Presentation of Research Report on Labour Issues in State of Nation Address & Discussion on Matters arising from Public hearings

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Employment and Labour

20 February 2007
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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

20 June 2007

Ms O R Kaslenyane (ANC)

Documents handed out:
Labour and the 2007 State of the Nation Address: Research Report by Ms J Watson

Audio Recording of the meeting

The Committee researcher summarised the main issues dealing with labour matters that were included in the State of the Nation address by the President. The fight to eradicate poverty was the most central theme of the address, and this included economic empowerment through job creation. The address reflected on the challenges that stood in the way of job creation, skills development and broad based Black Economic Empowerment. The economy had grown substantially but was still not meeting current demand. Some jobs were created through the Expanded Public Works Programme but there was a need to explore the nature of jobs and how the programme could be improved. There were still too few black companies listed and the Committee had a role to play in hastening progress. Government would be reviewing its progress in macro-economic indicators such as the exchange rate, inflation and interest rates. More could be done to create self employment through small and micro enterprises. Since the majority of unemployed were youth, there was a need for specific interventions such as the National Youth Service programme and the development of young entrepreneurs. Difficulties in the activities of the Further Education and Training Colleges would need to be resolved urgently and would require oversight from this Committee. Youth Development emerged quite strongly from the address and the Committee would have to review programmes of the DOL that would also involve integration of youth development and mainstream government work. The implications on the labour sector of the comprehensive Social Security were examined. Despite unprecedented progress there were still critical areas and this Committee must accelerate black economic empowerment, job creation, investigate implementation of plans and discover the hindrances to speedy progress.  Other issues identified at the public hearings that needed to be taken further in the Committee programme included the role and functioning of Sector Education Training Authorities.

Members believed that other Departments and other Portfolio Committees would also have to be involved. 
The role played by the Umsobomvu Youth Fund was examined in depth. Funding was a serious issue and answers were sought as to how the funds were being accessed and handled. Further discussions related to foreign workers and small business operators, the involvement of municipalities, skills development, cross cutting programmes, the work of agencies, the operation of the National Skills Fund, the placement of FET colleges, and the bursary information at such institutions. Further comments addressed the application of the Equity Act to youth, the relevance of the College programmes to the skills needs, the limited range and focus of the Expanded Works Programme, the need to develop artisan skills, the need to harness scarce and retrenched skills and to create a linked data base that would address unemployment and re-skilling needs. 

The Committee postponed its adoption of its Reports on the International Labour Conference and the public hearing on Youth Unemployment.

Labour and the State of the Nation Address: Research Report
Ms Joy Watson (Parliamentary Researcher) gave a brief overview of the labour issues emanating from the State of the Nation address, which had been covered to a large extent in the report of the Committee. The President placed the fight to eradicate poverty as the most central theme of the address. Poverty eradication was not just about social grants but was about economic empowerment through job creation. The address provided the opportunity to reflect on the challenges that stood in the way of job creation, skills development and broad based Black Economic Empowerment (BBBEE).

The rate of economic growth over the past two years had averaged 4.5%, the highest since 1994. Over the past three years the economy had created approximately one and a half million jobs, but that was clearly not enough given the current demand. Between March 2005 and March 2006, 300 000 jobs were created in the formal sector outside of agriculture. Most of the job creation was happening in the informal sector, particularly through small, medium and micro enterprises (SMMEs).

The President pointed out that some of these jobs were created through the Expanded Public Works Programme (EPWP). One of the criticisms of the Programme was that it created short term jobs only. There was thus a need to re-look at the programme and explore the nature of the jobs created and how it could be improved.

The number of employed people had increased by about half a million in the past three years, with steady progress in the black economy. Statistics on black companies listed on the Johannesburg Securities Exchange showed growth from 3% of market capitalisation to 5%, but this was still shockingly low. The Committee had a role in speeding up this progress significantly.

In relation to the implementation of the Accelerated Shared Growth Initiative of South Africa (ASGISA) government had set itself a target of reviewing its progress in macro-economic indicators such as the exchange rate, inflation and interest rates. This would be done to facilitate the growth of industry that produced tradeables for both the domestic and import markets in the hope that this would create jobs for semi-skilled workers.

The President acknowledged that much more could be done to create self employment through small and micro enterprises. Given that the large majority of unemployed were youth, there was a specific need for interventions such as the National Youth Service programme and the development of young entrepreneurs. Specific targets set for implementation over the course of the next year included practical action to improve access to micro-finance, including the reach of the South African Micro-Finance Apex Fund (SAMAF) and the Micro Agricultural Finance Schemes (MAFISA) credit fund. Further targets included the proper functioning of the Small Enterprises Development Agency (SEDA), and the processing of the Companies Bill, which would reduce the regulatory burden on SMMEs and empower minority shareholders and employees.

The President had also made brief mention of the Further Education and Training Colleges (FET’s), which had been raised during the public hearings of this Committee. South Africa was not generating enough artisans, although other forms of education and training were being pursued. In this year resources would be allocated to provide financial assistance to FETs. Certain difficulties around responsibilities of the national and provincial spheres in the management of the FET system would need to be resolved urgently. The Committee would be involved in this oversight.

The issue of Youth Development emerged quite strongly in the State of the Nation address. The Government had set itself a target of increasing the number of young people engaged in the National Youth Service Programme to 10 000, and now that this goal had been met and exceeded, Government was looking in the next year to increase this number by at least 20 000 through 18 departments that had already developed plans. The Department of Labour would have to indicate its plans and the Committee would have to oversee them. 30 000 volunteers would be enrolled in community development initiatives and 5 000 young people would be employed as part of the EPWP in maintenance of government buildings. Efforts to integrate youth development into the mainstream of Government work would be intensified. Government would link unemployed graduates to job opportunities through the Youth Cooperative Programme.

Finance Minister Trevor Manuel would be elaborating on social security in the budget speech the next day. The Report of the Committee of Inquiry into a Comprehensive System of Social Security in South Africa (2002) showed that there was a need for a contributory earnings-related social security system in South Africa because this was currently lacking for large numbers of working people. The principle guiding the approach was that over and above social assistance provided through the government budget, the Committee would need to look at how to implement an earnings-related social security system. The elements of the system would include continuation of the minimum benefits presently contained in the social grants system, by way of a modern administrative system; a wage subsidy for low-wage employees, possibly directed at first entrants into the job market, especially young people; and a social security tax to finance basic retirement savings, death, disability and unemployment benefits.

Ms Watson concluded that in the last thirteen years the South African government had made unprecedented progress. Notwithstanding that, there were still critical issues where not enough was being done, particularly in the eradication of poverty and creation of employment. The majority of South Africans were living far below the bread line. There was an urgent need to investigate why the system of skills development and job creation was not happening fast enough. This Committee must accelerate black economic empowerment, job creation, investigate implementation of plans and discover the hindrances to speedy progress.  

Ms Watson said the challenges were how to take the discussions at the public hearings further through the Committee programme in order to oversee the work in the labour field. The Department of Labour (DOL) was not performing to optimum standards. The Sector Education Training Authorities (SETAs) were under-performing. Clearly the Committee had a role to play in black economic empowerment and job creation that would lead to eradication of poverty. Its further role was to examine existing legislation, determine the problems and the hindrances to implementation, and decide how best to encourage BEE, skills development and job creation.

Discussion of address and Proposal for Adoption of Committee Report on Public Hearings on Youth Unemployment
Ms S Rajbally (MF) said that although there had been an increase in the employment rate but for some time there had been a downturn in the large clothing and textile industries, which employed a number of people.

Mr M Mzondeki (ANC) referred to the EPWP, stating that the Committee might have to look beyond the Department of Labour because the Departments of Local Government and Public Works had become key players. It might be necessary also to engage with these respective portfolio committees. The identification of the driver of the SMME programmes and the questions around access to finance were important. The Committee might want to engage with agencies that distributed funds.

Mr S Morotoba (DDG: Department of Labour) agreed that the suggestion to link the Labour Portfolio Committee with other committees was important because the Department of Trade and Industry (dti) was the main driver for SMME, and the issue around the National Youth Policy had been driven by its Minister and the Presidency, so all other departments would be affected.

Mr B Mkongi (ANC) reflected that structures had already been created to deal with these SMMEs. It was very important to relate to the role played by the Umsobomvu Youth Fund. He noted that the finance crisis had been raised several times and the Committee must decide what it would do about this crisis. 

Ms Kaslenyane said that the committee had discussed the empowerment of SMMEs the previous week, and the foreigners who had taken over the small business. This was a critical issue. The question was whether we could learn from these foreigners and discussing integration. What could we learn from them and how could the committee assist because the situation needs to be monitored. It was not against these people, but was discussing monitoring because there was a need to had data as to how many were flocking in. Nobody seemed to be caring of this. Somebody must be given responsibility to monitor because the committee was discussing enterprises and how to empower our local business people. The main area was funding. Had given over to these people because they didn’t have funding for their small businesses but something should be done about this.

Mr V Mtshali (ANC) queried the statement made by Mr Mkongi. He did not see how the Committee could become further involved in the funding of the Umsobomvu Youth Fund when the youth were already complaining about it. He asked whom the Youth Fund was funding.

The Chairperson agreed with this concern.

Mr Mzondeki reminded members that in discussions the previous week, it had become clear that more information was needed on the impact of the Umsobomvu programmes, precisely to deal with the questions raised by the youth. Their programmes were not visible and the Committee did not even know whether those that were funded by them had sustainable companies. Further analysis was needed to determine which sector was creating jobs. It was said that so many jobs had been created, yet the queues of people in the constituencies looking for jobs increased. A current conference was dealing with the question of illegal foreigners. The Director General of Foreign Affairs had been asked by the media how to deal with the influx, and the point was made that the Department of Home Affairs had been asked to give more information and tighten up its activities to find out who was in the country legally and illegally. There was a need to follow up on the conference and those discussions.

The Chairperson agreed it was very important that the Committee understand exactly what should be done, and identify the key person in the Department dealing with it.

Mr Prince Zulu (IFP) agreed that it was vital to find how the youth got funding to start their businesses, because it appeared from discussions that this was very difficult. This was the context in which Umsobomvu, the Youth Commission and the other young people’s organisations came into being. They were not accessible to those people in the rural areas or the townships. He believed there was very little that could be done about the influx of foreigners because this was the business of Home Affairs. There was an automatic assumption that foreigners would take over small businesses and deprive the youth of the opportunity. In fact they had not taken over anything else, but simply put up their stalls on the street. South African youth had not done so because they thought the pavements must be decent and neat. This was surely a matter for the local Council who must ensure that these people did not trade without licences.

The Chairperson asked Mr Morotoba to convey these messages to the Umsobomvu Youth Fund and invite the Commissioner of this Fund to attend a meeting and answer some of the questions. She agreed that the foreigners were not this Committee’s responsibility but there was a need to be engaged with the issue because it impacted on South African youth. There was a need to engage municipalities in the rural areas and traditional leaders and Home Affairs about the order and number of people who were arriving.

Mr Morotoba responded that when Umsobomvu was discussed there was a complaint that municipalities were not cooperating, and therefore there was now a youth desk mechanism in each and every municipality. The youth should be informed about Umsobomvu because DOL could not be everywhere at once. The municipalities must be monitored to ensure they were getting the word out. Most youth would not attend meetings. If the mechanism in municipalities was strengthened to ensure youth understanding and participation this would help.

The Chairperson agreed that it was important to know what the youth were doing and whether the youth desks were created.

Mr Mkongi wished to reserve his comment on the report. The issue of Umsobomvu was very important, and this meeting clearly needed to get information. Last year the committee had three times read the key issues and challenges. One of the issues was funding using agencies, who would interact with young people through their own staff. Municipalities also funded some programmes. He felt that no resolution should be taken on this question at this stage.

The Chairperson felt that the issue should rather be dealt with now. However, she wondered if the Committee should already be discussing its report on the Public Hearings as Ms Watson and some members needed to be released. She noted that the State of the Nation address obviously required the commitment of Members on all the issues relating to the committee that had been described by the Parliamentary Researchers.

Mr Mkongi believed that there was a need to interact further before adopting the report.

Mr Mzondeki thought that Ms Watson would have given a summary that would form part of the Committee recommendations, so that all issues could be agreed upon formally.

The Chairperson stated that there was a summary, but that it had not yet been distributed.

Mr Mzondeki felt could not adopt the report without that document.

The Chairperson suggested the point was that the Committee had already agreed that it would be adopting the report at this meeting..

Mr Mzondeki’s proposal to postpone adoption of the report was seconded on the basis that there were still issues to be dealt with.

It was resolved that the adoption of the report stand over to the next meeting, when the summarised document would be made available to members.

The Chairperson noted that the item of Further Education and Training Colleges had been discussed and there was a need to engage with the Department of Education. More information was required as to discussions by the Portfolio committee on Education about FET colleges.

A Member referred to the question of skills, which was also being dealt with by the Portfolio Committee on Science and Technology, but this Committee were unaware of the views and approach being raised there. The question of FETs could not be separated from skills development.

The Chairperson felt the Committee should also bear in mind that other departments and portfolio committees dealt with SETAs and therefore with skills development, although this Committee was the overarching Committee for all SETAs. There was a need to combine and have a single framework for skills development.

Mr Mkongi referred to the cross cutting nature of the programme of skills development. He also proposed an opportunity to meet to discuss the mandate on the policy on National Skills Development given to the National Youth Commission, and to find out how they were handling this. There was an inter departmental committee on youth affairs and all departments were supposed to be strategising and coordinating efforts on youth development.

The Chairperson asked who should be taking the initiatives.

Mr Morotoba responded that this issue was critical across all government departments. The five clusters were all grappling with this matter to the extent that there was currently a debate as to whether there should be another cluster formed. At the same time the Joint Initiative for Priority Skills in South Africa (JIPSA) was dealing with the matter over a set time span. On the issue of SETAs he agreed that they did fall under this Committee but at the same time specific SETAs and the sector Charters fell for discussion by other Portfolio Committees. There had also been other developments on the Umsobomvu Youth funding. Members would remember that Umsobomvu was established from a sick fund that came from the Old Mutual, and was financed by the interest on that fund. It had now been projected that by the end of March there would be only R50 million in the account. Umsobomvu, in order to sustain services, would need R350 million, as some of its funding came from loans, and repayments had been a problem. The Department approached National Treasury to request a once-off allocation of R400 million to take it through to the end of March next year, on the understanding that between January and June, before the Medium Term Framework (MTEF) process, the Department must discuss all issues with the youth and come to some agreement on Umsobomvu. So that would be another debate. Members would have to play a role in policy guidance.

The Chairperson asked whether there was assurance on the funding of R400 million in March and said that more information was required.

Mr Mtshali asked whom they were funding, because they were not known by the youth.

The Chairperson suggested that question stand over as some discussions were still pending.

A member commented that the question was very relevant. If Umsobomvu was doing its work through agencies that was a problem because the agency would not necessarily disclose Umsobomvu as the primary motivator. The Committee must discover who and where these agencies were.

The Chairperson agreed this was a valid point.

The member continued that if these agencies were then devolving work to the municipality then it appeared as if the municipality was delivering, while someone else was funding.

Mr Morotoba responded that Umsobomvu’s core mandate was to fund youth. The funding took place through a loan scheme as one of the programmes. Umsobomvu also had guidance and training programmes and skills information services. He clarified that the agencies would normally provide information to one official already employed by the municipality, not to an Umsobomvu person. This issue was discussed with the Minister. There were issues of expanding the structure of Umsobomvu, although it was unknown where funding would come from, and might impact on the funding available to run the programmes. In most cases youth formations’ career guidance services would be used, and they would not necessarily get the contract from Umsobomvu. Umsobomvu would undertake to provide information, or in some cases would place an official in the offices of the agency. The funding problems were also a reason was why Umsobomvu had also played down the issue of issuing tenders to contractors, so that it could ensure that the people on the ground could direct applications to the regional offices. The majority of the beneficiaries were young people.

Mr S Siboza (ANC) maintained that there was a need for synergy. Umsobomvu did not appear to be following structures but rather seemed to be operating on their own.

The Chairperson said that point would also be raised in the public hearing report.

Ms Watson referred to the Chairperson’s comments on the document. She clarified that her document was intended as a summary of key points that emerged from the State of the Nation address. The issue was already blurred because all the issues in the address had already been identified through the process of the public hearings, and therefore the Committee had essentially already discussed them last year. The one issue that was not apparent last year was the issue of BBBEE and this was therefore the one area that the Committee needed to investigate, particularly in the light of the fact that the progress was so slow, and formulate a response, which might address questions such as whether the implementation of the legislation must be reviewed, or hold public hearings to identify the problems. The address also gave the opportunity to start looking at recurrent questions such as the  National Skills Fund. Even before the report had been adopted the Committee had been working on a number of issues, and the question was how best to prioritise. Issues of social security would need to stand over until after the Budget Speech. Other issues did not really need to be discussed now, unless the Committee wanted to discuss the approach to BBBEE.
A member felt it was important to locate and explore the responsibilities expected of the provincial spheres and the FETs. Many families were economically disempowered as the only education available was through primary and secondary schools. If the children wished to study further they would have to move to other areas at high cost. This was a topic to discuss to see how the costs could be contained. FETs should be established in the most needy areas.

Ms Kaslenyane agreed that was an important issue. The Department of Education or the Portfolio Committee on Education could inform the committee about that issue.

Mr Mkongi asked that the Department of Education must explain how information was communicated. Many students entering universities and FETs were unaware of how they could access funding as most bursaries were given to institutions of higher learning. Because upfront payment was needed on registration, many people were denied access. This situation was apparently to be changed but he enquired how students could access the information.

Mr Mkongi also noted that the Equity Act did not specifically make provision for the youth although some, but not all, Charters might deal with this. It was a further matter requiring investigation.

The Chairperson agreed with these comments and asked that they be noted for follow up.

Mr Morotoba said that he would check the Equity Act. He wished to bring the debate on the FETs into perspective. In the past there were Technikons and technical colleges linked to the industry, and the previous government was very creative in ensure that there was synergy between their programmes and the labour market. The situation had now changed and on the one hand there were serious shortages of scarce and critical skills but also huge unemployment in other areas. The issue was really whether the education systems were producing people with relevant skills and how to strike a balance between open education and producing employable people who had a sustainable livelihood. The role of the Portfolio Committee would be critical, because the labour market stakeholders and the trade unions were asking what could be done change the system to alleviate the levels of unemployment. The academic approach was not meeting the practical needs.

Mr Siboza was concerned that the emphasis related to skills development, particularly of the youth and unemployed. The majority of youth in reality was unskilled, and some had no hope of becoming skilled. Some had only primary education, some were drop outs, but they needed to be employed and jobs must be created. The plan was to use the Expanded Public Works Programme, but the Department of Public Works, who were leading the programme, were not doing enough. The EPWP was involved in upgrading houses, but this work was limited to a few employees and a few months in time and would not create jobs for the youth. 

Mr Mzondeki wondered if perhaps too much emphasis was placed on a certain type of skills when artisans were needed who could mix cement or saw a plank or do other construction work. He felt that skills development needed to  balance all the levels of skills.

The Chairperson emphasised that some people were under a misapprehension as to what the FET colleges would offer, and this could also be part of the public hearing report.

Mr Mzondeki added that the Committee must also look at people that were retrenched from mines and factories, and therefore had a skill that was not utilised.

The Chairperson agreed. There should be monitoring and coordination of these unknown factors.

Mr Mzondeki suggested that there needed to be a social plan, to identify and to communicate to municipalities that the skills were available from retrenched people. This should be done when such people registered with the DOL. It would be easy to get this data.

Mr Mkongi said that there was already a proposal that DOL must undertake a study to align the National Skills Development strategy with the skills in the country and the creation of jobs.

Mr Morotoba responded that there was a process under way to do exactly that. DOL was halfway to the implementation for 2010 and by the time of the Skills Conference in October that study would be ready so that it formed the basis of the review and looked beyond 2010. The information question had been raised last year in a strategic plan. A number of efforts would be made to ensure a data base of all people and their skills in the country, and to try to make sure that employers registered vacancies to facilitate emerging services. The trade union Solidarity and young people individually would come to DOL to offer their readiness to take on those jobs, but when those people were confronted they said they were unable to take them. The DOL was also trying to link compensation, UIF and skills development to ensure that somebody who was retrenched should be on the system. If that person had skills he could easily be matched to a job or referred to training services while still earning UIF. After UIF had expired, that person would be ready to be deployed in other areas. In the event of injury the question was whether a person could be retrained for another job. Loss of eyesight would require retraining in braille while still getting UIF.  DOL would also depend on cooperation from the Department of Home Affairs and the Revenue Services (SARS), as SARS would be able to track whether a person was still employed. DOL would also be called upon to assist in areas such as mining where job losses were anticipated. The system would provide comprehensive information in due course.

The Chairperson said that retrenched people and retired people with scarce skills were important and should be recognised.

Committee business
The Committee was not able to adopt the report on the International Labour Conference.

The Committee would, in the following week, try to adopt the Report on the public hearing and also adopt its Minutes of past meetings.

An invitation to a conference on 3 and 4 April on the Ethical Leadership Project was tabled.

The meeting was adjourned.



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