Youth Unemployment: hearings

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Employment and Labour

29 May 2006
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Meeting Summary

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Meeting report

LABOUR PORTFOLIO COMMITTEE
30 May 2006
YOUTH UNEMPLOYMENT: PUBLIC HEARINGS
 


Chairperson: Ms O R Kasienyane (ANC)

Documents handed out:

SA Youth Council submission
Quadpara Association of South Africa (QASA) submission: Unemployment amongst mobility-impaired youth
Rural Education Access Programme (REAP) submission on Youth Unemployment
Free Market Foundation submission on Youth Unemployment

SUMMARY
A number of submissions were made on the subject of youth unemployment at the public hearings. The Department of Labour (DOL) had set firm targets in respect of gender, race, and disability for employees. DOL described some of its flagship programmes and achievements. Challenges included the 4:1 ratio of applicants to learnerships, placements, and the tracking system.

The National Youth Commission submitted a written representation only.

The SA Youth Council stated that stumbling blocks to youth development included lack of skills, lack of internships, the high cost of tertiary study, and limited employment opportunities. It submitted that government should put major investment into accessing higher education, supporting institutions and developing youth resources. There was currently insufficient co ordination, insufficient lobbying of government and insufficient powers in the Youth Commission.

The Quadpara Association of South Africa (QASA) welcomed the DOL’s criteria for disabled employees. There remained a problem integrating disabled persons and obtaining skilled employment. QASA called for fast tracking of integrated skills development, including management skills. QASA had run some programmes but struggled to access funding. The disabled faced additional barriers such as inaccessible public transport and buildings. QASA appealed to the Committee to interact with other departments to ensure that disabled youth could progress.

Services SETA gave input on DOL’s comment on learnerships. Major constraints included a disproportionate sense of entitlement amongst the youth, inadequate secondary education, poor quality matric, Further Education and Training and university training, and insufficient incentives to employers to employ after learnerships. The Insurance SETA agreed with this analysis, in particular commenting on the low numbers of matriculants with maths. Unemployment could be assisted if more learners were made aware of the scope of sectors, were assisted by mentors, were offered work readiness training at school, and proper careers advice. INSETA called for the Department of Education to work far more closely with DOL and the Sector Education and Training Authorities (SETAs).

Umsobomvu Youth Fund (UYF) commented that graduates also had problems with literacy and numeracy. UYF extended its programmes also to those who had missed opportunities in the past. UYF stressed that any interventions made should be directly correlated to obtaining jobs. UYF offered youth advisory centres, information on careers, assistance in writing CVs, accessing job information, and interview techniques. UYF was prepared also to work with other organisations, and to assist them in research.

National Productivity Unit (NPI) believed that the attitude of private and public sectors was also important in facilitating unemployment. Past business practices contributed to an inefficient economic system. Unless the challenges accompanying ownership, and the willingness of corporations to do business with those newly in the marketplace were addressed, South Africa would remain an inefficient and non-competitive system.

BANKSETA’s challenges included young matriculants not possessing entrance requirements for universities, bridging programmes, and lack of relevant experience. BANKSETA addressed youth issues in an integrated way, providing many subsidiary skills. Partnerships were seen as an important element in youth development. BANKSETA spent much time promoting the sector, had produced a career guide, and worked with partners to skill guidance counsellors.

The Wholesale and Retail SETA believed that the mandate of developing skills was not an end in itself. Training was useless if the learner was not placed in a position where he could start to earn an income. This SETA would only fund learnerships if the employer guaranteed permanent employment to at least 90% of the learners. This SETA was involved in partnerships, and with national institutions working with disabled people. In all cases it was important to define and identify the exit strategies. Training alone would not result in success, as it was merely a stepping-stone to success.

The Right To Work Campaign commented that many people moved from one to another learnership. The Campaign called for unemployed to be given reduced rates on public transport for the purpose of accessing jobs. Many youth in learnerships were exploited. Although the Campaign could support incentives, youth would not be assisted by deregulation. Private business could not be relied upon, and the SETAs would have to seek solutions.

The Rural Education Access Programme (REAP) accessed financial and other support for higher education for students from rural areas. Workshop programmes included life-skills, preparation for work, sustaining successful study and similar fields. REAP supported about 400 extremely disadvantaged students each year. REAP’s efforts made a real difference to throughput of students, reduced the dropout rate and most of their graduates did find employment. One of their recent graduates believed the Departments of Labour and Education must create employment and initiatives. He urged that the doors of learning be opened now to ensure access to information, a better link to urban areas, and better access to state resources by rural areas.

The Free Market Foundation was a non-profit organisation, which provided a think-tank on public policy to promote economic freedom. FMF commented that South African labour laws gave a high level of job security, but the market demanded high standards. Many firms found the costs of complying with the legislation were not comparable to the benefit received. FMF had proposed that all people who had been unemployed for longer than six months should be able to apply for an exemption certificate in respect of labour laws, which would be valid for two years, and would exclude the basic conditions of employment, entitling the person to work for any small firm on any conditions. There must be a basic, simple, written contract, but no minimum standards should apply. Government should advise, but not dictate, rights and fair conditions. If 3 million people were able to get employment this way, and earn R5000 per year, this would translate to R15 billion in the hands of the poorest communities.

Questions asked by Members and other delegates are enumerated under each presentation.

MINUTES
The Chairperson welcomed all to the meeting. South Africa celebrated the 30th anniversary of Youth Day, marred regrettably by the serious challenge of youth unemployment. It was hoped that the outcome of the hearings today and in the weeks to come would secure a good future for young South Africans. Although the Portfolio Committee was not attempting to create expectations amongst the youth, it hoped to ensure that issues were put forward, discussed and a joint approach adopted.

Department of Labour input
Mr S Morotoba (Acting Deputy Director-General, Department of Labour (DOL)) reported that one of the mandates of the DOL was to enhance skills development, and oversee the Manpower Training Act, Skills Levies Act, and other training legislation. DOL had invested in projects on youth within the country, including joint projects with the Departments of Education, Arts and Culture and Sport, and also held discussions with the International Labour Organisation (ILO). It interacted with the National Youth Council, the S A Youth Commission and the office of the Presidency. The framework adopted in the National Skills Development Strategy (NSDS) targeted youth in the 2001-5 cycle, and also had an objective, in the 2005-10 cycle, of assisting young entrants to secure work. DOL had set very firm targets in respect of gender and race, and had included a 4% disability target. Flagship programmes included apprenticeships under the Manpower Training Act, involvement of 27 Sector Education and Training Authorities (SETAs), internships and bursary schemes through the National Skills Fund (NSF). There was also a range of skills programmes in which implementation agreements had been drawn with the SETAs. DOL also was the body working with the Umsobomvu Youth Fund.

Achievements included creating and managing 170 000 learnerships, in excess of the targets of 80 000. 70% placement was achieved. Incentives were given by way of tax relief to institutions that offered permanent employment after learnerships. Learners were protected under the Basic Conditions of Employment Act. Challenges included the 4:1 ratio of applicants to learnerships, placements (for DOL did not want to force employment of trainees), and the tracking system of those concluding learnerships.

Discussion
Mr B Mkongi (ANC) commented that despite the DOL tracking system, there was a reality that many of those completing learnerships remained unemployed, or switched from one learnership to another. He queried whether 70% placement was an accurate reflection.

Mr L Nzimande (ANC, Joint Monitoring Committee, Youth, Children and Disability) commented that the DOL used to have placement and recruitment programmes and asked if these were effective. There was no point in involving the youth in employment that was not sustainable. Previous opportunities, such as Expanded Public Works Programmes (EPWP) had offered temporary and inconsistent opportunities. He asked if the DOL had evaluated the market opportunities. There were many problems of access in particular by rural youth. Even the sectors that could grow in rural areas were not being sufficiently encouraged.

Mr Morotoba (DOL) commented that DOL did undertake some rural initiatives, but perhaps these were not sufficient. DOL had funded an initiative to co-ordinate training in rural areas, and this was being piloted through 21 small and medium entities, for a period of one year, and would give a better understanding of how to support other agencies, without detracting from the role of SETAs.

Submission by the National Youth Commission
Ms A Vanda, representing the National Youth Commission, was present at the meeting but was suffering from a throat infection and unable speak. She did however inform the Chairperson that written submissions were available. Several Members expressed their displeasure that none of the Commissioners were available. Eventually Ms Vanda was given the opportunity to explain that one of the Commissioners had flown to Cape Town but was taken ill on the plane and was presently in hospital in Cape Town. She herself was available and taking notes throughout the presentation, but her throat infection simply did not permit her to make representations. She assured the Chairperson that there was no disrespect intended to the Committee and indeed the representations were available. The Chairperson accepted this explanation.

Submission by National Youth Council, Western Cape
Ms N Ngeju (SA Youth Council, Western Cape) reported that the National Youth Council (NYC) had recently held a summit attended by various youth organisations. Various stumbling blocks were identified as impacting on youth education and development, including the lack of skills, lack of internship opportunities, the high cost of tertiary study, and the limited employment opportunities to those who had completed their university studies. It was agreed that major investment was needed by government to provide access to higher education, to support the efforts of a number of institutions with the responsibility to drive economic and social development. To build a society with information, and a civil society that ensured youth development it was necessary to develop resources. These attempts were hindered by lack of co-ordination, lack of Chapter 9 powers for the Youth Commission, and lack of civil society lobbying of government.

Submission by the Quadpara Association of South Africa (QASA)
Mr P Coetzer (Director, QASA) stated that the organisation addressed youth with disabilities. It was aware that job development was influenced by a number of factors unrelated to disability. It welcomed the DOL’s inclusion of disability minimum criteria in employment, noting that Black Economic Empowerment (BEE) legislation did not mention disability. However, the reality was that the percentages of employed disabled people had fallen from 1.2% to 0.9%, highlighting the problem of integrating disabled people in the workplace, particularly in management structures. 70% of unemployed people said that the lack of existing employment opportunities and the lack of technical skills were major factors. QASA submitted that, instead of seeing the legislation as a hurdle, business should welcome the creation of opportunities.

Mr A Seirlis (National Director, QASA) stated that some members of QASA had been integrated into jobs, but these were mainly based in call centres, reception work and similar fields. He was concerned that disabled youth would perceive these types of jobs as the ceiling of opportunity, so that they would not aspire to CEO levels. In order to do so, there would need to be a fast-track system of integrated skills development, ensuring that management skills were available through the SETAs. QASA had run its own schemes, had interacted with the Umsobomvu Youth Fund, but had struggled to access funding. It hoped that future efforts to access finance from NSF would be easier. People with disabilities were by nature resilient and determined, and therefore ideal candidates to run their own businesses that would survive in the marketplace. Funding and skills were however required. QASA had managed to run two learnerships, through the SETA, training 129 learners ranging in age from 18 to 59, and had achieved good success rates, including 28 learners starting their own business. QASA welcomed the opportunity to interact with the Committee and to stress that there were serious barriers to disabled youth in mainstream employment. The Department of Health did not attend adequately to rehabilitation, and Department of Social Development projects had not proved successful. Other major hindrances included the lack of public transport and public building access for disabled persons. Mr Seirlis appealed to the Committee to interact with those departments to ensure that skills development programmes could progress. QASA was keen to develop relationships, was committed to skills development, especially amongst youth, and especially at management level.

Discussion
A Committee Member asked QASA about their composition, in particular if it included previously disadvantaged members of the community. There was insufficient time for this question to be answered.

Mr Mkongi commented that there was a serious need to understand all issues involving disability before making decisions on what would be appropriate. He commented that many government departments themselves did not comply with minimum targets on equity and disability employment.

Mr Nzimande commented that disabled youth required far more support in their endeavours to find opportunities, including transport, sign-language assistance, and other areas.

Mr D Gamede (ANC, Joint Monitoring Committee, Youth, Children and Disabilities) commented that there was still a challenge in unifying unemployed youth, and unemployed disabled youth. He believed there must be an integrated approach. Special needs would certainly need specialist treatment, but this would be over and above more general programmes.

Input from the Services SETA
Mr I Blumenthal (CEO, Services SETA) wanted to comment on the learnership opportunities mentioned by DOL. The Services SETA had processed 27 000 learners through registered learnerships and many more through skills programmes. There were several major constraints affecting youth, and he stressed that he had to generalise to illustrate his points. Firstly, there was a disproportionate sense of entitlement among the youth, which proved an impairment to gaining long term or gainful employment. This was sometimes fuelled by the national policy to create entrepreneurs, which bred a culture in the learnership environment which was counter productive. The culture could be fuelled by economic and political factors. Secondly, the quality and non-availability of education was a barrier. Employers could not place reliance on the quality of matriculation certificates, nor even on the three-year undergraduate degree. Recently the Services SETA was required to find 1000 suitable learners for posts. The search took five months. An independent examinations board conducted the tests, and found that less than 100 of the applicants, who were all matriculants or had degrees, possessed the equivalent of Grade 10 levels of numeracy and literacy. There was huge inconsistency, and it was impossible to improve skills without being able to rely on formative qualifications. The SETA spent more on retraining and re-education than on skills training for jobs. The third impediment was poor quality of education from the Further Education and Training (FET) colleges. Fourthly, although there was a possibility of employers obtaining tax deductions for employment, the SETA submitted that the incentives were insufficient to encourage employers to employ people on a sustainable basis.

Discussion
Mr Mkongi commented on Service SETA’s comment about entitlement. He stated that there was a decision that the youth should take ownership of programmes, policies and implementation. He asked that this statement be explained further.

Mr Blumenthal stated that he would use some examples, drawn from recent experiences, to highlight what he meant about the "entitlement attitude". He stressed that these were generalisations, and that some of the learnerships evidenced no such problems. The SETA had found, in general, that there was a lack of respect for existing structures, such as training institutions, SETAs and the Department of Labour. There was lack of respect for teachers and employers, and the SETA received many complaints about learners becoming unruly. There was no responsiveness to assessments on prescribed standards, which were set nationally. There was lack of respect for mentors, policies and procedures. Lack of respect for older and more experienced employees, many of whom were trade union officials, led to such employers being unwilling to take on learners. Time keeping was poor, training was missed with no apologies, and many learners dropped out of the final third of training, when it required effort. Learners did not use the proper channels for resolution of disputes, preferring to get Members of Parliament or Members of the Youth League involved, which wasted time and money when it was discovered that in fact their claims had not been marginalised, but that they had not made use of the proper procedures from the start.

Mr W Mshudulu (ANC) commented that there was still inconsistency in the quality of education. He believed SETAs should work with institutions of learning at district level, as this was where the most practical solutions would be found. He noted that many disabled learners, through problems of access, could not attend schools and higher colleges, and therefore disability became a social problem. He urged all structures to ensure that they interacted with their constituent officers. He stated that often parliamentarians were unable to contact organisations, as there was insufficient public knowledge of their activities and whereabouts. He stated that youth became the victims of society’s degradation. Youth were often unemployed because of the high costs of further education.

Prince N Zulu (IFP) asked if the poor matriculation standards applied across the board, or were limited to certain areas and sectors of the population.

Mr Blumenthal replied that around 80 – 90% of those with poor standards were from previously disadvantaged backgrounds, and that public schools rather than the private schools showed a lower standard.

Mr Mzondeki commented that such generalisations could be very misleading and he took objection to them. He proposed that Mr Blumenthal address the Portfolio Committee in detail at a later stage.

Mr Mkongi commented that one of the elements of learnerships was supposed to be life skills programmes and many of the problems outlined seemed to arise at that level. He believed the DOL should undertake some further research and give a response, both in respect of the school results, and the other comments made.

Mr A Madella (ANC, Joint Monitoring Committee on Youth, Children and Disabilities) was disheartened by what he had heard from the SETAs and gained the impression that the youth were being rejected. Any suggestion that unemployment was attributable to youth attitudes was serious, but this same suggestion surely could not be made in respect of disabled youth. Challenges did exist at the workplace but many of the problems could be averted by the employers treating workers properly, informing them of the scope of and expectations from learnerships, and conditions of employment. He agreed with Mr Mzondeki that the Services SETA be asked to explain the views in more detail to the Committee.

Mr Gamede commented that generalisations served no purpose and the Joint Monitoring Committee would also require facts and figures.

Mr C Lowe (DA) was concerned that the Committee was, at this hearing, challenging facts presented by the SETA in good faith. He fully supported the suggestion that Mr Blumenthal attend a further meeting. He pointed out that these problems had previously been made known to the Committee, but that the Committee had not taken the matter further.

Ms N Ngeju (SAYC) commented that training required greater resources; that both national and local government needed to tackle this issue robustly, and give practical and financial assistance to youth, who should take ownership of programmes and policies, to assist them to add more value. She did not believe that enough real emphasis was given to youth development, and to involving youth in policy frameworks. Rural areas needed more resources.

Input from the Insurance SETA
Ms S Steenekamp (Insurance Sector Training Authority (INSETA)) stated that Mr Blumenthal’s analysis of the literacy and numeracy levels was quite correct. A survey in the insurance field had found that 52% of matriculants did not take maths at matric, and of the 48% who did take maths, 21% failed. Only 5% had maths at higher grade. This meant that the financial and insurance industries, mining, engineering, medicine and science professions could only draw on that limited number of matriculants. INSETA believed that part of assisting unemployment would be to foster better understanding of what the sectors could offer. For instance, the insurance sector offered opportunities in urban and rural areas, and included doctors, lawyers, accountants, actuaries, IT, finance, HR, and marketing experts. Greater input was needed at school level to apprise students of their subject options in order to access opportunities. INSETA believed that mentors and coaches should assist learners. It believed that work readiness should be added as a school subject, with National Research Foundation (NRF) funding. Provinces should not just focus on mining, tourism and agriculture, but stress opportunities in other sectors, so that young people could understand the nature of the different sectors, and what they needed to do in order to become gainfully employed. A far more coordinated and broader input and understanding was required of all sectors. The Department of Education should engage far more actively with DOL and the SETAs.

Discussion
Mr Mkongi asked who monitored the activities of SETAs. There had been complaints about abuse of learners.

Mr M Mzondeki (ANC) commented that perhaps INSETA itself needed to address its marketing strategy in order to make the opportunities in the sector far more apparent and readily available.

Input from the Umsobomvu Youth Fund
Ms V Mathebula (Research Manager, Umsobomvu Youth Fund (UYF)) commented that not only matriculants, but also graduates, had problems with literacy and numeracy. UYF had isolated the need for a graduate development programme to give practical skills, such as obtaining driving licences, interview techniques and CV drafting. The new curriculum could address the younger sector, but there were already a number of unemployed, some over 35. UYF extended its programmes also to those who had missed opportunities in the past. UYF stressed that any interventions made should be directly correlated to obtaining jobs, and its effectiveness assessed on that basis. UYF offered youth advisory centres, information on careers, assistance in writing CVs, assistance in accessing job information and how to present at an interview. There were many challenges, but UYF was prepared also to work with other organisations, and to assist them in research.

The Chairperson commented that she hoped that UYF were also giving assistance in the rural areas.

Input from National Productivity Unit (NPI)
Mr S Mosai (representative, NPI) believed that skills were an instrument to alleviate unemployment. The attitude of private and public sectors was also important. The way South Africa had conducted business in the past contributed to an inefficient economic system, which did not use human resources to full advantage, with eight million people out of economic activity. It was necessary to examine the contribution of corporate South Africa, especially in view of the clear mandate of the Accelerated Shared Growth Initiative of SA (ASGISA) to promote skills to make the economy more efficient and inclusive. Unless the challenges accompanying ownership, and the willingness of corporations to do business with those newly in the marketplace were addressed, South Africa would remain an inefficient and non-competitive system.

Discussion
Mr M Mzondeki (ANC) commented that many corporates seemed to hold the attitude that learnerships and experience opportunities took up too much time. That time must be found and dedicated. Whilst the Committee accepted that there were problems in SETAs, if South Africa was truly committed to re-training then these problems would be lessened.

Mr I Blumenthal (Services SETA) stated that the SETA had taken input from the 140 000 HR managers in the sector and it was naïve to suggest that there was insufficient engagement with the corporate sector, and to try to apportion blame. The corporate sector did a great deal for skills development. The entire levies for the SETAs came from that sector, and the majority of learnerships were created there.

Input from the Banking SETA
Mr T Rammitlwa (Manager, Skills and Learnerships, BANKSETA) commented that there had been many positive results from the first cycle of the NSDS. However, challenges in this SETA included young matriculants not possessing entrance requirements, and therefore requiring bridging programmes before university with graduates lacking the correct experience. The BANKSETA addressed youth issues in an integrated way, providing not only the skills for the job, but also life-skills, employability skills, facilitating other support, including mentorship and coaching, addressing HIV and Aids, and ensuring access to information. Learnerships could not be seen as the total solution to the problem. New venture creation projects should be included. Partnerships were an important element in youth development. There was need for communication about scarce skills. BANKSETA spent much time promoting the sector, so that perceptions and attitudes changed and there was better career guidance. BANKSETA had produced a career guide, and worked with partners to skill guidance counsellors.

Input from Wholesale and Retail SETA
Mr J Brauns (representative of Wholesale and Retail SETA) believed that the problem faced by many SETAs lay in the exit strategy – what happened after training? An incentive had been proposed, to run two years after termination of the learnership, to encourage companies to offer permanent employment to the graduate learners. The mandate of developing skills was not an end in itself. Training was useless if the learner was not placed in a position where he could start to earn an income. The area of learnerships was one of the ways to absorb into employment. Therefore the Wholesale and Retail SETA would only fund learnerships if the employer guaranteed permanent employment to at least 90% of the learners. This had been well received by corporate stakeholders. Whenever the SETA looked at venture creation, it would create partnerships with stakeholders who could give tangible business opportunities to learners. Projects included targeting rural youth, where containers and stocks were provided, and the SETA undertook training. This SETA was involved with national institutions working with disabled people, who had many more barriers. There was a pre-learnership programme to equip people to meet the entry-level requirements. However, it was always important to define and identify the exit strategies. In summary, training would not result in success. It was merely a stepping-stone to success.

The DOL commented that exit strategies were a challenge. They agreed that it would be useful to have locally developed strategies. Local programmes provided DOL with the opportunity to place graduates, but there were problems if no programmes existed.

Input from the Right To Work Campaign
Mr Ulrich (representative of the Right To Work Campaign) commented that in addition to the shortage of learnerships, there were many people who moved between learnerships. Unemployed people suffered from the high cost of transport, which prevented them from accessing job opportunities. The Campaign called for the unemployed to be given reduced rates on public transport for the purpose of accessing jobs. The waiting period for driving licences also hindered opportunities. The unemployed were often alienated by society. Many youth in learnerships were exploited. Although the Campaign could support incentives, youth would not be assisted by deregulation. Private business could not be relied upon, and the SETAs would have to seek solutions.

Discussion
The Chairperson asked the Right to Work Campaign to submit written submissions to the Committee.

Ms A Vanda (National Youth Commission) supported the views expressed. Although government had made a number of interventions, there had been no assessment of their effectiveness, and short-term opportunities provided by EPWP and SETAs did not allow them to access jobs. Ms Vanda asked for a joint approach by the Portfolio Committees on Labour, Education and other relevant fields.

Submission by the Rural Education Access Programme
Ms G Glover (Rural Education Access Programme (REAP)) stated that REAP accessed support for higher education for students from rural areas. The support lasted until completion of the degree. Workshop programmes included life-skills, preparation for work, sustaining successful study and similar fields. REAP believed it contributed to ASGISA by supporting about 400 extremely disadvantaged students each year. She commented that REAP had not experienced "entitlement" attitudes, but the group was small and select. REAP was aware of the real problems of schooling, but had to work around the problems to give opportunities to talented students. Their graduates struggled to get work experience and therefore some facility for this would be useful. REAP would like to enter partnerships but had thus far been unable to do so, despite working with Umsobomvu. REAP’s efforts made a real difference to throughput of students, reduced the dropout rate and most of their graduates did find employment.

Mr L Makasi was a graduate of the programme. He had been educated in "deep rural areas", had completed his LLB degree at UWC with assistance from REAP and was now in the first year of articles at a law firm. He confirmed hat there were access problems. REAP had helped him to identify skills suited to his personality and abilities, given career advice, and provided financial assistance. REAP believed education was key to addressing skills shortages and youth unemployment. Of his matriculation class, only 10% had managed to move into higher education, and the rest were unemployed or informally employed. Wider access to higher education would benefit long-term skills, address poverty eradication and employment issues. Education played a key role in achieving 2014 goals. He believed the Departments of Labour and Education must create employment and initiatives. SETA learnerships were regarded as a risk, and life-skills not sufficiently emphasised, particularly for those who had not been brought up in a Western lifestyle. He urged that the doors of learning be opened now to ensure access to information, a better link to urban areas, and better access to state resources by rural areas.

Discussion
Mr Mshudulu asked where REAP was located. Ms Glover replied that the head office was in Western Cape, but it was represented in all nine provinces, with 24 monitoring committees working in all rural areas.

Hearing on submissions by the Free Market Foundation
Mr T Nolutshungu (Director, Free Market Foundation (FMF)) reported that FMF was a non-profit organisation that provided a think-tank on public policy to promote economic freedom. It had undertaken the task of finding solutions to the problem of unemployment, particularly of youth. FMF believed that South African labour laws gave a high level of job security. However, the market demanded high standards, and required a good return on high costs. Many firms found the costs of complying with the legislation were not comparable to the benefit received from low-wage workers, and therefore preferred to mechanise. Reducing job security was not a viable option as the labour unions would object. Therefore liberalising the labour law for youth was not politically possible. FMF had therefore proposed a solution that did not call for upsetting the balance of legislation.

Mr E Davies outlined the proposal. Around 50 – 70% of all unemployed people were youth, and this was further explained in the study "Jobs for the Jobless". The proposal was therefore that all people who had been unemployed for longer than six months should be able to apply for an exemption certificate in respect of labour laws, which would be valid for two years. This would entitle the person to work for any small firm (under 200 employees) on whatever basis he and the employer agreed upon. There must be a basic, simple, written contract, but no minimum standards should apply. The unemployed person was under no obligation but could choose to use this exemption, and to set his own wages and terms of employment. Government should advise him, but not dictate to him, his rights and fair conditions. The requirement that he should have been unemployed for six months was to prevent employers firing a person, and then re-hiring with exemptions. The two-year validity would help him to find the job, change the job field, gain skills and experience. Small firms had been selected as they generally provided the most employment, and they were hit hardest by the costs of complying with the labour legislation. They were also more likely to give on-the-job training. If 3 million people were able to get employment this way, and earn R5000 per year, this would translate to R15 billion in the hands of the poorest communities.

Discussion
The Chairperson asked Mr Davies to elaborate on his comment that small firms found it burdensome to comply with the labour law legislation.

Mr Davies explained that the majority of cases before the Commission for Conciliation, Mediation and Arbitration (CCMA) involved small employers who had fallen foul of the legislation as they simply did not have the skills to comply with every aspect of the labour legislation. Many would prefer not to hire as they found the legislation imposed too many restrictions and responsibilities.

Mr V Gore (ID) took exception to the use of the word "handicapped" in the presentation. He understood the reasons for the proposals but commented that South Africa’s history of employer abuse had led to stringent laws giving protection. This proposal did not address the possibility of abuse.

Mr Seirlis (QASA) commented that many disabled people feared that if they entered the market place, but failed they still stood to lose their disability grant. He wondered if a similar scheme could be used as a "testing period" for the disabled sector.

Mr Ulrich (Right to Work Campaign) believed that the exemption proposal paid no heed to the imbalanced relationship between established employer and hopeful employee, particularly when many might be competing for the same job. It effectively amounted to deregulation for small businesses.

Ms V Mathebula (UYF) did not agree with all deregulation as the quality and the quantity of jobs were important.

Mr Nolutshungu replied that this proposal was intended to address access to jobs, but FMF had another project that would proliferate Spaza shops and Small, Medium and Micro Enterprises (SMMEs). Youth should also be seen as potential business operators, who would in time create jobs for others. SMMEs were a potential way to enter the sector. Whilst he agreed that labour did need some protection, it was a reality that compliance with all regulations had serious cost implications. This must be seen as a tool for unemployed people with no other options. Many unemployed believed that any job was far preferable to no job – and the choice remained with them, as a way to embark on skills development.

Mr Davies added that such people were free to take advice. They should be advised if they were being exploited to move jobs – and once they had employment this would be easier to do than seeking employment from scratch. Written contracts would exist as some form of protection. In regard to quantity and quality, the fact that the firm was small did not mean that the quality of jobs was poor.

Mr L Makasi (REAP) commented that this proposal would detract from the role of government to protect individuals in the labour market. Leaving all labour laws in place, yet granting this limited exemption, seemed to him to be a contradiction. He believed that more protective measures were needed for those employed in small businesses. An open process to advise the unemployed would mean an ombudsman system, which would involve further costs.

Mr Morotoba (DOL) commented (in response to this presentation and to Mr Mkongi’s earlier question on control of SETAs) that learners in learnerships were protected firstly by determinations setting out obligations of learners and employers. DLO distributed pamphlets explaining the impact of learnerships. There were inspectors, although there were not enough. Protection of those under learnerships was a collective responsibility. Trade unions could play some role in ensuring protection, reconciliation, and fostering understanding of rights. To depart from the determination of learnership wages, following the suggestion of FMF, might cause problems. FMF had not specified which of the labour laws were seen as costly by small businesses, and perhaps this needed to be clarified. A Presidential Commission had already been appointed to examine small businesses, and this had focused on labour-market legislation. It seemed that other costs – such as infrastructure, phones, tax regulation and the like, might be the root of the problem. Affecting the rights of employees was also a constitutional issue. DOL suggested that FMF look to the ministerial determinations.

Mr Nolutshungu stated that the comments made were based upon empirical evidence in a study on economic freedom of the world that had drawn upon fifty think tanks. It had demonstrated a direct correlation between the labour market and free market growth. The figure of R5000 may seem very small, but it was large in comparison to an income of absolutely nothing. Regulations definitely did have cost implications and companies had to analyse whether the costs outweighed the benefit of taking on employees.

The Chair ruled that there was no further time for discussion of the issues, but that the Committee would probably ask FMF for further input at a later stage.

Final input by Department of Labour
Mr Morotoba reported that the DOL had essentially attended not to present, but to listen to presentations. DOL could however comment on some issues raised. Specific questions and comments were reflected under each submission.

Funding presented challenges. The allocation of NSF funding was fairly limited, which caused DOL to work with other organisations. Subsidies were made to some of the organisations. DOL had lobbied Treasury to increase learnership allowances. Loss of grants if disabled people took employment was a serious issue and DOL would continue to engage with other departments on this issue.

The Department of Labour had started a process that would be taken to the National Economic Development and Labour Council (NEDLAC) for further determination. The ILO had reviewed the labour law in 1995 and the Minister had asked for a further review by the ILO, so that there would be a well-informed position.

Mr E Mtshali (ANC) thanked the presenters.

The meeting closed.

 

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