ATC140711: Report of the Portfolio Committee on Labour on Budget Vote 18: Labour and on the Strategic Plans of the Department of Labour (2014 – 2019) and its Entities, dated 10 July 2014

Report of the Portfolio Committee on Labour on Budget Vote 18: Labour and on the Strategic Plans of the Department of Labour ( 2014 – 2019 ) and its Entities, dated 10 July 2014

The Portfolio Committee on Labour, having considered Budget Vote 18: Labour and the Strategic Plans of the Department of Labour ( 2014 – 2019 ) 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 2014 respectively. Since 2014 was an election year, the DoL submitted revised Strategic and Annual Performance Plans to Parliament 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 (2014-2019) 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.

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

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

c) About 11 million additional jobs by 2030.

In order to achieve these targets, the rate of investment in Gross 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.

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.

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	2013/14	2014/15	2015/16	2016/17	2013/14-2014/15		2013/14-2014/15
Administration	840.4	787.7	829.9	956.8	-52.7	-98.7	-6.27	-11.74
Inspection and Enforcement Services	439.2	403.2	433.1	600.2	-36.0	-59.5	-8.20	-13.56
Public Employment Services	400.1	466.5	489.2	514.7	66.4	39.2	16.60	9.79
Labour Policy and Industrial Relations	765.4	869.9	926.2	976.4	104.5	53.7	13.65	7.02
TOTAL	2 445.1	2 527.3	2 678.4	3 048.1	82.2	-65.3	3.36	-2.67

Source: National Treasury 2014

During the 2013/14 financial year, the Department received a total of R2.4 billion. In the 2014/15 financial year, this budget was increased to R2.5 billion. This is a nominal rand increase of R82.2 million but in real monetary terms, it is a decrease of R65.3 million. In nominal percentage terms, this is an increase of 3.36 per cent in the budget and in real percentage terms, it is a decrease of 2.67 per cent.

2.2.1 Programme 1: Administration

The Administration programme received a total of R787.7 million for the 2014/15 financial year. This is a nominal decrease of R52.7 million from the previous financial year. However, in real rand change, that is a R98.7 million decrease. In real percentage terms, it is an 11.74 per cent decrease.

The programme consists of the following sub-programmes: Ministry, Management, Corporate Services, Office of the Chief Financial Officer and Office Accommodation.

All Administration subprogrammes have had allocation reduction in the current financial year. Ministry’s budget has been reduced by R1.7 million or 11.13 per cent in real terms. The Management subprogramme has been reduced by R55.8 million or 13.04 per cent in real terms. The Corporate Services’ budget has been reduced by R2.8 million or 4.44 per cent in real terms. The Office of the Financial Officer’s budget has been reduced by R10.4 million or 7.50 per cent in real terms and the budget for Office Accommodation subprogramme has been reduced by R28.1 million or 14.28 per cent in real terms.

The spending focus over the medium term will be on building the capacity of the Chief Financial Officer in order to establish and enhance the IT operating model. This is funded in part by additional allocation for IT personnel of R35.5 million in 2016/17, which allows for an increase in the total number of filled posts to 1 303 in that year. The significant growth in spending on computer services between 2010/11 and 2013/14 was driven by the Department taking over the provision of IT services at the end of the public private partnership ( PPP ) contract with Siemens in 2012/13. Spending on consultants was equivalent to 22.9 percent of total spending on compensation of employees in 2013/14, and is projected to constitute 3.4 percent of spending on compensation of employees over the medium term. This is a massive drop in expenditure and the Department can finally build in-house IT capacity that is dedicated to assisting labour centres and entities to address current challenges. Consultants funded through this allocation will be used mainly for specific technical tasks such as the implementation of the new IT operating model, the organisational review and redesign project, and business advisory services to the chief financial officer. [1]

Spending focus will also be on the Department’s project (Project Shanduka), an organisational review and design project, which aims to improve service delivery by ensuring that all strategic positions are filled, overlaps and duplication of functions are minimised, and reliance on consultants is reduced. Expenditure on the organisational review and design is reflected in spending on consultants and professional services in the Management subprogramme.

2.2.2 Programme 2: Inspection and Enforcement Services (IES)

The Inspection and Enforcement Services received a total of R403.2 million during the 2014/15 financial year. This is a decrease of R36 million in nominal terms. In real terms this is a R59.5 million decrease. It is a 13.6 per cent decrease in real terms.

The Compliance, Monitoring and Enforcement subprogramme has the biggest budget allocation in this programme with a total of R 293.9 million for the 2014/15 financial year. This is a 72.9 per cent share of the total programme budget. However, according to the Department, due to rising fuel prices and the introduction of e-tolling system, it is expected that travel related expenditure will increase over the medium term, which is expected to reduce the number of inspections the Department can perform within the constraints of the allocated budget. [2]

Over the MTEF period much focus will be on conducting occupational health and safety inspections, enforcing labour legislation, and registering labour relations and occupational health and safety incidents as reported by members of the public. As a result, the Statutory and Advisory Services subprogramme’s budget increased from R1.9 million during the 2013/14 financial year to R4.7 million in the 2014/15 financial year. This is a real increase of R2.5 million or 138.6 per cent.

2.2.3 Programme 3: Public Employment Services (PES)

During the 2014/15 financial year, the Public Employment Services Programme received a budget allocation of R466.5 million. This is a nominal increase of R66.4 million from the previous financial year. Whereas, in real terms it is a R39.2 million increase. In real percentage terms, this is an increase of 9.79 per cent.

The biggest programme percentage share of 29.8 percent is allocated to the Sheltered Employment Factories (SEF). For the MTEF period, the focus of this PES programme will be on enhancing the Department’s capacity to implement the Employment Services Bill once it is promulgated and on managing the implementation of the turnaround strategy for the SEF. Over the MTEF, this programme receives additional funds of R83.4 million through reprioritisation of funds from spending on compensation of employees in the Inspection and Enforcement Services programme to spending on compensation of employees in this programme. The reprioritisation is to fund the occupation specific dispensation for career counsellors from 1 April 2014 and improved conditions of services. A total of R15.9 million over the MTEF has also been reprioritised within spending on goods and services, from communication, property payments and travel and subsistence to provide employment services projects.

The Work-Seeker Services subprogramme’s budget has increased by 7.9 per cent in real terms. This will assist the subprogramme’s focus to increase the number of work seekers registered and facilitate access to employment and income generating opportunities. The subprogramme receives R24 million for improved conditions of service over the MTEF, from the reprioritisation from spending on compensation of employees in the Administration programme.

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

The Labour Policy and Industrial Relations programme received R869.9 million during the 2014/15 financial year. This is a nominal increase of 13.7 per cent from the previous financial year. However, in real percentage terms, it is 7.0 per cent.

A total of 78.99 percent was transferred to the CCMA amounting to R687.1 million during the current financial year. In monetary terms, this is a nominal increase of R92.7 million or 15.6 per cent. In real terms, the CCMA budget increased by R52.6 million or 8.8 per cent. This is consistent with the focus on promoting sound labour relations, with a particular emphasis on the resolution of the industrial action and the reduction of tensions and violence in the labour market. In the 2013 budget, the Commission was allocated additional funds to address increasing caseload arising from amendments to the labour laws, the rollout of the web-based case management system, expansion of access to dispute resolution services as well as a job saving unit.

Other increases include the Labour Market Information and Statistics subprogramme with a budget allocation of R36.5 million that is a nominal increase of R 2.2 million and a nominal percentage change of 6.3 percent. However, in real terms, it is a 0.1 percent change. A significant budget increase also went to International Labour Matters that facilitates bilateral and multilateral cooperation between the Department and its partners internationally to exchange information and best practices on labour market issues. A total of R33.9 million was allocated to this subprogramme during the 2014/15 financial year. This is a R6.9 million increase which translates into a 23.7 per cent nominal increase in the budget. In real terms, it is a 16.5 percentage change.

The National Economic Development and Labour Council (NEDLAC) received a total budget of R28.1 million during the 2014/15 financial year. This is a nominal increase of R1.8 million when compared with the previous financial year. This is a nominal percentage change of 6.8 per cent. In real terms, this is a 0.65 per cent change.

2.3. Recommendations

After receiving the presentation of the Department of Labour, the Committee recommended that the Minister of Labour gives consideration to:

a) Expediting the process of building internal Information and Communications Technology (ICT) capacity without delay;

b) Briefing the Committee on progress regarding the organizational review and recommendations (Shanduka) project;

c) Ensuring that all vacant funded posts are advertised and filled in compliance with the Public Service prescripts; and

d) Capacitating the Inspection and Enforcement Services programme so as to ensure that the Department fulfills its decent work mandate.

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 R17.3 million to the entity in the 2014/15 financial year. This is a nominal increase of R1.6 million or 10.5 per cent. In real terms, the budget allocation of the Compensation Fund increased by R629, 300.00 or 4.02 per cent.

The strategic objectives of the Compensation Fund for the current financial year are to:

a) Strengthen corporate governance;

b) Improve financial viability;

c) Provide an efficient social security net;

d) Promote policy advocacy;

e) Provide professional, efficient and client oriented human resources; and

f) Enhance quality and access to COIDA services and information.

3.1.1 Recommendations

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

a) Reporting to the PC on Labour on progress with regard to the implementation of Umehluko claims processing system before the end of the second term (September 2014);

b) Briefing the PC on Labour on progress with regard to the implementation of the decentralized structure before end of the third term (December 2014); and

c) Building internal capacity so as to reduce spending on consultants.

3.2. Unemployment Insurance Fund (UIF)

The Unemployment Insurance Fund (UIF) was established in terms of section 4(1) of the Unemployment Insurance Act (Act 63 of 2001) as amended. Section 8 of the Unemployment Insurance Contributions Act (Act 4 of 2002) empowers the South African Revenue Services (SARS) Commissioner to collect monthly contributions from both employers and workers who are required to register as employers in terms of the fourth schedule to the Income Tax Act and who are liable for the payment of the skills development levy in terms of the Skills Development Act (Act 9 of 1999). Section 9 of the Act empowers the Unemployment Insurance Commissioner to collect contributions from all those employers who are not required to register as employers in terms of the fourth schedule to the Income Tax Act and who are not liable for the payment of the skills development levy in terms of the Skills Development Act.

The UIF strives to contribute to the alleviation of poverty in South Africa by providing short-term (currently to the maximum of 8 months) unemployment insurance to all workers who qualify for unemployment-related benefits (The Public Service employees and Parliament employees are excluded from UIF contributions). 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 R13.8 billion for 2014/15.

The strategic objectives of the UIF for 2014/15 to 2018/19 are to:

a) fund poverty alleviation schemes;

b) improve governance;

c) strengthen institutional capacity of the Fund;

d) encourage compliance through enhanced service delivery; and

e) improve stakeholder relations.

3.2.1 Recommendations

After receiving the presentation on the UIF, the Committee recommended that the Minister of Labour gives consideration to:

a) Investigating the possibility of using the reserves of the UIF for job creation initiatives;

b) Investigating the possibility of using the reserves of the UIF to improve on the benefits payable to beneficiaries as well as the duration of payments, particularly better maternity benefits;

c) Reporting to the PC on Labour on the number of unemployment insurance beneficiaries trained;

d) Briefing the PC on Labour on projects funded through the UIF Social Responsibility Investments and beneficiaries on a quarterly basis; and

e) Conducting advocacy campaign to make people aware of the UIF benefits.

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

The CCMA is an independent statutory body established in terms of section 112 of the Labour Relations Act of 1995 as amended. Its mission 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. In order for this mission to be realised, the Department transferred R687 million to the Commission in the 2014/15 financial year. This is a nominal increase of R92.7 million or 15.6 per cent. In real terms, the CCMA budget allocation increased by R52.6 million or 8.8 per cent. The Commission plans to spend its budget on the following strategic objectives:

a) To enrich the role of the CCMA in the labour market.

b) To build to achieve professionalism.

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

d) To enhance and entrench internal processes and systems for optimal deployment of resources.

e) To align the structure that will enable optimal implementation of the strategy.

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

3.3.1 Recommendations

After listening to the presentation made by the CCMA, the Committee recommended that the Minister of Labour gives consideration to:

a) Briefing the Committee with regard to progress on the establishment of the fund to assist workers in enforcing the CCMA awards.

b) Ensuring that when planning to open new offices, consideration is given to access by the disadvantaged users of the services of the CCMA.

c) Ensuring that the Commission reports on case postponement statistics and reasons for such postponements in its annual report.

d) Ensuring that the CCMA offices are accessible to the physically disabled users of the CCMA services.

e) Financially capacitating the CCMA so as to accomplish its mission to be the best dispute management and dispute resolution organization trusted by its social partners.

3.4 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 transferred R28 million to Nedlac for the 2014/15 financial year.

The strategic objectives of Nedlac for 2014/15 financial year are as follows:

a) Promoting and embedding a culture of effective social dialogue and strategic engagement;

b) Promoting effective participation in policy making and legislation; and

c) Promoting economic growth, social equity and decent work.

3.4.1 Recommendations

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

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

b) Financially capacitating Nedlac to effectively play its role as a forum for social dialogue.

3.5 Productivity South Africa

Productivity SA is an organisation for South African businesses, industries and general public, that advises, implements programs, monitors solutions and evaluates progress in order to promote a more competitive South Africa. The entity received R43.1 million, R9.1 million and 69.4 million in the 2014/15 financial year from the DoL, Department of Trade and Industry (DTI), and UIF respectively. The total transfers amounted to R121.7 million.

The strategic goals of Productivity South Africa are:

a) To establish new and foster existing partnerships and measure the impact of these partnerships.

b) To evaluate, design, develop new and existing products and services and demonstrate the impact of these.

c) To assess, monitor and evaluate organisational performance.

d) To assess, measure, monitor and improve public presence and demonstrate impact.

e) To determine, asses and measure, monitor and improve processes and demonstrate impact.

f) To design, implement and monitor an employee value proposition strategy.

3.5.1 Recommendations

After receiving the presentation of the Productivity SA, the Committee recommended that the Minister of Labour gives consideration to:

a) Ensuring that funds are made available for Productivity SA to be able to extend its services to areas where they are currently not operating, marketing purposes and to ensure the entity is rendered more visible.

b) Encouraging Productivity SA to work with other entities of the Department, such as Nedlac and CCMA, in job saving projects.

4. Conclusion

The Committee considered the Strategic Plans and Annual Performance Plans of the Department of Labour and its entities. The Committee also received presentations and engaged with the Department and its entities. The Committee is generally satisfied with the plans of the Department and its entities. However, it has made recommendations to assist the Department and entities to perform at optimal level given the resources constraints. Having noted the challenges of unemployment, poverty and inequality that the country is grappling with, the Committee has recommended financially capacitating of the CCMA, Nedlac and Productivity SA. These institutions can help addressing the challenges of protracted industrial action through provision of mediation services as well unemployment through job saving and job creation initiatives. It is also recommended the responsible entities work together where they can in addressing these challenges.

Report to be considered.