ATC130520: Report of the Portfolio Committee on Labour on Budget Vote 18: Labour and on the Strategic Plans of the Department of Labour (2013 – 2018) and its Entities, dated 17 May 2013

Labour

Report of the Portfolio Committee on Labour on Budget Vote 18: Labour and on the Strategic Plans of the Department of Labour (2013 – 2018) and its Entities, dated 17 May 2013

Report of the Portfolio Committee on Labour on Budget Vote 18: Labour and on the Strategic Plans of the Department of Labour ( 2013 – 2018 ) and its Entities, dated 17 May 2013

The Portfolio Committee on Labour, having considered Budget Vote 18: Labour and the Strategic Plans of the Department of Labour ( 2013 – 2018 ) and its entities, reports as follows:

1. Introduction

In terms of the Public Finance Management Act, No. 1 of 1999, accounting officers must provide Parliament or the relevant legislature with their respective institution’s Medium-Term Strategic Plan (MTSP) and, where applicable, with its Annual Performance Plan (APP). The Budgets and Strategic Plans of the DoL and its entities were tabled in Parliament in February and March 2013 respectively and were referred to the Portfolio Committee on Labour for consideration and report. In performing its constitutional mandate, the Committee scrutinised the alignment of strategic plans (2013-2018) of the DoL and its entities taking into account the following:

  • State-of-the-Nation Address;
  • Government priorities and key policies to develop programmes;
  • National Development Plan (NDP); and
  • New Growth Path (NGP).

The above fundamental principles served as government’s underlying programme of action. The Committee wanted to establish whether the funds allocated would help transform programmes to actual service delivery within the workplace and especially to protect vulnerable workers. The Money Bills Amendment Procedure and Related Matters Act, No. 9 of 2009, grants Parliament the power to either reject or recommend budgets of departments.

2. Department of Labour ( DoL )

2. 1 Mandate of the DoL

The Department of Labour derives its mandate from the Constitution of the Republic of South Africa ; Chapter 2 - Bill of Rights. The legislative mandate is reflected in a range of legislation, including the Labour Relations Act (1995), the Basic Conditions of Employment Act (1997), the Employment Equity Act (1998), the Unemployment Insurance Act (1996), the Occupational Health and Safety Act (1993), the Compensation for Occupational Injuries and Diseases Act (1993), National Economic Development and Labour Council Act (1994) and the Skills Development Act ((1998) as amended) and Employment Services Provisions.


2.2 Strategic and Annual Performance Plans of the Department

Table1: Budget allocation per programme

Programme

Budget

Nominal Rand change

Real Rand change

Nominal % change

Real % change

R million

2012/13

2013/14

2014/15

2015/16

2012/13-2013/14

2012/13-2013/14

Administration

764.6

785.4

833.4

877.5

20.8

- 20.9

2.72 %

-2.73 %

Inspection and Enforcement Services

399.0

465.2

494.4

522.5

66.2

41.5

16.59 %

10.41 %

Public Employment Services

334.3

400.1

438.2

461.8

65.8

44.6

19.68 %

13.34 %

Labour Policy and Industrial Relations

636.0

764.5

867.5

923.7

128.5

88.0

20.20 %

13.83 %

TOTAL

2 133.9

2 415.2

2 633.5

2 785.5

281.3

153.2

13.18 %

7.18 %

Source: National Treasury 2013

The DoL’s Strategic Plan (SP) 2013 – 2018 and the Annual Performance Plan (APP) 2013/14 which were published and tabled in Parliament during March 2012, had shortcomings identified in relation to:

  • Proposed corrections not having been effected;
  • Misalignment between the SP and APP;
  • Some Indicators and Strategic Objectives not fulfilling the SMART principles; and
  • Some Indicators being too operational and not strategic.

Subsequent adjustments were made to the SP and APP and an Erratum approved by the Minister was tabled in Parliament.

In response to the Department’s Strategic Objectives, four programmes have been developed with achievements noted on selected indicators and outcomes.

During the 2012/13 financial year, the Department received a total of R2.1339 billion. In the 2013/14 financial year, this budget was increased to R2.4152 billion. This is a nominal rand increase of R281.3 million but a real rand increase of R153.2 million. In nominal terms, this is 13.8 per cent increase in the budget and in real terms, this is a 7.18 per cent increase.

2.2.1 Programme 1: Administration

The administration programme received a total of R785.4 million for the 2013/14 financial year. This is a nominal increase of R20.8 million from the previous 2012/2013 financial year. However, in real rand change, that is a R20.9 million decrease. In real percentage terms, it is a 2.73 per cent decrease.

The programme consists of the following sub-programmes: Ministry, Management, Corporate Services, Office of the Chief Financial Officer and Office Accommodation. According to the Department, the key focus areas of this programme will be on;

· Unbundling the public private partnership unitary fee to fund the implementation of the new IT operating model;

· The organisational review and redesign project;

· The procurement of new departmental fleet of vehicles as the department will not be extending the contract with the previously contracted car hire company; and

· There will be a significant increase in the number of personnel as the Department will absorb 46 IT staff following the conclusion of the Siemens IT PPP in November 2012.

2.2.2 Programme 2: Inspection and Enforcement Services (IES)

The Inspection and Enforcement programme received a total of R465.2 million in the 2013/14 financial year. This is a nominal rand increase of R66.2 million. In nominal percentage change, this budget has increased by 16.5 percent. Whereas in real terms, i.e. effecting inflation, the budget has increased by 10.4 per cent.

Over the MTEF period, the focus will be on effective and efficient registration of labour relations and occupational health and safety incidents. Compensation of employees has been the main reason for the budget increase for this programme and two-thirds of spending relates to staff employed in the Compliance, Monitoring and Enforcement sub-programme. These are inspectors who ensure that employers and employees comply with labour legislation. According to the Department, improving the inspectors’ remuneration will ensure that the Department is able to retain them, and creating new specialist labour inspector posts.

2.2.3 Programme 3: Public Employment Services (PES)

The Public Employment Services programme received a total of R400.1 million during the 2013/14 financial year, compared with the previous year’s R334.3 million. The 2013/14 PES’s budget increased by R65.8 million in nominal terms. However, in real terms, this was a R44.6 million increase in the budget. In nominal percentage terms the PES budget has increased by 19.7 per cent, whereas in real percentage terms that was an increase of 13.3 per cent. This programme has the second highest budget allocation. Although this is in line with the Department’s objectives of promoting the PES to reduce unemployment through registration and placement of the work-seekers, when compared with the projected resources that are needed to promote this programme, the budget falls short.

Sub-programmes include Management and Support Services, Work Seeker Services, Employer Services, Designated Groups Special Services, Sheltered Employment Factories and Subsidies to Designated Workshops, Productivity South Africa, Unemployment Insurance Fund and the Compensation Fund. The Department’s expenditure focus will be on enhancing the Department’s capacity to implement the Employment Services Bill and the public employment service projects once the bill is promulgated, and on managing the implementation of the turnaround strategy of the Sheltered Employment Factories.


2.2.4 Programme 4: Labour Policy and Industrial Relations (LP&IR)

The Labour Policy and Labour Relations programme received a total of R764.5 million in 2013/14 financial year compared with the R636 million in 2012/13 financial year. This is a R128.5 million nominal rand increase and a R88 million rand increase in real terms. In nominal percentage terms, the 2013/14 budget has increased by 20.2 per cent but in real percentage terms, the budget has increased by 13.8 per cent.

Sub-programmes include Management and Support Services; Strengthening Civil Society; Collective Bargaining; Employment Equity; Employment Standards; Commission for Conciliation, Mediation and Arbitration (CCMA); Research Policy and Planning; Labour Market Information and Statistics; International Labour Matters; and National Economic Development and Labour Council (Nedlac).

The CCMA has the biggest budget share when compared with other sub-programmes. It received R594.4 million in the 2013/14 financial year, which is an increase of R115.7 million in nominal terms from the previous year allocation of R478.7 million. An additional R20.6 million from the Department is earmarked for improved conditions of service. A further R380 million is allocated for the expansion of services. This is to deal with additional caseload arising from the implementation of amendments to labour legislation and the rollout of the web based management system to labour centres and bargaining council, a new office in the Vaal Reefs area in Gauteng and Welkom in Free State , and a dedicated job saving unit for the training lay-off scheme.

2.3 The National Development Plan (NDP)

According to the National Development Plan (NDP), one of the key elements in accelerating the more inclusive growth is to ensure that the labour market improves on its performance to reduce tension and ease access to young, unskilled work seekers. In its analysis, the NDP identifies the following challenges; low levels of competition for goods and services, large numbers of work seekers who cannot enter the labour market, low savings and poor skills profile. It further argues that uncompetitive labour markets keep new entrants out and skew the economy towards high skills and high productivity sector.

The NDP’s 2030 vision for employment and growth includes:

· A fall in the strict unemployment rate from 25 per cent to 14 per cent in 2020 and to 6 per cent in 2030;

· A rise in the labour force participation rate from 54 per cent in 2010 to 65 per cent; and

· About 11 million additional jobs by 2030.

In order to achieve these targets, the rate of investment in Growth Domestic Product (GDP) is expected to rise from 17 per cent to 30 per cent by 2030. The real GDP will have to more than double, i.e. average growth of 5.4 per cent between 2011 and 2030. At this rate of growth, there will still be substantial reliance on very low-income employment, survivalist activities and public employment schemes.

The proposals of the NDP may well be ambitious given the current rate of economic performance and other challenges that are not of the country’s making. As a small open economy and with the Euro zone being South Africa’s largest trading partner, the prevailing financial crisis has reduced demand for South Africa’s goods and has, to some extent, driven away potential and existing investors from riskier emerging market assets, as they become more risk averse in their investment behaviour. As a result, the South African economy is expected to grow by around 2.7 per cent in 2013, 3.5 per cent in 2014 and 3.8 per cent in 2015. This is far below the hoped for 5.4 per cent by the NDP. It will take time for Europe to recover and it is expected that the economic landscape will never be the same as it was before. From this perspective, South Africa will have to change its traditional focus to trade with BRIC countries ( Brazil , Russia , India and China ) and the rest of Africa .

To achieve set targets, the NDP further suggests that there needs to be social cohesion, because if South Africa registers progress in deracialising ownership and control of the economy without reducing poverty and inequality, transformation will be superficial. Similarly, if poverty and inequality are reduced without demonstrably changed ownership patterns, the country’s progress will be turbulent and tenuous. In addition to broader targets and proposals, the NDP has listed a series of specific labour market interventions to ultimately reduce unemployment, poverty and inequality.

3. Public Entities of the DoL

3.1 Compensation Fund (CF)

The Compensation Fund (CF) is a public entity of the DoL which administers the Compensation for Occupational Injuries and Diseases Act, No. 130 of 1993, as amended by the COIDA,- No. 66 of 1997 . The main objective of the Act is to provide compensation for disablement caused by occupational injuries or diseases sustained or contracted by employees, or for death resulting from such injuries or diseases, and provide for matters connected therewith.

The Department transferred an amount of R15.6 million to the entity.

For 2013/14, the strategic objectives of the Compensation Fund are to:

a) provide an efficient social safety net;

b) provide professional, efficient and client-oriented human resources;

c) strengthen corporate governance;

d) integrate the Fund with the comprehensive social security reforms;

e) promote policy advocacy;

f) improve financial viability;

g) improve corporate support and services; and

h) enhance quality and access to Compensation of Occupational Injuries and Diseases Act (COIDA) services and information.


3.1.1 Recommendations

The Committee recommended that the Minister of Labour gives consideration to:

a) A further briefing to the Portfolio Committee by the Compensation Fund on outstanding issues as tabulated in a list of questions forwarded to the entity;

b) Strengthening the re-training of workers affected by occupational injuries and diseases;

c) Addressing the growing number of cases not adjudicated by the Compensation Fund; and

d) Providing a progress report on the turnaround strategy by the task team appointed by the Minister.

3.2 National Economic Development and Labour Council (Nedlac)

Nedlac is a statutory body which is governed and mandated by the National Economic Development and Labour Council Act, No. 35 of 1994.

In terms of the National Economic Development and Labour Council Act, Nedlac shall:

a) strive to promote goals of economic growth, participation in economic decision-making and social security;

b) seek to reach consensus and conclude agreements pertaining to social and economic policy;

c) consider all proposed labour legislation relating to labour market policy before introduction in Parliament; and

d) encourage and promote the formulation of coordinated policy on social and economic matters.

The Department made a transfer of R26.5 million to Nedlac for the 2013/14 financial year.

The strategic objectives of Nedlac for 2013/14 are as follows:

a) Administration

· Improved systems and operations.

· Effective governance and oversight.

· Provide leadership and strategic direction.

b) Human resource management

· Strengthen organizational culture and performance.

c) Finance

· Improved resources management.

d) Nedlac chambers

· Conclude matters under consideration within the framework of the Nedlac protocol.

e) Communications and outreach

· Promote social dialogue through communication, information and capacity building.

· Promoting social dialogue through institutional collaboration and building networks.


3.2.1 Recommendations

The Committee recommended that the Minister of Labour gives consideration to:

a) Additional budget allocation for Nedlac in order for them to effectively implement their mandate;

b) Continuously improving the turnaround times on cases addressed by Nedlac;

c) Strengthening community constituency by ensuring that the interests of the unemployed and the most vulnerable groups are accommodated in decisions taken at Nedlac.

3.3. Commission for Conciliation, Mediation and Arbitration (CCMA)

The purpose of the CCMA is to promote social justice and economic development in the world of work and to be the best dispute management and dispute resolution organisation trusted by its social partners. The Department made a transfer of R594.4 million to the CCMA for the 2013/14 financial year.

The CCMA’s strategic objectives for 2012/13 are to:

a) enrich the role of the CCMA in the labour market;

b) build up skills for staff and social partners to achieve professionalism;

c) deliver excellent service rooted in social justice, ensuring a balance between quality and quantity;

d) enhance and entrench internal processes and systems for the optimal deployment of resources;

e) align the structure that will enable optimal implementation of the strategy; and

f) entrench an organisational culture that supports the delivery of the mandate.

3.3.1 Recommendations

The Committee recommended that the Minister of Labour gives consideration to:

a) Ensuring that the CCMA concentrate on measures to reduce the workload such as guidance and training to employers and employees in order to avoid unnecessary referral of disputes.


3.4.
Unemployment Insurance Fund (UIF)

The UIF strives to contribute to the alleviation of poverty in South Africa by providing short-term unemployment insurance to all workers who qualify for unemployment-related benefits. The UIF does not receive transfers from the Department of Labour because it generates its own funds. The entity has budgeted for a total income of R18.9 billion for 2013/14.

The strategic objectives of the UIF for 2013/14 are to:

a) encourage compliance through enhanced service delivery;

b) improve governance;

c) strengthen institutional capacity of the Fund;

d) improve stakeholder relations; and

e) fund poverty alleviation schemes.

3.4.1 Recommendations

The Committee recommended that the Minister of Labour gives consideration to:

a) The DoL to consider ways in which the reserves of the UIF can be used for job creation initiatives; and

b) Ensuring that the high reserves of the UIF lead to improved benefits payable by the UIF, particularly better maternity benefits.


3.5
Productivity South Africa

The aim of Productivity South Africa is to improve productivity by advertising, implementing, monitoring and evaluating solutions aimed at South Africa ’s competitiveness. The Department made a transfer of R40.3 million for 2013/14 to the entity.

The strategic goals of Productivity South Africa for 2013/14 are:

a) value chain competitiveness;

b) workplace challenges;

c) organisational productivity solutions; and

d) turnaround solutions.

3.5.1 Recommendations

The Committee recommended that the Minister of Labour gives consideration to:

a) Ensuring funds are made available for Productivity SA

i. to be able to extend its services to areas where they are currently not operating; and

ii. for marketing purposes and to ensure the entity is rendered more visible;

b) Developing the capacity of Productivity SA to position itself as a consultant of first choice in improving productivity rather than the service provider of last resort for entities on the brink of bankruptcy.

4. Overall Recommendations

The Committee, therefore, recommends that the Minister of Labour gives consideration to:

a) A further briefing to the Portfolio Committee by the Compensation Fund on outstanding issues as tabulated in a list of questions forwarded to the entity;

b) Strengthening the re-training of workers affected by occupational injuries and diseases;

c) Addressing the growing number of cases adjudicated by the Compensation Fund;

d) Providing a progress report on the turnaround strategy by the task team appointed by the Minister;

e) Additional budget allocation for Nedlac in order for them to effectively implement their mandate;

f) Continuously improving the turnaround times on cases addressed by Nedlac;

g) Strengthening community constituency by ensuring that the interests of the unemployed and the most vulnerable groups are accommodated in decisions taken at Nedlac;

h) Ensuring that the CCMA concentrate on measures to improve or reduce the workload such as guidance and training to employers and employees in order to avoid unnecessary referral of disputes;

i) The DoL to consider ways in which the reserves of the UIF can be used for job creation initiatives;

j) Ensuring that benefits payable by UIF are used to improve people’s lives e.g. through maternity benefits;

k) Ensuring that funds are made available for Productivity SA:

i. to be able to extend its services to areas where they are currently not operating; and

ii. for marketing purposes and to ensure the entity is rendered more visible;

l) Expanding the capacity of Productivity SA to enable the entity to position itself as a consultant of first choice in improving productivity rather than the service provider of last resort for entities on the brink of bankruptcy;

m) Capacitating the Inspectorate of the DoL taking into consideration the coming legislation;

n) linking up the DoL with the tertiary institutions to build up its capacity e.g. to acquire specialized skills;

o) Addressing the continuing ICT challenges including down-time affecting services of the Labour Centres and the Compensation Fund;

p) Capacitating the call centre of the DoL and its entities; and

q) Improving the planning and reporting capacity of the Department, including the Strategic Plans and Annual Performance Plans.

5. Conclusion

The Committee was generally not satisfied with the DoL’s Strategic Plan for 2013-2014.

The 2013 budget has greatly reflected the government’s NDP policy. In order to achieve government’s objectives in fighting poverty, inequality and unemployment, the NDP emphasises the importance of collaborative dialogue between business, labour, government and the community to make the Plan work. However, even though it has received positive feedback from certain sectors of society, it also received criticism from organised labour.

Of great concern to the Committee was the issue of the Compensation Fund which has a potential of becoming dysfunctional due to a number of unresolved issues with regards to claims. The Committee was concerned that the Department of Labour was allocating and transferring funds to an entity that was not doing what it was mandated to do.

It is also important to note that, the past few decades have witnessed the economic and geopolitical rise of a number of large middle-income countries around the world, which have to varying degrees embarked on a rapid path to economic development. Even during the recent global crisis, these ‘emerging economies’ such as Brazil , China , India , Indonesia and Turkey have been able to grow strongly, resulting in a decline in poverty. In South Africa , however, despite the economic progress made, improvements in the labour market have not been impressive. In the pursuance of economic progress, the focus should be to create jobs through labour intensive growth.

Report to be considered.

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