National Skills Fund 2006/07 Budget briefing; Department 2006/07 Budget and Strategic Plan: discussion

Meeting report

LABOUR PORTFOLIO COMMITTEE
29 March 2006
NATIONAL SKILLS FUND 2006/07 BUDGET BRIEFING; DEPARTMENT 2006/07 BUDGET AND STRATEGIC PLAN: DISCUSSION

Chairperson:

Ms O Kasienyane (ANC)

Documents handed out:

National Skills Fund Presentation to the Labour Portfolio Committee 29 March 2005 (PowerPoint)
Department of Labour Strategic Plan 2006-2009 presented on 9 March 2006 (PowerPoint)

SUMMARY

 

The National Skills Fund briefed the Committee on its primary objectives, main tasks, expenditure trends, achievements, new funding windows and its priorities and challenges. The Committee sought clarity on the National Manpower Development Fund and the mechanisms used to track graduates. Members also enquired about the effects of the Accelerated and Growth Share Initiative of South Africa and the Joint Initiative for Priority Skills Acquisition on the Fund. Members were concerned about the issue of labour brokers and the empowerment of domestic workers and people in rural areas. The Committee also sought clarity regarding the distinction between learnerships and apprenticeships and on the Fund’s qualified Audit Report.

The Committee posed questions to the Department of Labour on its presentation that it made to the Committee on 9 March 2006. Members sought more information on the inspections the Department undertook, the efficiency and efficacy of the National Economic Development and Labour Council and the action taken against non-complying Sector Education and Training Authorities. The Committee was very concerned about the prevalence of child labour in the country, the situation of farm workers as well as the high dropout rates from Department training programmes. The Committee and the Department planned to hold a workshop in the second term to deal with labour issues that had not been addressed.

MINUTES

Briefing by the National Skills Fund (NSF)
Mr S Morotoba (Acting Deputy Director-General: Employment and Skills Development Services) briefed the Committee on the activities and plans of the NSF. The NSF was established in terms of the Skills Development Act of 1998 and its main source of income was 20% percent of the skills levies that were collected. The NSF could only use its funds on projects identified by the National Skills Development Strategy (NSDS). The Governance Structure of the NSF was explained as well as its main tasks. Its income for 2005/6 was R942, 1 million while its expenditure was R596 million. It therefore had a surplus of R346, 1 million.

The focus areas and achievements for the first NSDS strategy (2001-2005) were discussed. The Committee was then presented with the adjusted NSDS strategy planned up to 2010. The five-year funding framework and the nine NSF funding windows were explained in greater detail. The NSF also had a number of strategic projects which it presented to the Committee. The achievements of the adjusted NSDS strategy were presented up to December 2005 and the 2006/7 Budget distribution was highlighted. Lastly, the NSF had a number of priorities and challenges that fell under the new adjusted NSDS strategy.

Discussion
The Chairperson highlighted that after the NSF briefing and question and answer session the Committee would immediately pose questions to the Department of Labour on the presentation it had made on 9 March 2006.

The Chairperson asked that the National Manpower Development Fund (NMDF) be explained in greater detail.

Dr V Mkosana (Director-General, Department of Labour) wished to emphasise a number of points. Firstly, when looking at the NSDS strategy up to 2010 there were five key objectives that needed to be realised. These objectives were critical skills, workplace training, employability, sustainable livelihoods and new entrants in the employment sector. However, this strategy was developed before the introduction of the Accelerated Shared Growth Initiative of South Africa (ASGI-SA) and the challenge was how to align the NSDS to ASGI-SA. He highlighted that four of the key objectives directly spoke to ASGI-SA and were sensitive to the reduction of inequality and poverty and focused on economic growth and employment creation. This meant that a solid framework was in place. The NSF was merely looking at the details of this framework to ensure it related to ASGI-SA at all times.

Dr Mkosana said the second issue that needed to be highlighted and which often came up was the accounting system of the NSF. The Act was very clear as far as this issue was concerned. This system was a programme that was managed by the Department and was therefore accounted for along the same lines. However, there were a number of details that needed to be explained. One of the things the Department had done was to ensure it had a Chief Financial Officer (CFO) who had overall control of the finances of the Department including the National Skills Fund. There were processes in the Government that were meant to guide the Department on how to manage government agencies. These processes were closely monitored by the Department and were linked to how it managed the NSF.

Dr Mkosana replied, as far as the National Manpower Development Fund (former Bophutatswana Fund) was concerned, this amount was originally around R40 million. With the assistance of the North West province this amount has been allocated so that only R17 million remained. The Department has implored the North West province to make sure this remaining amount was used soon as it had taken too long to do so and it showed that the province’s capacity to spend was not at a desired level. This situation has led the Department to implement a number of measures. One of these measures was if the province failed to spend this money the Department would deduct R17 million from the social services funds deployed by the NSF to the North West province in the future. This was a drastic step but it would be taken if this spending did not occur.

The Chairperson responded that Dr Mkosana had not answered her question but had rather discussed concerns that had been raised by the Auditor-General. She had requested that the National Manpower Development Fund be explained to the Committee. The Auditor-General’s report had stated that R1, 2 million was not utilised by the steering committee which was established by the Department to approve projects and determine the allocation of funds. The intention of this steering committee was to allocate the total funds to training projects within eighteen months. The steering committee allocated R34 million in February 2005 for skills development into the training programmes of various stakeholders in the North West province. However, by the end of 2005 only R1, 2 million had been paid over to these programmes. She sought clarity on this issue.

Mr Morotoba explained that the National Manpower Development Fund was originally located in the former Bophutatswana. Before 1994 there were a number of labour laws including the Manpower Development Act and the former self governing states also had their own legislation. After 1994 the Department led a rationalisation process through the Public Finance Management Amendment Act which repealed all Acts that had been taken over by the new Department. This process included addressing the funds of the different areas. Most of the areas did not have money except for the former Bophutatswana which had a ring-fenced amount in its Manpower Development Fund. The Department’s preference was to take all these funds and form a single fund known as the New National Skills Fund. However, the Premier of the North West insisted that the former funds of Bophutatswana should be ring-fenced for the North-West province and the Department did so.

Mr Morotoba added that in order not to dilute the National Skills Fund allocations which were allocated through the Social Development Fund annually to the provincial offices, a steering committee was established which included the premier’s office that had to ensure the National Manpower Development Fund allocations were spent. Once this occurred the province would then move to the funds allocated to them by the NSF. However, the North West province was currently concentrating on the NSF funds and ignoring the funds that fell under the National Manpower Development Fund. The main problem was that these funds had been allocated but the money was not moving, in other words there was no expenditure. The Department had therefore taken the decision to subtract the amount not spent under the National Manpower Development Fund from the funds allocated from the NSF in order to try to get this money spent in the future.

Mr M Mzondeki (ANC) wanted to know what the Department’s observations were regarding why the National Manpower Development Fund money was not being spent.

Mr Morotoba answered that one of the main problems was that the steering committee met irregularly while the Department was dedicated and focused on the NSF allocation. There were also no support structures in place to ensure that funds other than those allocated from the NSF were spent. Provinces were usually able to spend more time on allocating the Social Development Funds.

Mr Mzondeki commented that a great deal of money was spent on scarce skills. However, he was not sure that all graduates were employed. What mechanisms were in place to track these graduates? He also enquired about the sustainability of the Expanded Public Works Programme (EPWP) projects and the use of municipalities to support NSF projects.

Mr Mkonto (Deputy Director-General: Service Delivery) replied that tracking graduates was a serious issue that needed to be addressed. The Department had identified this as a weak area especially in terms of holding the National Student Financial Aid Scheme (NSFAS) to account for the placement of learners. There was no proper tracking mechanism in place and this had to be developed in the future.

Mr Mkonto added that the NSF had also on a provincial and a local level stated that it would not fund any projects that were not linked to the local and provincial development initiatives. This decision had been met with an outcry from service providers who were dissatisfied with this decision. The Department then backed down and struck a balance between the projects local service providers could submit and the projects municipalities could submit or projects that were in line with the municipal development initiatives. However, the long-term objective was that all projects funded by the NSF would be in line with the local development initiatives and provincial growth and development strategy initiatives. This was to ensure long-term sustainability of employment so that graduates were not jobless once projects ended.

Mr G Anthony (ANC) commented that it was unfortunate that the Committee had only received information on the National Manpower Development Fund at this meeting. However while the Director General spoke of R40 million and R17 million not having been allocated, the Chairperson had mentioned different amounts. This was confusing and he sought clarity in this issue. Secondly, there had in recent months been restructuring of cross-boundary municipalities in the North West province and some of the North West communities now fell under the Northern Cape province. Were these communities not going to be disempowered as they were no longer entitled to the National Manpower Development Fund?

Mr Anthony added that nearly 75% of Kgalagadi had fallen under the North West province and had now been allocated to the Northern Cape. There was only one labour centre in Kuruman that now had to serve this entire area and it therefore had a capacity problem. He therefore believed that the remaining R17 million should be used to empower the labour centre in Kuruman so that it could serve these new communities that had now been assigned to it. He requested that the Committee receive written information on this issue so that it could then come up with proposals to try to alleviate this problem. Lastly, there had been new developments in the form of ASGI-SA and the Joint Initiative for Priority Skills Acquisition (JIPSA). How would the processes deriving from JIPSA affect the NSF?

Dr Mkosana noted that when addressing the use of the remaining R17 million the NSF would be conscious of the new assignment of these communities although the amount was ring-fenced. However, the NSF did not have mechanisms in place as this was a new development but it would focus on it in the future. The NSF would also give a written reply on what the actual figures were regarding the National Manpower Development Fund and also how the remaining amount would be spent.

Mr Mkhonto responded that it was important to accept the reality that the Skills Development initiatives had been developed before ASGI-SA and JIPSA. However the NSF had recognised that ASGI-SA provided a number of opportunities as learners that went through the NSF got real jobs and were trained in real projects. It was therefore important to align with the focus areas of ASGI-SA. However, he was not sure that the Sector Education and Training Authority (SETA) or NSF funds would be able to sustain everything that fell under ASGI-SA. He felt that this would not be the case as the Department was only one contributor and the Department of Education was another contributor and was a leader in terms of Human Resources Development (HRD). This Department also had to ensure that its policies were aligned with ASGI-SA as well as the Department of Trade and Industry and the Department of Science and Technology. This has led to the Departments working in an employment cluster. The DG of the Department of Labour and the DG of the Department of Education acted as Co-chairs of this focus group on skills development that aimed to combine resources to support ASGI-SA initiatives.

Dr Mkosana added that although the NSF had not planned the development of ASGI-SA it was currently investigating the 108 ASGI-SA projects to determine which were funded and which were not. It was also scanning the skills needed and determining the financial implications and these appeared to be huge. The NSF had at the end of a previous financial year ended up with a budget surplus. This would most probably not be the case due to ASGI-SA projects. An important question that had to be asked was how skills development could be funded to equal the demand for this funding. The NSF was not in possession of the exact details of the implications and effects of AGI-SA but would forward this to the Committee at a later stage.

Mr O Mogale (ANC) stated that JIPSA was launched by government, business and civil society while the NSF had its own role-players. Would a conflict of interest therefore not arise? He further argued that the question surrounding the effect of JIPSA on the NFS had not properly been addressed.

Dr Mkosana responded that he did not believe there would be a conflict of interest as JIPSA was merely the normal execution of government work and the NSF was continuously implementing this mandate. JIPSA would be focusing for eighteen months on the skills that needed to be prioritised by government. The only concern that could be raised was that there could be a duplication of efforts as work on skills development was undertaken by a number of Departments. The Deputy President had however been distinct in this regard. JIPSA was not taking over the work done by Departments but was rather unblocking blockages that existed and providing necessary assistance. The Department was fully involved in the JIPSA process and it was therefore not a threat to the NSF.

Mr B Mkongi (ANC) wished to know how the four qualifications raised in the Auditor-General’s Report had been addressed by the NSF. Secondly, he noted that the operations expenditure had been tested and a significant adjustment of R3, 4 million had been made. The report of the Auditor-General explained that this was a result of project expenditure that had been incorrectly allocated to the Department. How did this occur if systems of internal control existed? Thirdly, an amount of R60 577 could not be verified through confirmations. According to the Auditor-General’s Report this was a result of inadequate file administration and timeous approval of contracts. He wished to know how this was possible if in 2005 there was an updated and transparent accounting system. Lastly, the accounting systems of the NSF did not seem to comply with the processes laid out in the Public Finance Management Act (PFMA) or other Treasury guidelines. For example, bank funds and cash were disclosed as an overdraft in the NSF Annual Financial Statements. Did internal audits occur on NSF bank statements and if so, how did this mistake occur?

Mr J Du Preez (Senior Executive Manager of NSF) replied that as far as the structure and accountability of the NSF was concerned, the DG had already indicated which processes were underway to address this problem. He wished to deal with the issue of the NSF’s operating expenditure in conjunction with the issue of the bank statements as they were related by the way the Department was addressing these concerns. Basically, these issues originated form the fact that a separate NSF account never existed and was rather a programme of the Department and the flow of NSF funds therefore occurred through the Department’s accounts. However, the DG and the National Treasury had recently approved the establishment of a separate bank account for the NSF and this would be implemented from 1 April. This would address the concerns surrounding the operating expenditure, confirmation issues and the balancing of figures.

Mr du Preez added that the issue of commitments needed to be explained by emphasising that the Department of Labour’s records showed that there was no question over the balances of the NSF being correct. However, at the end of the Audit, the Auditor-General decided to do a third party confirmation. In other words the legal documents could be identified that represented the actual commitments for the full amounts stated in the NSF books. The Auditor-General then requested the SETAs that were the disbursing agents of the strategic projects to confirm this balance. The amount seen by the Committee was the amount that reflected the responses the Auditor-General had not received. There was therefore no evidence of a contradiction but rather that the Auditor-General could not confirm the balance due to not receiving responses from some of the SETAs. The NSF had since then instituted mechanisms that ensured that within a certain period all SETAs would confirm in writing that the balance on the NSF books was correct. So the actual problem that existed was in fact the non-response from third parties and not that responses were given and there was a contradiction with the balance.

Mr Morotoba had already explained that in the NSF disbursement model there was a system of advance payments as not all agencies had money to implement projects and then claimed back this money from the NSF. However, in the past the Department’s accounting system could not accommodate this type of account and as the advances were paid back instead of subtracting it from the loan account, it was entered as income and was therefore a separate entry. The NSF has since then reconciled these amounts and all outstanding amounts were now confirmed by supporting documentation. The NSF has also requested that its Internal Auditors do internal verification of these balances for the financial year.

Mr Mogale noted that there were 20 000 adult learners spread across the country. However, it was difficult for the Department to trace these trainees. Was it possible for the Department in the future to inform the Committee in writing in which provinces these learners were situated as well as whether service providers had been identified?

Mr Morotoba responded that the research section of the Department conducted studies periodically that aimed to look at the impact and the differences being made by its learnership programmes. The Department also received reports from the various service providers which it had entered into contracts with. One of the conditions in these contracts was placement. Part of this process was a verification process which was very complex but was not enough and therefore tracer studies were done at different intervals.

Mr Morotoba added that the process followed with regards to service providers was that firstly the Department requested proposals from service providers and it had received 146 proposals. However, at the provincial level a different process was followed as the Department acknowledged that not all communities could meet the requirements needed for the tender process. It therefore employed employment services practitioners that went to these communities to aid them in the application process and to write project proposals. However, these practitioners were not involved in the adjudication process. A different team undertook this. The accreditation of service providers was complex. The accreditation of the larger service providers was the responsibility of SETAs. However, the Department was still flexible in this regard and allowed service providers who were not accredited to take part in projects but also ensured that these providers would be accredited at a later stage.

Ms L Moss (ANC) referred to the management capacity of the NSF in the provincial and labour centres. She was concerned over the roll-out of NSF programmes as the country was very big and therefore people working in the labour centres were not reaching the people on the ground. She wished to know if the Department would strengthen its Human Resources with regards to this issue as it was a major concern. Employment equity with regards to black learners was also a problem. The problem of scarce skills was also linked to it. Newspaper reports have shown that as more black people were trained so were white people and this latter group benefited the most from this training according to the SETAs. This trend was also seen when observing senior management positions.

Ms M Xaba (Deputy Director-General: Corporate Services) replied that from September 2005 the Department had reflected on ensuring that the capacity to deliver on the ground was increased substantially due to the demand for services. The Department had undertaken an integrated business process in terms of developing a strategy known as Project IBS (Integrated Business Systems). This project aimed to ensure the bulk of financial and human resources were where the actual services were situated. The Department had ensured that 70% of its budget and resources were put into the labour centres. To further increase this, a study was undertaken by the Human Sciences Research Council (HSRC) and through using the Geographical Information System (GIS) this study was able to assist the Department where the locations of the service points should be. In terms of the Department’s service delivery model it was looking at three pillars for service delivery namely human capacity, automation and partnerships. These partnerships would further ensure that the Department would be present in all localities. For the year 2006/7, the Department would be rolling out the IBS at full steam and this would begin to decentralise its services and resources and also deploy services and human capacity to the regions and the labour centres.

Ms H Weber (DA) sought clarity regarding the difference between internships and learnerships. She also wished to know if there was a specific time allocated for completing a specific learnership and when it was completed did the person receive any sort of accreditation? She noted that the Department had stated that there was a strategic project for the taxi industry and small boat operators. She requested elaboration on this project by the Department.

Mr Morotoba replied that the apprenticeship system had in the past been governed by the 1924 Apprenticeship Act but this had changed over the years. However, it was still in the statute book and sections of the Manpower Training Act were still enforced. It was important to understand the context in which the learnership system was introduced. Companies complained over the length of time it took to train an apprentice as well as the number of apprentices graduating and the number of vacancies for these graduates and lastly the cost of these programmes. The response made by the Department to these concerns was not unique to South Africa. It implemented a learnership structure that was called traineeships in other countries. A learnership was seen to combine the education and the skills development component and was based on the apprenticeship model. Instead of a three to four year process the minimum time frame for a learnership was a year. It also included a contract that a learner signed and it outlined the employment, learner, service provider, and employer obligations.

Mr Morotoba added that these learnerships were accredited according to the National Qualification Framework and learners also received qualifications that were in line with this framework. The standards of the learnership were determined by the employer through standard setting processes. Learners were also able to leave the learnership at different stages and would then receive a qualification according to what had been completed. This was an important difference between a learnership and an apprenticeship.

Mr Morotoba said the Transport SETA had been included in the strategic projects that fell under the first taxi strategy where funds had been allocated. This SETA included the maritime industry and the taxi industry who approached the NSF as they wanted to introduce a number of programmes. One of these programmes in the taxi sector was SIYAYA. This was where a number of taxi drivers were trained in a number of areas including personal relations in order for them to get new SIYAYA microbuses. This same approach was currently being used in the new taxi recapitalisation programmes which were also supported by the Department of Transport. Regarding the small boat sector, the Department had started mainly in the Hout Bay area and the programmes mainly dealt with the training of small-scale fishermen in a number of fields including safety at sea and so forth. These were the main programmes that were funded by the NSF under its SETA strategic projects up to 2005. It was currently identifying a number of new projects to fund in the future.

Mr E Mtshali (ANC) highlighted that there had been no mention of the issue of labour brokers by the Department. This was an important issue as labour brokers often tended to be a menace especially to workers. Did these labour brokers comply with basic conditions of employment and where did they stand with ASGI-SA? Lastly how would JIPSA affect the programmes of Affirmative Action and Black Economic Empowerment?

Mr T Mkalipi (Acting SEM of the Department) answered that the Department had made a number of interventions regarding the issue of labour brokers. One of these interventions was a research document which looked at the extent of typical employment in the labour market. This research document was introduced 18 months ago and submitted to the National Economic Development and Labour Council (NEDLAC) for discussion. The NEDLAC report was then submitted to the President. NEDLAC was currently involved in interventions dealing with this typical employment specifically in terms of labour brokers. If these labour brokers did not comply with the law the Department’s service delivery section was responsible for ensuring compliance.

Mr Mkalipi added that the Department had also proposed a regulation to NEDLAC which would assist the courts in determining who were employees. The Department hoped that this regulation would be accepted before the debates began at the International Labour Organisation (ILO) in June on employment practices. These debates would deal with the issue of typical employment and labour brokers and so forth. The Department hoped that the interventions of NEDLAC would allow the country’s delegation to give an idea to other countries of South Africa’s direction on this issue.

Mr Mtshali replied that he was concerned about the fact that municipalities approached labour brokers and requested, for instance five hundred workers. These municipalities would tell the labour brokers that they would pay R600 a month to the workers and the labour brokers would provide the workers but would then only pay them R200 a month and would pocket the rest. These labour brokers also fired workers whenever they wished to do so. He did not believe this was fair practice yet it was what was occurring across the country.

Mr Mkalipi replied that all the Department could do was to implement the laws of the country. For example if the labour broker worked in the domestic worker sector there was a minimum wage that applied to this sector and the brokers had to comply with it. If these labour brokers did not do so the Department’s inspectors could enforce compliance. Unfortunately South Africa did not have a minimum general wage but different minimum wages existed in some of the employment sectors. In the municipal sector this minimum wage did not exist therefore Department inspectors could only enforce the general regulations of the Basic Conditions of Employment Act.

Mr Mkalipi agreed that labour brokers had a negative effect on the employment sector as well as the quality of work. Unfortunately workers often agreed to very low wages and the question that could be asked was whether a ceiling should be created under which no employee should ever be paid. The Department was trying to address the issue through its skills development fund by forcing labour brokers to register with the Department so that it could then regulate these brokers. However, it was often impossible to enforce when no laws existed in the employment sector concerned. When this occurred the issue of wages was left to a power struggle between the parties. The fact that general wage legislation did not exist was a huge problem.

Ms Mtshali responded that the Department and the Committee needed to work together to do something about this situation. It was terrible to see workers working for fifty years and then having no retirement or funeral policies. This problem regarding South Africa’s labour laws needed to be addressed immediately.

Mr Anthony added that an important question was whether there was actually a need for labour brokers and whether the current labour laws encouraged the use of labour brokers. This needed to be addressed as this question arose directly from experiences in the workplace and it seemed that big companies were hiding behind these labour brokers and were not implementing the laws that existed as the brokers did their dirty work for them. Were these labour brokers assisting their process of job creation and economic development?

Dr Mkosana added that the whole concept of how the work was organised and how it was shaped was an international phenomenon and it impacted on South Africa’s labour sector. This issue called on all stakeholders who were active in the labour market to continuously see what needed to be done regarding developments as they continuously were presented to this sector. As already mentioned the Department had conducted a study on atypical forms of work and this study has gone through NEDLAC. What now needed to be implemented from this study was currently being identified. The Department’s programme of action which was presented to the Committee included reviewing the determinations that were in place regarding some of the issues that the Committee had raised at this meeting. These issues would therefore be addressed without touching the legislation that was in place.

Dr Mkosana added that the Department was continuously coming up with wage determinations which had not been seen worldwide such as those about domestic and agriculture workers. These were some of the interventions the Department undertook within the framework of legislation. It was important to note that there were flaws within the implementation details of this legislation and these flaws needed to be dealt with. The Department had identified a number of determinations it needed to address such as hospitality, welfare, private security and civil engineering. These were some of the areas where labour brokers were very active and the Department would therefore also address them. Unfortunately labour brokers were a product of trends that were occurring worldwide.

Mr Mkhongi qualified Mr Mtshali’s last question. JIPSA had recently recruited retired white people to assist in the scarce skills projects. Would this not affect the Affirmative Action programme being implemented by Government? What constraints would this recruitment pose?

Dr Mkosana answered that no contradictions would arise due to the employment of white retirees as well as any other skilled retirees. The assumption was that ASGI-SA would help push economic growth to six percent and this implied broadening the "cake". This also meant an all-inclusive economy which included the second economy that operated on the periphery of the country. It was therefore important to empower the people in this second economy who had the assets such as livestock and land in the rural areas. ASGI-SA therefore spoke to Black Economic Empowerment and Affirmative Action and also ensured that these people graduated and obtained skills so that a vibrant single economy was realised. The economy would also be broadened to accommodate both black and white people who were able to make a contribution to it. At the present moment the Department planned to use all those people who were able to make a contribution to the economy including white retirees and even people that lived outside South Africa. This would hopefully result in a situation where affirmative action would not be needed anymore but this would obviously be far into the future.

Ms N Ncengwane (ANC) acknowledged that the Department tried to do a lot but unfortunately their efforts did not always reach the people. Members of Parliament were public representatives and they offered their assistance as well as the assistance of parliamentary constituency offices in the provinces. However, many of the unemployed and disabled approached these offices and it did not have any information to give them. She also sought clarity on the Domestic Worker Skills Development Project. Was this project done through the unions and once domestic workers had completed the training, did they receive a qualification and did they have access to better wages? Lastly, the NSF had mentioned in its briefing that only 0.05% of its learners were people with disabilities. What was the NSF’s target regarding this issue?

Mr Morotoba answered that domestic workers were included in one of the projects in the previous strategy of the NSF. Previously, the two big unions in the domestic sector teamed up with the services sector and applied for funding from the NSF. This was a three-year project and those who took part received a qualification. The starting point of this programme was that the lives of domestic workers needed to be improved. Some of these domestic worker’s lives have improved as they have received an increase in pay and have enjoyed an increase in status. However, many domestic workers who completed this training have moved into other sectors due to their skills being improved and others have continued studying. The project was therefore successful as it empowered domestic workers to improve their lives.

Mr Morotoba said the NSF had not included a domestic worker project in its new strategy. It did not preclude any party including the unions from submitting applications that would target these groups in the future. There were therefore opportunities to apply to one of the funding windows for future domestic worker projects. The NSF target for learners with disabilities was four percent in its first strategy. This target had not been met and therefore was retained in the new strategy. It was important to note that this was not the ceiling but rather the minimum target that had to be reached in the future.

Mr Mogale raised a question on the industrial support programmes. How was the Department engaging the Department of Trade and Industry (DTI) to assist Small, Medium and Micro Enterprises (SMMEs) in creating employment in the informal sector? How was the Department ensuring that workers who were unemployment and unskilled were able to enter the labour market? Why had the Department set its target for people completing learnerships at 50%? He also asked if the apprenticeship system founded in 1924 was still relevant and if so was it not difficult to implement the skills development programmes of 1998?

Mr Morotoba answered that a new venture had been created in partnership with the DTI known as the new venture creation learnerships. One of the problems of the learnerships was that when young people completed them they were often in the same position they were before this training. One of the major challenges was the issue of start-up capital. This challenge had not been included in the NSF framework but it had formed a number of partnerships with various stakeholders including the Umsobomvu Youth Fund who were focused on this challenge. A key area was to make sure that graduates not going into formal employment or other cooperative projects needed to have access to start-up capital especially if they were interest in starting a business. This was why the NSF was working with the Department of Trade and Industry in this regard.

Dr Mkosana answered that the apprenticeship system was first introduced and regulated in South Africa in 1924 by the Apprenticeship Act. Over the years this system had changed until the introduction of the Manpower Training Act in 1981. Although the content has changed the apprenticeship system has remained and the need for qualified men and woman in the various trades could not be underestimated. However, the problem with the traditional apprenticeship system was that it had targeted mainly young white males and had excluded black people and women. These restrictions had been removed and all races and genders were now included in the system. This system had also been modified to meet with the times and with modern technology. However, this development was still not moving at the same speed as a number of other countries. There were also a number of valid arguments for and against the apprenticeship system but the Department had decided to leave the system intact for the time being.

Briefing by the Department of Labour: discussion
The Department had briefed the Committee on its strategic plan up to the year 2009 on 9 March 2006. Members were requested to pose questions to the Department on this strategic plan. The Chairperson also requested that Members pose questions to the Department on issues that arose regarding the briefings received by the Committee on all the other entities in the labour sector.

Discussion
Mr Mzondeki recognised the Department’s aim of promoting employment equity. How far was it with this aim and when would the regulations for Employment Equity be implemented? He noted that the Department and the Department of Trade and Industry were currently aligning the Employment Equity Act and the Broad-based Black Economic Empowerment Act. He sought more clarity on this issue. He also wished to know how the Department ensured that employers, especially in the farming and domestic worker sector, complied with employment sector regulations.

Mr Mkalipi responded that the regulations surrounding the Employment Equity Act would be introduced after the Commission for Employment Equity (CEE) conference on Employment Equity on 29 March 2006. He hoped that these regulations would be finalised at the conference and be sent to the Minister who then had two weeks to approve these regulations for publication. There had also been extensive discussions between the Department and the Department of Trade and Industry on the codes of practise for Black Economic Empowerment. In terms of compliance with these codes the elements of Employment Equity played a role. Employment Equity demanded certain requirements from employers while the codes for Black Economic Empowerment demanded different requirements. The Department and the Department of Trade and Industry aimed to ensure alignment between these policies and there had been an agreement between the two that the codes for Black Economic Empowerment published by the Department of Trade and Industry received full approval by the Department and the Minister after the discussions. The Department had therefore aligned the implementation of its compliance practices with these codes. The report from these discussions had been submitted to NEDLAC in order for it to provide input on these issues. There had therefore been a hundred percent alignment on this issue.

Mr Mkonto responded that to ensure compliance the Department had to inspect certain areas. These areas were firstly, the area dealing with general labour legislation and secondly, the area of Occupational Health and Safety (OHS). Despite the fact that the Department had increased its inspections it had also implemented follow-up inspections where it had found non-compliance and had issued prohibition orders. These follow-up inspections aimed at ensuring employers had followed the orders that were made by the Department. This meant that the inspection number seemed high but this was only because of these follow-up inspections. With regards to SASOL, the Department had undertaken a number of follow-up inspections due to them employing private contractors to run certain of the SASOL projects who often did not comply with the OHS requirements. An enquiry on SASOL had been done and a report would be issued soon.

Mr Mkonto added that there were a number of challenges facing the Department in the agriculture sector due to labour brokers. Many farmers had abdicated their responsibilities to these brokers who had to manage labour and compliance issues. However, when Department officials arrived to undertake an inspection the farmers would not allow this to take place without their labours brokers being present. The workers also belonged to these brokers and not the farmers. Farmers could therefore not be found guilty of non-compliance. It was important that this issue was addressed as it was a serious barrier to the inspection programme of the Department. However, the Department was also reviewing its enforcement strategy as in the past the approach had been mostly towards the punitive side as when non-compliance was identified compliance orders would be issued. The Department was moving away from this situation to one which involved training so that the Department assisted the process rather than being a hindrance.

Mr Mkhongi had a number of questions. Firstly he saw a television show on the issue of child labour. The Minister had established a commission to investigate this issue. How far was this report? Child labour was a problem in Cape Town where children were brought from the rural areas and were forced to work. There had definitely been an improvement in the functioning and the reporting of SETAs. However, some SETAs had still not made these improvements. How was the Department addressing these SETAs that were not doing anything? Lastly, at most of the labour centres staff were underpaid and their office conditions were poor. This situation did not promote economic growth. Did the Department’s new budget aim to deal with this problem?

Mr Morotaba replied that the Department had approached Parliament in the past and had requested amendments to the Skills Development Act so that the Minister obtained additional powers. These new powers included new regulations that could be used to change the behaviour and compliance levels of SETAs. One of the main changes that had been introduced was that SETAs no longer had lifetime licences to exist but rather five-year licences. The Minister reviewed the SETAs every five years and decided whether to extend their licenses. This review process had also led to the merging of SETAs so that now only 23 remained.

Mr Morotoba said the Department was also ensuring that senior people sat on the SETA boards in order to make them more accountable. SETAs have also been required to account to Parliament which has been a great help. The DG of the Department met regularly with these public entities while the Minister met twice a year with the SETAs to address their performance. The Department had also improved the monitoring, evaluation and the report mechanisms of the SETAs which allowed it to intervene when things went wrong. The Department had also allocated one manager to four SETAs who were in charge of these SETAs’ activities. However, some SETAs were not developed including the Local Government SETA and the PSETA (Public Service Sector SETA). The Minister had convened a high level meeting with the Chairperson and senior members of the South African Local Government Association (SALGA) and the Department of Provincial and Local Government (DPLG) and the unions to discuss this issue. This meeting was seriously needed as the Department had been considering implementing the last resort found in the relevant legislation which was either to merge the two SETAs or to take over the administration of the SETAs. The meeting resulted in the Department receiving a number of assurances on what was going to be done regarding this issue and the Department was monitoring the situation closely.

Regarding the PSETA, Mr Morotoba said the main issues were its budget and on its relationship with the Department of Public Service and Administration (DPSA). Out of the above process the Department was able to secure an amount which would allow the PSETA to stand independently and to be listed as a public entity so that it would be recognised as any other SETA. The Department hoped that the measures put in place regarding these two SETAs would lead to a number of improvements. Most of the other SETAs were doing well in terms of meeting the requirements. However, there were issues of sustainability the Department was trying to address and these were beginning to impact mainly on the Energy and Clothing and Textile SETAs.

Mr Mkalipi answered that under the Basic Conditions of Employment Act there was the Child Labour Action Programme. This programme comprised of non-governmental agencies in the area, various other stakeholders and a number of Government Department whose interests lay in this area of child labour. Part of this programme was a research project that tried to determine the extent of child labour as well as the sectors in which it existed. This research report had not yet been released yet the Department was carrying on with other interventions. For example, it had introduced sector regulations in the performing arts sector where many children took part. The results of the research project would lead to the introduction of sector regulations in other areas.

Ms Xaba replied that the Department had looked into the salary levels of its staff and had made a major shift. The Minister had approved that no staff even at the entry levels would receive a salary below level five. This salary increase ensured that all workers were elevated except for those not covered in the Department’s dispensation. The Department had also applied to DPSA to cover jobs in the future that had not been under the previous Department such as gardeners and cleaners.

Prince N Zulu (IFP) wanted more clarity on the efficacy and the efficiency of NEDLAC. This might be done with the assistance of the International Labour Organisation (ILO). He also wished to know if there was a possibility of the Standing Committee on Public Accounts (SCOPA) becoming interested in investigating the National Manpower Development Fund in the future.

Mr Mkalipi replied that NEDLAC and its stakeholders had agreed to institute a review by the ILO. A provisional report had also been introduced by the two main researchers who had been appointed to identify how effective NEDLEC was as an institution. This original report had been sent back by the NEDLAC constituencies to the researchers and further discussions on this report would occur with the ILO. This research was therefore still taking place and the Department would report on the issue soon.

Dr Mkosana responded that the Department did not wish for SCOPA to become involved and was therefore pushing for the issue to be resolved before it reached this point. A report on the developments regarding this would be submitted to the Committee. He added that with regards to the efficiency of NEDLAC the Department was currently reviewing how it managed its mandate as well as to see it in the context of the Department’s own development and future plans. The ILO had agreed to undertake this review and a report was submitted to the Department in January. The Department had then requested that the ILO conduct a deeper study and a report was expected by June. The Department would then be able to see how NEDLAC was playing an increasing role internationally and was an important model for social dialogue all over the world. He believed that that the report by the ILO would be able to determine whether this was true or merely a false perception of NEDLAC.

Mr Mkhongi had three questions. Firstly, he wished to know how the Department knew if different industry sectors were mature. How did the Department measure this maturity? Secondly, how did the Department know if its inspectors were honest during their inspections as it was often found that inspectors accepted bribes? Lastly, the Department had answered his question on child labour generally. However, he had referred to a specific child labour incident in Cape Town which the Minister had investigated. How far was this specific process?

Mr Mkalipi replied that the bargaining council could be recognised as a form of social government and was a voluntary process. When the Department tried to identify the readiness of a specific industry it looked at the amount of organisation in this industry such as whether trade unions and employer organisations existed. For example, when comparing the security industry with the domestic service sector one could see that the latter had a low level of organisation and this indicated for the purpose of forming a bargaining council that it was not ready. The recent security industry strikes indicated that it was an industry that was mature. There was a danger that the term "maturity" was clouded and therefore the term "readiness" should rather be used. Readiness was also represented by the level of interaction that occurred between the parties in these sectors.

Mr Mkonto answered that it was difficulty to identify corrupt officials. The Department did however have an internal control system in place that could determine these acts of corruption and it also had another mechanism where letters from the office of the Public Protector were sent to the Department. The Department then investigated and when officials were found guilty of corruption the Department instituted disciplinary action. However, it was still tough as the Department believed that the training given to the officials was sufficient for them to perform their functions and this training also informed the officials of the implications of engaging in corruption. The Department had additionally removed certain elements from the work of the inspectors. In the past these inspectors had been required to collect money on behalf of the Department. However, this was too tempting for some officials and this function was therefore removed. Inspectors were now required only to issue an order for the employer to directly deposit an amount of money in the case of the Unemployment Insurance Fund (UIF) and would conduct follow-up inspections if this money were not deposited.

Dr Mkosana added that one of the mechanisms the Department had also planned to implement was tracking these officials’ productivity. The Department planned to use present day technology to monitor what these officials were doing wherever they were. This meant there would be continuous monitoring on how these inspectors were conducting their work.

Dr Mkosana said, regarding child labour in Cape Town, that the Minister had issued a statement the previous day. Child labour was not permissible in South Africa and South African legislation stated this fact. South Africa was also a signatory of the ILO conventions and a number of these conventions spoke to child labour. However, this child labour problem emerged continuously. A study conducted showed that child labour was a problem in South Africa. However, it was a minor problem and was not spread throughout the country. It was still important that the Department addressed this problem.

Ms Ncengwane stated that the Commission for Conciliation, Mediation and Arbitration (CCMA) was meant to protect employees against exploitation by employers. However, it seemed that employers were now bringing lawyers to the CCMA hearings. Was this allowed? She also wished to know if the Department had tried to determine the root cause for the large number of dropouts from its training programmes as 50% of learners dropped out. Thirdly, she wished to know if the Department had a tracking mechanism to track trained learners who had graduated from its training programmes. Lastly, she wished to know if the Department had internal control mechanisms in place which were also referred to as risk management systems that could help explain why it had underspent or overspent.

Mr Morotoba replied that the dropout issue was a major concern to the Department as it resulted in a loss of money and a loss of opportunity for other young people as the waiting lists for these training programmes were very long. The Department and its social partners decided on the benchmark of a 50% dropout rate for a number of reasons. However, he acknowledged the concerns that this benchmark was way too low and there would be a consideration to raise this percentage in the future. There were a number of reasons for dropouts in all the sectors these young people were trained in. Firstly, health reasons often prevented people from completing their training. The allowances that were given to trainees were extremely low and this lead to young people jumping for new opportunities especially in the formal employment sector. However, it was important to note that this 50% was the minimum threshold and the dropout rate was not allowed to move below it. The Department even aimed for a 100% completion rate.

Mr Morotoba added that the tracking of learners was also part of the strategic objective of the Department. It was making sure that it revived and revitalised the Employment Services System to ensure that graduates registered as work seekers. Beyond this there also needed to be registration of learners in specific geographical areas and these were then linked to other databases in these areas. The Director General had already spoken about displaced skills where for instance engineers would be found working as managers. This was a core function of the Department so that information could be given on a specific area in terms of which skills could be found in this area as well as the vacancies which existed. It was also important to interact with the Department of Home Affairs to determine how many people with skills had left the country. All this formed part of the broader tracking system which would go beyond the occasional studies the Department had undertaken in the past to track learners as these studies were not sufficient. The Department therefore hoped that the Employment Services System would become a better national tracking system that could be used to track various skills.

Dr Mkosana confirmed that a risk management system did exist within the Department. It worked on an ongoing basis with its internal auditors to identify areas of risk and areas that needed to be investigated. He agreed that the CCMA had been created to help workers but unfortunately the employers were now using lawyers. This undermined the entire system which was created to make the process simpler for workers. However, on 6 April a round table debate would be held on this issue in order to come up with a solution.

Ms S Rajbally (Minority Front) stated that child labour was a burning issue; however the answer given by the Department was that it was not a crisis. She was concerned about the fact that consideration was meant to be given to children who were household providers. She felt that this statement placed the Department in a catch twenty-two situation as it was difficult to determine which children were household providers and which were not. How did the Department determine this? Lastly, she proposed that leather be incorporated into the Clothing and Textile SETA.

Mr Morotoba stated that the Clothing SETA had a number of industries that were linked to it including the clothing, textile, leather and footwear industries. However, this SETA only brought in around R4 million a month and the clothing industry in KwaZulu-Natal and the Western Cape were closing down. This problem would hopefully be solved by the clothing and textile strategy of the Department of Trade and Industry.

Dr Mkosana answered that with regards to child labour there was clear legislation on how a child was allowed to be involved in the employment sector. Children could work if it was not detrimental to their schooling or their psychological status. If a child became involved in the employment sector there was usually legislation that regulated his or her involvement such as the performing arts regulations. Specific conditions also existed regarding the issue of a child being a household provider. However, this could be discussed in greater detail at the future workshop between the Committee and the Department.

Mr S Siboza (ANC) noted that the strategic objectives of the government were to improve the lives of the people especially in the rural areas. It was therefore worrying that the Department stated that the issue of child labour in South Africa was not a problem. His general feeling was that the issue of child labour should not be treated in isolation from migrant labour that came through South African borders. Cheap outside labour was used especially on farms and child labour was often combined with this. Lastly, he appealed that with regards to labour brokers the Department needed to develop a holistic strategy to deal with this problem as well as with the child labour and migrant labour problems. He felt that the Department could not deal with these issues alone and needed to include other Government Departments such as the Department of Home Affairs. If these problems were not addressed the South African population would continue to be unemployed and impoverished.

Mr Mogale had a number of questions. Firstly, the Government wished to halve unemployment by the year 2014. What mechanisms were the Department using to gauge this process? Secondly, in farming areas many of the farm workers were not liberated as they worked long hours and they did not even have identity documents. Inspectors also accepted bribes which had already been discussed. With these issues in mind what was the reason for the Department reducing its spending budget? What was the rationale behind this reduction? He also wished to know how far the Department was on the issue of deracialising sheltered employment. Lastly, he commented that there were a number of labour issues the Committee needed to engage with the Department and it was therefore important that a workshop take place between the Committee and the Department in the future. A date for this workshop had to be determined as it was one of the only Committees that had not met with its corresponding Department in a workshop. The Committee had signed a contract with the people of South Africa yet many of these people were abused.

The Chairperson responded that the Department was ready to receive the Committee for a workshop. However, this had been delayed as the first term of Parliament had been dedicated to the Budget Votes. This workshop would hopefully take place in the second term.

Dr Mkosana confirmed that the Department did have a strategy to change the current situation of sheltered employment. It had also based this strategy on lessons learnt from other countries like New Zealand.

Ms Moss stated that recent newspaper reports had shown that farm workers’ salaries were being increased and their working hours were being decreased. She therefore wanted to thank the Department for this move as it greatly improved the lives of these farm workers and it showed progress was being made. It was also important to note that this problem would not be solved immediately.

Ms Ncengwane added that the issue of farm workers was a "sore" subject. One of the main reasons for these farm workers being treated badly was because they had to live on the farms in houses provided by their employers. The NSF briefing had indicated that more than a R1 billion would be allocated to the provinces. She wished to know if it was not possible to use some of this money to build houses for these workers outside the farms. Could the Department not persuade the Department of Housing to do so?

Dr Mkosana replied that the Department would talk to its strategic partners and would also identify if other Departments were interested in implementing this proposal.

The Chairperson noted that the Department had reported 50 000 learners had entered training programmes that were linked to scarce skills but only half of these learners graduated. Why was this completion rate so low? Secondly, time constraints meant that Members could not pose questions to the Department on the different entities that had made presentations. Some of these issues were the qualified audit report of the UIF, the R25 million overpayment of benefits to UIF contributors, non-compliance with laws and regulations and the policies of procurement not being adhered to. She wished to hear what the Department’s opinion was regarding all these issues.

Dr Mkosana answered that the Department did have a report on the UIF which would be sent to the Committee.

The Chairperson highlighted that Members needed to attend a plenary session which meant that the meeting had to come to an end. This time constraint had resulted in the Department being unable to answer all the questions Members had posed and she requested that the Department therefore send these answers to the Committee in writing. She reminded the Committee that the budget debate was scheduled for 17 May and Members were encouraged to approach the Department for any information they would need for this debate.

The meeting was adjourned.