National Economic Development and Labour Council: Budget hearing

LABOUR PORTFOLIO COMMITTEE
9 May 2007
NATIONAL ECONOMIC DEVELOPMENT AND LABOUR COUNCIL: BUDGET HEARING

Chairperson: Ms O Kasienyane (ANC)

Documents handed out:
NEDLAC Presentation on the Strategic Plan and Budget

SUMMARY
NEDLAC briefed the committee on its workings, the Work Programme for 2007/2008, Budget Allocations, Key Challenges and the Way Forward. A major challenge facing the country is the “casualisation” of employment, as it leaves workers vulnerable to exploitation. Another important key focus area is the Supreme Courts Bill, and a proposal to do away with the specialized courts such as the labour courts. Key policy challenges include the poor relationship with most parliamentary committees, and the late tabling of issues at NEDLAC or not at all in some cases.

The Committee asked questions relating to employment equity, casualisation of employment, Insolvency Bill, the skills flight and brain drain

MINUTES
National Economic Development and Labour Council (NEDLAC) presentation
Mr H Mkhize (Chief Executive Officer) briefed the committee on the workings of NEDLAC, the Work Programme for 2007/2008, Budget Allocations, Key Challenges and the Way Forward. He was accompanied by the Mr U Dulabh (Chief Financial Officer of NEDLAC).

Mr Mkhize focused on each of the four sections in the presentation elaborating on important features. He briefly mentioned the main representatives of each of the constituencies that makeup NEDLAC, that is government, business, labour and community. These constituencies re-affirm their commitment to social dialogue and working together to address the economic and development challenges our country faces.
Mr Mkhize made the following additional remarks on certain parts of the presentation:

Strategic objective number one focused on tackling challenges facing the economy and building an enduring partnership that would help  build a prosperous SA, is a very broad objective and there is no monopoly of this particular challenge.

The second strategic objective focused on negotiations that aimed to deliver formal consensus based agreements on the economic and social policy focuses on the sometimes poor agreements that emerge. However, feedback from the International Monetary Fund (IMF) and International Labour Organization (ILO) affirms that we have world class policies. For instance our definition of an employee is word for word with that of the IMF. The feedback received further asserts that our development policies are advanced.

Strategic objective four entailed selecting from many possible interventions those which hold the promise of the greatest possible impact in the shortest possible time. This means that we do not do everything but choose interventions with the greatest possible impact. It is based on the fact that the relations in the labour market are not were NEDLAC would want them to be.

Section 1 of the presentation ‘Modus Operandi’ outlined what the representatives of organized business, community, labour and government engage in, in order to meet the outlined objectives. These are the tools that NEDLAC uses to achieve its objectives. By resolving socio-economic disputes in terms of section 77 of the Labour Relations Act (LRA), NEDLAC intend to resolve disputes outside the CCMA and other dispute resolution structures. The issues that come to NEDLAC were beyond the usual workplace issues like cash and transport disputes.

Section 2 of the presentation was issue driven, whereby the most important are the insolvency bill and the Changing Nature of Work.

A key focus area is the Companies Bill: Chapter 6, business rescue model. NEDLAC have until June to finalize the agreements on the Companies Bill. The Companies Bill has huge implications for the labour market, though NEDLAC were not going to be involved in the implementation process.

Engagements have also commenced on the Insolvency Bill. A major problem is that a company can easily be declared insolvent due to a single creditor. What is intended is that when there are signs of a company going down NEDLAC will send in an insolvency rescue team, which will try turnaround the company

With reference to the changing nature of work as a key focus area, this is an issue that deals with labour brokers, casualisation and other atypical forms of employment. The prevalence of these forms of employment implies that the current labour market has gaps. Specifically it implies that there are loopholes in the labour legislation, and because of this, these processes were not illegal by evading the regulation. The major function of the labour law was to protect vulnerable workers.

Casualisation puts workers in a vulnerable position and thus the labour market policy needs to deal with this. However, these forms of employment, such as home-working, are a global phenomenon. The question then is whether to get rid of them or to manage them so that they do not undermine worker interests. The government has said that the labour market needs to be flexible without getting rid of the gains made. These are two extremes that the government has commissioned, and has resulted in several reviews and recommendations. These reviews and recommendations have pointed out that there is nothing wrong with the labour law. The reviews have all pointed to one major problem, that it is difficult to dismiss an employee. The procedural requirements are just too cumbersome. NEDLAC have thus decided to focus on fixing the labour institutions, that is the Commission for Conciliation Mediation and Arbitration (CCMA), the Employment Conditions Commission (ECC) and Bargaining Councils, rather than fixing the labour law itself. Feedback from professors asked to review and give recommendations indicates that the legislation is flexible particularly through its support of Collective Bargaining.

With regard to minimum standards that may be regarded as causing inflexibility. The government never said it would set minimum wages and standards on a generic level. When it did set minimum standards, such as the domestic sector wages, it did so with advice from ECC. The ECC gives advice to the minister over what is necessary regarding wages.

Most of the reviews where due to the Cabinet requiring the Minister of Labour to review the labour market so to determine how best to give effect to Accelerated and Shared Growth Initiative-South Africa (ASGISA). In one of the cabinet meetings, a major issue brought up was the ability of ASGISA with regards to the labour market. The tax on Small Medium and Micro Enterprises (SMMEs) and service delivery were indicated as being binding constraints on the labour market. Henceforth the Minister of Labour was asked to review the labour market. Thereafter several academics were invited to make recommendations on what needs to be done with the labour market.

All the reviews done indicated that there was nothing wrong with the legislation. It was however pointed out that the CCMA was efficient though it was over proceduralised and thus costly for workers to use it. We do not need to change the law in terms of how the CCMA functions. It is a free system though it is being clogged up by managerial employees and the middle class. Some of the recommendations made were that these middle class employees pay a fee, or use be made of accredited private mediation and arbitration agencies. Tax was raised as in issue for SMMEs, and was agreed that the South Africa Revenue Service (SARS) would best know what is taking place. Reviews are thus being conducted with the aid of SARS. The four ministers asked by Cabinet to review these issues, will have to go back to Cabinet to report on their findings. NEDLAC was thus waiting for the reviews, though their position was not to temper with the law. Their reason is due to the number of chapters were concessions have been made and the interlink between them. Changing one chapter will have an effect on the other chapters. In other words, tinkering with one part will unravel the entire LRA.

Another important key focus area is the Supreme Courts Bill. There has been a proposal to do away with the specialized courts such as the labour courts. This is a contentious issue which labour has protested against. One of the problems is that there are two courts that are on the same level, yet the judges are paid differently.  Furthermore some of these judges, like those of the labour court, are only part-time judges. However, having the criminal courts handling labour issues is problematic as this could result in judges handling labour issues without having the relevant background knowledge. NEDLAC has tried to avoid this occurring, though they have a further dilemma as the issue is already being looked at in Parliament.

The president has indicated that there is need for consultation with NEDLAC over the Supreme Courts Bill. Presently, NEDLAC have only had cooperation from the Justice and Constitutional committee, who are corresponding with us, though they needed the Labour committee to get involved in the consultation over the Bill. Currently, there has been a case of an employee who was dismissed, and the CCMA found the dismissal to be unfair on procedural grounds. The defendant however took the issue further to the labour court, which upheld the CCMA decision. The case was taken further to the High Court, which also upheld the decision. However the Supreme Court overturned the decision. The Confederation of South African Trade Unions (COSATU) then decided that it was constitutional matter and has thus taken it further. If COSATU wins it means that the dispute resolution process would be undermined.

The trade and industry stream work is highlighted in the presentation, where the key focus areas are outlined. Some of the driving forces behind this stream work is the eradication of poverty and high unemployment. The key focus area on trade and industry focuses on the trade and industry policies. The problem with these two policies is that they are fragmented and do not coordinate. For instance, this problem can translate to a situation whereby a sector is opened up to the global economy when it is not yet ready. This is problem is linked to the use of outmoded machinery and technology which affects production. The industrial policy is meant to take account and address such issues.

The trade and industry department has taken account of these issues. To address these problems there is recognition that there needs to be a balance in terms of the incentives that are given to particular sectors to foster their growth. We need to see information showing the development of these sectors that have been provided with incentives. Henceforth studies have been taking place in order to find out why some sectors have been performing poorly. In particular, we have been given the task to investigate why agriculture has ceased to be the main source of employment creation. The study is still going on but for now we can safely say that agriculture, as a form employment , is no longer attractive to the young generation. The second reason why this sector is no longer a thriving source of employment creation is that there are no guaranteed markets for the produce. This is a disincentive for investors and translates into poor growth and employment creation. A third reason is that farmers do not want to invest in long term crops as they are waiting for the results of the investigation on bio-fuels.  There is no telling what the outcome of this investigation will be.

Section 3 of the presentation was on Finance. The first column indicates the sources of funds, and one can see that the government budget allocation is the main source of finance. Last year NEDLAC received 7 million and this year they received 13 million. This was certainly not a huge increase, and the allocation is far from enough. However this has not compromised our tasks. To supplement the allocation, we target the particular department that is involved in the task being dealt with, and ask for funds. Notwithstanding how we source more funds, we have asked the ILO to do a ten year review of NEDLAC. The review report will be taken to Cabinet, after which we will go back to Cabinet to ask for more funding. It can thus be seen in the presentation that there is nothing left, and this is due to the above reason.

Section 4 of the presentation focuses on the challenges being faced by NEDLAC. The labour market is a huge challenge, in particular the skills development. Some Sector Education Training Authorities (SETAs) have been identified as being not up to scratch. NEDLAC had decided to investigate what exactly is taking place in the SETAs in terms of skills development. Skills shortage is a big issue, and there is need to know why a lot of graduates are unemployed. Secondly we need to investigate the brain drain, as to why it is occurring. Is it because of Affirmative Action? If so it will certainly be an unintended aspect of an otherwise good law. Affirmative Action is meant to provide an enabling environment. For instance we need to address, the issue that designated employers do report on what they are like in terms of Affirmative Action measures , and indicate what they intend on doing. However, it appears that some do not report back on the progress made. Regarding institutional capacity, there has been criticism that NEDLAC is merely a platform where people fight. However, this just the nature of dialogue.

One of the current challenges is the Trade, Investment and Industrial Policy. This is very important to NEDLAC who see the need for infrastructure development by government. There is need to see results of the money that government has allocated to public investment.

A further important challenge, highlighted in the presentation, is social dialogue. A huge issue is that some government departments do not correspond  with  NEDLAC, with the exception of the Labour, Trade, Public Works and Treasury Departments. Furthermore is the issue regarding committee’s involvement in NEDLAC. The question is why the committee’s constituencies are restricted from the Development Chamber, yet all these committees have an influence on the Development Chamber. In particular the community constituency wants to participate in all four chambers. Under the challenges for social dialogue, is the growing number of new labour market entrants. Currently there are 17.2 million people in the labour market. 12.2 million of these people are employed and NEDLAC needs to find out how many of those are causal workers.

Key policy challenges include the poor relationship with Parliamentary committees besides Labour, Trade, Public Works and Finance committees and the late tabling of issues at NEDLAC or not at all in some cases. This exemplified by the new Public Service and Administration Amendment Bill, which did not come to NEDLAC. NEDLAC needs to have some say over the Bill, as there is some need for policy consideration. Presently NEDLAC need to go to Parliament if they need say something about the Bill.

The last section in the presentation was the Way Forward. NEDLAC have developed a protocol as to how policies are dealt with at NEDLAC. We need to sell this protocol for tabling issues, so that it becomes part of NEDLAC.

Discussion
The Chairperson expressed her delight with the presentation and that it was highly commendable as almost all issues raised last year were addressed. She further remarked that there is need for consideration of the poor budget allocation. The Committee was also going to have a meeting on Employment Equity, where they are going to ask NEDLAC to send representatives. They would also deal with the SETAs, and had already prioritized some of them. Other chairpersons should also be invited to the meeting. It appears that the main issue in the presentation has been that of casualisation and labour brokers. These issues are of concern to the committee and it was hoped that the Cabinet’s 10 year review of NEDLAC, will result in the granting of  more funds  She then remarked that there are always new issues concerning the labour market. Other countries are always interested in our policies. What are the implications for the immigration policies and employment equity policies?

Mr W Spies (FFP) commended the presentation. He said that two important issues were raised in the presentation. These are the issues of skills development and employment equity.

Mr Mkhize responded by saying that when policies are developed there is likely to be some resistance faced. This is the nature of policy development and applies to the policy on Employment Equity. Employment Equity addresses three things and is not just about populating the workplace. He added that at the centre of each workplace should be skills development. In order to populate the workplace we need skills development and training. This is what is needed to induce employers to meet the goals of employment equity.

Ms S Rajbally (MF) asked if there would be a policy Bill to deal with the issue of casualisation. Specifically will there be a bill that stipulates that after a certain period casual workers would have gained enough skills to be able to move into full time employment? A further concern is over the brain drain of workers. The MF offices in KwaZulu-Natal are always receiving people looking for work permits to go out of the country. How should they deal with this issue? A further issue that needs clarification is the differential remuneration for the same job. For instance, why do workers in Johannesburg receive higher wages?

Mr Mkhize replied by saying that there is no stipulation that after a certain period a casual worker becomes a permanent worker. However, such a requirement may actually be used in the future to deal with the issue of casualisation. With regards to the skills flight, we have to understand that as part of the global community our skilled workers might leave. However, since South Africa has a skills shortage we need to address the issue of brain drain or skills flight

The Chairperson asked for more clarification over the casualisation and exploitation in the retail sector?

Mr Mkhize replied by saying that government sees casualisation as bad. Casualisation is however here to stay and one has to be very creative as to how you deal with it and not just take off the shelf solutions to deal with it.

Ms H Weber (DA) asked whether the policies referred to in the presentation transform into actual jobs. She also remarked that she had a problem with the rulings that the CCMA gave out but are not carried out. Do the insolvency committees you mentioned have the capacity to do what there are meant to do?

Mr Mkhize responded by saying the start to fixing the country after 1995 was partly through the labour market policies. They do not have clinical labour policies that deal with workplace issues. The policies focus goes beyond the work place and focuses on fixing the anomalies of the past, even though classical economists criticize this. At the advent of democracy the issue was rights and thus the tonality of polices was about rights. They are now gradually looking at how these policies impact society. They now assess the impact of these policies first. This is a new approach to policy development.  In terms of capacity, the harsh reality is that our capacity to implement the insolvency bill is problematic. They were not saying NEDLAC will implement the turnaround of businesses. They were saying that NEDLAC wants to use consultancy firms that are good at turning around struggling businesses.

Mr B Mkongi (ANC) remarked that a problem with the SETAs is partly due to the lack of capacity of the people who sit on the SETA boards. Those people need help. He wanted to know NEDLACs view on this.

Mr Mkhize responded by saying that the question of who sits on the SETA boards is a dilemma. The members who sit on these boards were recommended by labour. We do not have a say over who sits on these boards

Mr Mkongi asked for further clarification on the Insolvency Bill. He also added that the problem with CCMA was that it was incapacitated and this needs to be dealt with rather than accrediting private mediation and arbitration agencies. He also aired his concern over COSATU winning its case and how this may open the doors for everyone to take matters to the constitutional court, rather than resolving them in the labour courts.

Mr Mkhize replied by saying the information that they had received was from professors who had been commissioned to review and report on the functioning of the CCMA.

Mr L Maduma (ANC) aired his concern over casualisation. Do the casual workers who are dismissed leave with nothing? He also added that casualisation is also a form of union bashing, and needs to be addressed as it leaves workers vulnerable to exploitation. He also asked for clarification of the role of the CCMA and raised his concern over it being clogged up by middle-class workers. Is there also not an imbalance when workers go to the CCMA represented by a shop-steward whilst the employer is represented by lawyers?

Mr Mkhize responded by saying that casualisation is high in the sectors that are growing, particularly in the construction industry, which is a sector that has been growing rapidly. They needed to have a task team in NEDLAC to deal with this issue. In relation to dismissal of casual workers, South Africa does not have a very broad social security system and thus NEDLAC is trying to make it difficult to dismiss workers. With regards to the issue of a shop-steward representing someone at the CCMA whilst the employer has got a lawyer is just a harsh reality. This problem is particularly common with the smaller CCMA branches and is to be dealt with by the three constituencies.

Mr M Lowe (DA) aired his concern over the high unemployment rate and the skills shortage. He wanted to know in more concrete terms about what is being done to deal with these problems. He added that as much as protection of workers is needed, it is more important to have jobs first.

Mr Mkhize said that he agreed with Mr Lowe’s assertion that jobs need to be created first before protection of workers is given. The key issue is for NEDLAC to get people to work first then deal with the working conditions.

Mr Lowe raised his dissatisfaction of the centralised bargaining framework. His main concern was over parties who do not want to be represented yet still were. He further aired his concern over the problems in SETAs and how there were always plans to boost them, yet nothing really materialized.

Mr Mkhize responded by saying that the collective bargaining system had an exemption system and according to his knowledge exemptions where granted expediently. He thought the concerns about the collective bargaining system may be due to the small employers not having knowledge of the exemption system. He further noted that there is a directive from Parliament that NEDLAC has to come to Parliament to present information on its budget and performance. The reason why the Committee did not have a lot of information about NEDLAC’s performance was because it had been assumed that NEDLAC was going to come back to address the performance issues in 6 months.

Mr E Mtshali (ANC) remarked that the skills flight and brain drain being experienced could be partly due to the under payment of workers. Particularly Teachers and Nurses appear to be underpaid. He added that there are professional nurses with 20 years experience at King Edward Hospital in Kwazulu Natal who are only being paid 5 000 rand.

Mr Msthali remarked that there might not be enough being done to foster agriculture. In particular not enough has been done to boost cooperatives. A major problem is that land has been allocated yet little has been done to educate people on how to efficiently use this land. There is also need to foster farming of certain produce, like grapes, in the rural areas. This might resolve the issue of people moving to the Western Cape to look for jobs which they do not find.

Mr Mkhize replied that government and other stakeholders agree that cooperatives are means to poverty eradication. Business is however skeptical about how these cooperatives can be supported. This is an issue that has been raised by Business in NEDLAC. NEDLAC have however addressed this in a Bill as to how cooperatives can have access to funding. That issue has already been taken to Treasury. The issue of giving people land with out providing education is certainly a cause of concern. A further concern to us is the lack of enthusiasm sometimes shown by the people given land.

Mr T Anthony remarked that there is currently a database which lists all the unemployed graduates. What is being done to make them more employable?

Mr Mkhize agreed that there are a lot of unemployed graduates. However the problem is that these graduates are unemployable. This is due to a mismatch between skills development and education. To address this skills mismatch NEDLAC might need to limit the amount of humanities graduates and increase those of other faculties.

The Chairperson asked how NEDLAC was dealing with FEDUSA and the minority unions
 wanting to be part of NEDLAC.

Mr Mkhize replied by saying that to be part of NEDLAC, a union has to have 300 000 paid members. The union that wanted to be part of NEDLAC has approximately 500 000 members. On the other hand FEDUSA and SACTU have 3,2 million members and they feel the minority union is not representative. It is thus a contentious issue. They however respected anyone said that they are not represented and would look into the matter.

The meeting was adjourned