of the National Qualifications Framework Programme.

Ms Joy Watson (Parliamentary Researcher) commented that the UIF would be in a strong financial position for the next ten years. There were problems in responding to UIF requests but the UIF would be transformed and become independent. She said that this should turn things around.

Mr Mzondeki (ANC) wanted to know if resources have been allocated for ASGISA. He commented that even if resources were allocated, the capacity to deliver did not always exist. They needed the raw figures and not percentages. He said that a lot of enforcement services were needed on farms and even in towns. He wanted to know if there would be a decrease in the number of labour inspectors.

Ms Biutiwileng replied that Members should ask the Department about the decrease in Inspector Services. This service ensures that employers and employees comply with the labour market specifications. The Department did not report their findings. They needed to compile reports on what they found and monitor the expenditure of the departments. Often departments underspent in the 1st and 2nd quarters; however by the end of the 3rd quarter some of the money had not been spent and they then applied for a roll over. She said that this would affect the following years’ budgets. She commented that the Committee should have access to the Joint Budget Committee to keep an eye on the Department’s spending.

Mr Jawoodeen commented that one would have to look at the long-term inspection plan. He said that during 2003/04, the budget had increased substantially. The Department had to have an efficient service. He said that this programme was also linked to occupational health and safety.

Mr Mzondeki (ANC) wanted to know if underspending during the third quarter was due to a lack of capacity and skills.

Ms Biutiwileng replied that the departments first drew up a strategic plan and then the budget. She said that capacity is a real problem. Planning is a problem in the departments. For instance, the Department of Communications did not even have a cash-flow projection, but spent money as the need arose. She hoped that the Portfolio Committee would take part in the planning process. She commented that at first she thought that transfers were only used by government agencies, but later discovered that it was also used to transfer legal fees. Sometimes departments set goals that were not within their reach and that did not fit in with the budget.

Mr Jawoodeen commented that the budget was a bit silent on ASGISA and that the programme needed to be unpacked. The Department had to be asked about the budget allocation for ASGISA.

The Chairperson said that they would be focusing on government agencies when they invited the Research Unit again. She commented that ASGISA had isolated the shortage of suitably skilled labour. She said that 50 000 learners had entered a programme for scarce skills but the number of students who qualified was not high. She wanted to know how the Department could be approached on this matter.

Ms Joy Watson replied that the department has signed 23 SETA’s of which only 15 needed to be satisfactory. She said that this was a matter that only the Department could answer.

Mr G Anthony (ANC) wanted to know what the researchers’ view was of the impact of labour legislation on SMMEs. He wanted to know if it had had a negative impact on them.

Mr Jawoodeen replied that organised business had done studies on the negative impact of the legislation. He said that there could be exploitation of workers and norms and standards had to be set. Labour standards ensured a person’s dignity.

Mr Maduma (ANC) wanted to know if ASGISA would require an increase in departmental staff.

Mr Jawoodeen replied that there would be costs involved in the implementation of ASGISA. The Committee would need to look at the impact and consequences of ASGISA. He said that the Minister would have to make a decision on the matter.

The Chairperson commented that they needed to involve civil society in the budget but that they had to decide on the manner of involvement. The Committee also had to look at the implications of involving civil society.

The meeting was adjourned.



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