ATC1151027: Budgetary Review and Recommendation Report of the Portfolio Committee on Labour, dated 14 October 2015

Labour

Budgetary Review and Recommendation Report of the Portfolio Committee on Labour, dated 14 October 2015
 

The Portfolio Committee on Labour, having considered the performance and submission to National Treasury for the medium term period of the Department, reports as follows:

 

  1. Introduction

 

  1. Mandate of Committee

 

In terms of the Constitution of the Republic of South Africa, portfolio committees have a mandate to legislate, conduct oversight over the Executive and facilitate public participation.

The mandate of the Portfolio Committee on Labour (the Committee) is governed by Parliament’s mission and vision, the rules of Parliament and Constitutional obligations. The mission of the Committee is to contribute to the realisation of a developmental state and ensure effective service delivery through discharging its responsibility as a committee of Parliament. Its vision includes enhancing and developing the capacity of Committee Members in the exercise of effective oversight over the Executive Authority. The Committee is charged with the responsibility of holding the Executive and related entities accountable through oversight of objectives of its programmes; scrutinising its budget and expenditure (annually); and recommending through Parliament what actions the Department should take in order to attain its strategic goals and contribute to service delivery.

Furthermore, section 5 of the Money Bills Amendment Procedure and Related Matters Act, No 9 of 2009 (the Act) provides that the National Assembly, through its committees, must annually assess the performance of each national department and these Committees must annually submit Budgetary Review and Recommendation Reports (BRRR) for tabling in the National Assembly. These should be submitted to the Minister of Finance and the relevant Ministers.

  1. Description of core functions of the Department.

 

The mandate of the Department is to regulate the labour market through policies and programmes developed in consultation with social partners, which are aimed at:

  • Improved economic efficiency and productivity;
  • Creation of decent employment;
  • Promoting labour standards and fundamental rights at work;
  • Providing adequate social safety nets to protect vulnerable workers;
  • Sound labour relations;
  • Eliminating inequality and discrimination in the workplace;
  • Enhancing occupational health and safety awareness and compliance in the workplace; and
  • Giving value to social dialogue in the formulation of sound and responsive legislation and policies to attain labour market flexibility for competitiveness of enterprises which is balanced with the promotion of decent employment.

 

  1. Purpose of the BRR Report

 

The Act sets out the process that allows Parliament to make recommendations to the Minister of Finance to amend the budget of a national department. In October of each year, portfolio committees must compile BRRR that assess service delivery performance given available resources; evaluate the effective and efficient use and forward allocation of resources; and may make recommendations of forward use of resources. The BRRR are also source documents for the Standing/ Select Committees on Appropriations/ Finance when they make recommendations to the Houses of Parliament on the Medium-Term Budget Policy Statement (MTBPS). The comprehensive review and analysis of the previous financial year’s performance, as well as performance to date, form part of this process.

  1. Method

 

The Committee in reviewing the work of the Department for the 2014/15 financial year placed emphasis on the following aspects:

  • An overview and analysis of the Department’s strategic priorities and measurable objectives;
  • An overview of the overall performance of voted funds: Vote 18;
  • Consideration of the Auditor-General’s activities in relation to the Department;
  • Committee key findings; and
  • Recommendations.

 

The Committee, in undertaking this process used a number of source documents, including the 2014-2019 Strategic Plan of the Department, Annual Report, Financial Statements, 2015 Estimates of National Expenditure (ENE), briefings by the Department and its entities during the course of the year, presentation by Researcher from the Appropriations Committee, as well as the State of the Nation Address. The Committee also used the Constitution as its basis.

The Committee held meetings with the Department and its entities to receive presentations on their performance against their annual plans. It also invited the Auditor-General to brief it on its assessment of performance of the Department and its entities.

  1. Outline of the contents of the Report.

 

This report is comprised of the broader government policy, which is enshrined in the National Development Plan. It reviews the initiatives taken by the Department to ensure that the priorities of the plan are realised. Furthermore, the report reviews the recommendations made in the previous year’s BRRR to ascertain whether they have been acted upon. It also looks at the recommendations made by the Committee regarding the 2015/16 budget. The report assesses the financial as well as service delivery performance to ascertain whether the budget allocated to the Department was spent as envisaged in the Annual Performance Plan. Finally, it summarises the observations made by the Committee after considering all necessary documents, presentations and oversight visits before making recommendations aimed at improving service delivery.

  1. Overview of the key relevant policy focus areas

 

The National Development Plan (NDP) has been identified as a roadmap to a South Africa where all will have access to services and jobs.

The economy and employment related priorities of the NDP, include increasing employment through economic growth; reduce inequality; improve skills development and education.

Another relevant focus area for the Committee is the reduction of income inequality, which involves an investigation into the national minimum wage. The Committee completed this process through workshops on national minimum wage, which involved experts in this area as well as public hearings held on a national scales to ascertain the views of the public on this subject matter.

Improvement of UIF benefits to better the lives of beneficiaries, especially women, is another key focus area relevant to labour. These include:

  • Increased benefits to beneficiaries;
  • Increased benefits period from eight months to 12 months;
  • Women on maternity leave to be paid at an income replacement rate from 38 per cent to 66 per cent; and
  • Increase in the time for claiming UIF from six months to 18 months for death benefits and 12 months for other benefits.

 

The Unemployment Insurance Amendment Bill has been tabled before Parliament and referred to the Portfolio Committee on Labour for processing.

  1. Summary of previous key financial and performance recommendations of Committee

 

  1. 2014/ 15 BRRR recommendations

 

Having assessed the performance of the Department in 2014/ 15, the Committee recommended that the Minister of Labour should consider the following:

  1. Financial performance including forward funding recommendations
  • Recommendation:

Productivity SA and the UIF must speedily resolve delays in funding transfers as this has impact on the entity’s key programme.

Response of the Department:

The Fund is finalizing the funding agreement between Productivity SA and the Fund. An agreement was reached with regards to the funds which will be transferred to Productivity SA on an annual basis to enable them to execute the Turnaround Solutions program during Exco on the 15 September 2015.

 

 

  • Recommendation:

The CCMA has to establish appropriate supply chain management policies and ensure that sufficient measures are in place to detect and prevent supply chain management irregularities.

Response of the Department:

The matter is receiving attention.

  • Recommendation:

The Department and all its entities must report quarterly to the Committee to ensure that the quarterly expenditure improves.

Response of the Department:

Ongoing

  • Recommendation

The Department must monitor and ensure that Inspection and Enforcement programme’s expenditure increases to ensure that more inspectors are hired and are provided with appropriate tools of trade such as vehicles and laptops.

Response of the Department:

The matter is receiving attention.

The Department will receive R64 million in 2016/17 and will get back the money that was taken from it in the 2017/18 financial year. In 2016/17 no additional funding will be provided. Meetings have been conducted with National Treasury but it was made clear that there is no additional funding available during next year except for the R64 million for additional staffing.

  • Recommendation:

The Department must report to the Committee on a quarterly basis on progress made with regard to filling of vacant funded posts.

Response of the Department:

The establishment of the Department is being reviewed and approval is being sought to abolish unfunded posts. The submission is in the pipeline.

  1. Performance related recommendations with financial implications
  • Recommendation:

In view of the challenges faced by the Compensation Fund, it is recommended that the Minister ensures that the entity comes back within three weeks to brief the Committee on plans to remedy its problems. A tentative date of 5 November was identified.

 

Response of the Department:

The Fund is ready to provide an update as and when it is requested.

  • Recommendation:

The Minister ensures that the CCMA services are accessible to the most vulnerable people in rural and other outlying areas.

Response of the Department:

Some actions in connection to this proposal are already being implemented.

  • Recommendations:

The CCMA’s job saving functions, through the Training Layoff Scheme, must be extended to rural areas to curb growing rural unemployment rates. The Department must simplify the procedure for accessing the Training Layoff funds.

Response of the Department:

No response.

  • Recommendation:

The CCMA and the Department must ensure that Labour Centre staff is suitably trained to render advice on services offered by the CCMA.

Response of the Department:

Commenced and ongoing.

  • Recommendation:

The Minister should ensure that Nedlac provides a thorough briefing on the special audit report on irregularities within the entity.

Response of the Department:

The outstanding aspects of the report are being finalized.

  • Recommendation:

Nedlac must report back to the Committee on its detailed financial performance for 2013/14 and also present on its 2013/14 quarterly performance.

Response of the Department:

The matter is receiving attention.

  • Recommendation:

The Department must engage Treasury to consider increasing the Productivity SA’s budget in order to address challenges of ageing IT infrastructure and the funding of its turnaround solutions programme, given that this programme is key in employment creation as it assists companies in distress.

Response of the Department:

The National Treasury did not accept any new bids from the Department, including from its entities for the 2015/16 and 2016/17 financial year due to the current economic situation. Instead the Department baseline was reduced. The Department has however assisted the entity to secure additional funding for Turnaround Strategies to save jobs from the UIF to the tune of R58.5 million during 2014/15 and R62 million for 2015/16.

  • Recommendation:

The Committee is urging the Department to urgently resolve the discrepancy with Treasury and organisations representing the disabled, so that people with disabilities receive benefits due to them.

Response of the Department:

The Department requested Treasury to consider approving the continuation of the current disability scheme for the next 3 years i.e. 2015-2018 to provide for the new policy development and phasing out current arrangements. The Treasury formally approved during May 2015 the continuation of the scheme till end of 2017/2018 financial year.

  • Recommendation:

Due to the challenges faced by vulnerable groups, we propose that the number of inspectors in different categories should be increased.

Response of the Department:

The matter is receiving attention.

  • Recommendation:

The Committee further recommends that the budget cut for IES be reversed and the Committee will request the Department to table a detailed plan with time frames as to how the money will be spent.

Response of the Department:

R64 million will be received in the FY 2016/17 and will equate to an additional 124 inspectors (45xEE inspectors and 79xOHS inspectors). This figure is made up of CoE and G&S. A project Team has been put in place and a project plan has been drafted. The team will meet almost monthly and will monitor the appointment of the staff. Further progress reports will be made available during the course of the year.

  1. 2015/16 Committee Budget Report

 

  1. After receiving the presentation of the Department of Labour, the Committee recommended that the Minister of Labour gives consideration to:
  • Ensuring the ongoing alignment of the budget expenditure with the policy priorities of Government programmes as articulated in the NDP.
  • Ensuring that the plan for the recruitment and retention of inspectors contribute to strengthening the goal of decent work in South Africa.
  • Increasing the capacity of the inspectorate while recognising the specialised nature of the Occupational Health and Safety.
  • The Director General as the accounting officer engaging with and regularly reporting to Parliament on the expenditure trends and strategic plans of the DoL entities including budget surpluses and investments undertaken.
  • The Department, in its monitoring and evaluation function, to encourage job creation by all its entities.
    1. After receiving the presentation of the CCMA, the Committee recommended that the Minister of Labour gives consideration to:
  • The identification of future permanent sites for CCMA offices that should take into account the accessibility to poorer communities. It should also tighten its financial control on lease and other large commitments.
  • The CCMA engaging with the Committee on the operation and functioning of the Essential Services Committee.
  • The timing of engagement by the CCMA with stakeholders with regard to industrial strikes.
    1. After receiving the presentation of NEDLAC the Committee recommended that the Minister of Labour gives consideration to:
  • Reviewing the expenditure of NEDLAC as it relates to goods, services, consultants and telephone allowances especially for Senior Managers.
  • NEDLAC providing a plan to address the shortage of skills, including importation thereof, to ensure decent employment through inclusive economic growth.
  • Improving financial controls on spending.
    1. After receiving the presentation of the UIF, the Committee recommended that the Minister of Labour gives consideration to:
  • The financial sustainability of the UIF with regard to the Minister of Finance’s proposal in the 2015 National Budget for a temporary reduction in contributions by employers and employees to the UIF.
  • Rolling out advocacy programmes for domestic workers on UIF.
    1. After receiving the presentation of Productivity SA, the Committee recommended that the Minister of Labour gives consideration to:
  • Increasing the budget allocation of and work on a plan for Productivity SA to become more financially independent.
  • Productivity SA establishing partnerships with organisations within its scope of work.
  • Developing a plan to be more visible in the outlying provinces.
    1. After receiving the presentation of the Compensation Fund, the Committee recommended that the Minister of Labour gives consideration to:
  • Addressing the ineffective information and communications technology systems that are currently being used by the Compensation Fund, in order to improve service delivery, storage of documents and missing claims.
  • Ensuring that the plan for the recruitment and retention of staff and interns are implemented to address the backlogs of cases and delays in the implementation of the full decentralisation process.
  1. Overview and assessment of financial performance

 

  1. Overview of Vote allocation and spending (2011/12 to 2016/17)
 

Programme

R million

 

2011/12

 

2012/13

 

2013/14

2014/15

 

2015/16

 

2016/17

Audited

Audited

Audited

Main

Appropriation

Final Appropriation

Actual Expenditure

Main

Estimates

Administration

 

704.3

 

687.7

 

795.9

787.7

 

764.9

 

675.9

 

845.1

 

903.8

Inspection and Enforcement Services

 

375.5

 

395.6

412.2

 

403.2

 

432.4

 

430.9

 

430.8

 

587.3

Public Employment Services

 

332.2

 

331.7

 

413.5

 

466.5

 

481.5

 

465.3

 

488.3

 

535.0

Labour Policy and Industrial Relation

 

594.9

 

619.7

 

749.9

 

869.9

 

867.4

 

847.8

 

922.7

 

972.1

Total

2 007.1

 

2 034.6

 

2 371.4

 

2 527.3

 

2 546.2

 

2 419.9

 

2 686.9

 

2 998.2

Source: National Treasury (2015), Estimates of national Expenditure

 

The main allocation of the Department was R2.52 billion in the 2014/15 financial year. The budget was adjusted upwards to R2.54 billion. The increase in the overall budget was significantly as a result of upward adjustment of the budgets for Inspection and Enforcement Services and Public Employment Services, which were adjusted from R403.2 million to R432.4 million and R466.5 million to R481.5 million, respectively.

 

In the 2015/ 16 financial year, the Department received a total budget of R2.68 billion. The Labour Policy and Industrial Relations programme received the largest share at R922.7 million. It was followed by the Administration programme at R845.1 million.

 

  1. Financial performance 2014/15

 

The Department of Labour had a 2014/15 available appropriation of R2.54 billion which represented a nominal increase of R174.8 million or 2.5 per cent from 2013/14 final appropriation of R2 371.4.

 

Transfers and Subsidies accounted for R936.482 million of the available budget and Current Payments accounted for R1.5 billion of the Departmental budget. Payment for capital assets accounted for R37.5 million. In terms of economic classification, the Department spent 92.8 per cent of current payments budget, 98.7 per cent of transfers and subsidies and 96.1 per cent of payments for capital assets budget. In total, the Department spent 95 per cent of its budget.

 

The largest expenditure item in 2014/15 was R847 837 million spent under the Labour Policy and Industrial Relations programme. This comprised 35 per cent of the departmental budget. It translated to an increase of 3.4 per cent from the 2013/14 programme expenditure. The next largest element of expenditure was R675 957 million under the Administration programme. This comprised 27.9 per cent of the departmental budget, but was a decrease of 5.6 per cent from the 2013/14 programme expenditure. Public Employment Services spent, which was 19 per cent of the departmental budget. It translated to a nominal increase of 1.8 per cent from the 2013/14 programme expenditure. Enforcement Services programme spent R430 878 million or 17.8 per cent of the departmental budget in 2014/15. This was an increase of 0.4 per cent from the 2013/14 programme expenditure.

 

The Departmental expenditure has grown by a nominal amount of R48 492 million or two per cent, when compared to the previous financial year. Rand value expenditure growth was greatest in the Inspection and Enforcement Services programme. The least expenditure as a percentage of the final appropriation was on Administration programme at 88.4 per cent.

 

Programme 1: Administration

 

The programme consists of the Ministry, Management, Corporate Services and the Office of the Chief Financial Officer. The Ministry provides political oversight to ensure that the Department’s mandate is achieved. Management consists of the Office of the Director-General and the Office of the Chief Operations Officer. The Office of the Director-General provides administrative oversight for effective implementation of the Department’s mandate and overall accounting oversight. The Office of the Chief Operations Officer manages and directs medium-term strategic planning processes, performance information reporting, monitoring and evaluation of performance against plans and the service delivery improvement plan. Corporate Services consists of Human Resource Management, Internal Audit, Risk Management, Security Services, Communication, Legal Services and the Office of the Chief Information Officer. The Office of the Chief Financial Officer renders effective and efficient financial management and administrative support for the Department.

 

The Administration programme spent R675 957 million or 27.9 per cent of the departmental budget. The final appropriation for the programme was R765 919 million, translating to an underspending of R88 962 million or 11.6 per cent of the final appropriation. This programme’s expenditure decreased by R119 913 million from the 2013/14 financial year expenditure. A larger portion of the programme budget, R373 838 million or 55 per cent was spent on Management sub programme.

 

A total of R309 546 million or 45.79 per cent of the programme budget was spent on Compensation of Employees. Goods and Services comprised R326 480 or 48.29 per cent of the programme budget.

 

Programme 2: Inspection and Enforcement Services

 

The programme consists of Management and Support Services; Occupational Health and Safety; Registration; Compliance, Monitoring and Enforcement; Training of Staff; and Statutory and Advocacy. Management and Support Services provides corporate support to the line function sub-programmes within the Inspection and Enforcement Services programme. Occupational Health and Safety promotes health and safety in the workplace by regulating dangerous activities and the use of plant and machinery. Registration registers incidents relating to labour relations and occupational health and safety matters, as reported by members of the public and communicates these to the relevant structures within the Compliance, Monitoring and Enforcement sub-programme for investigation. Compliance, Monitoring and Enforcement ensures that employers and employees comply with labour legislation through regular inspections and following up on reported incidents. As the name suggests, Training of staff is responsible for staff training within the programme. Statutory and Advocacy gives effect to the legislative enforcement requirement and educate stakeholders on labour legislation.

 

This programme spent R430 878 or 99.6 per cent of the final appropriation of R432 405 million. This was an increase of R18.665 from the R412 213 spent in 2013/14. The larger portion of the programme budget was spent on Compliance, Monitoring and Enforcement sub programme. A total of R340 162 million or 78.9 per cent of the programme budget went to this sub programme.

 

In terms of Economic Classification, R350 098 or 81.2 per cent of the programme budget was spent on Compensation of Employees. This was followed by Goods and Services, which spent R76 746 million or 17.8 per cent of the programme budget.

 

Programme 3: Public Employment Services

 

The programme consists of Management and Support Services, Employer Services, Work-Seeker Services and Designated Groups Special Services. Management and Support Services provides corporate support to line function sub-programmes. Employer Services facilitates registration of vacancies and disseminate scarce skills information, issues immigrant corporate and work permits, records migrant skilled South Africans, oversees placements, responds to companies in distress, provides social plan and regulates private employment agencies. Work-Seeker Services registers work-seekers, retrenched workers, work vacancies, training and income generating opportunities on the employment services system and facilitate access to employment and income generating opportunities for the unemployed and under-employed. Designated Group Special Services facilitates the transfer of subsidies to national councils to promote the employment of people with disabilities, youth and women, in collaboration with Sheltered Employment Factories and other relevant bodies.

 

The programme has oversight over the Productivity South Africa, Unemployment Insurance Fund, Compensation Fund and Sheltered Employment Factories.

 

This programme spent R465 264 or 96.6 per cent of the final appropriation of R481 533. This was an increase of R52.7 million from the R413 495 spent in the 2013/14 financial year.

 

The largest portion of the programme budget was spent on Sheltered Employment Factories and Subsidies to Designated Workshops; Work Seeker Services; and Employer Services at R127 813 million; R117 234 million; and R116 829, respectively.

 

In terms of Economic Classification, R265 059 or 56.9 million per cent of the programme budget was spent on Compensation of Employees. The programme spent R32 418 million or 6.9 per cent on Goods and Services; and R167 269 million or 35.9 per cent on Transfers and Subsidies. The programme transferred R127 813 to Sheltered Employment Factories and Subsidies to designated Workshops, of which R99 215 million was spent by Sheltered Employment Factories. Further, the programme transferred R43 119 million and R23 752 million on Productivity South Africa and Compensation Fund, respectively.

 

Programme 4: Labour Policy and Industrial Relations

 

This programme is composed of ten sub programmes, which are Management and Support; Strengthen Civil Society; Collective Bargaining; Employment Equity; Employment Standards; Commission for Conciliation, Mediation and Arbitration; Research, Policy and Planning; Labour Market Information and Statistics; International Labour Matters; and National Economic Development and Labour Council.

 

The programme spent R847 837 million or 97.7 per cent of the final appropriation, which was R867 435 million. This programme expenditure amount to 35 per cent of the departmental expenditure. The larger portion of the programme budget was spent on the Commission for Conciliation, Mediation and Arbitration sub programme. Expenditure on this sub programme amounted to R687 096 million or 81.0 per cent of the programme budget. The programme transferred R27 227 million to Nedlac.

 

In terms of Economic Classification, R749 636 or 88.4 per cent of the programme budget was spent on Transfers and Subsidies. The larger portion of this amount (R714 543) was for Departmental Agencies and accounts.

 

Auditor-General’s Report

 

The Department received an unqualified audit opinion.

 

However, AGSA raised a matter of emphasis relating to material underspending of the budget. The Department underspent the budget to the amount of R126 356 000 or five per cent. This amounted to an increase of R52 553 000 in underspending from the R73 803 000 or three per cent of underspending in 2013/14. The underspending on current payments was mainly attributable to the Department of Public Works invoicing the Department of Labour for an amount which was R88 962 000 less than what was budgeted for. Additionally claims for the Compensation Fund were R16 269 000 less than anticipated, the Government Communications Information Systems (GCIS) did not provide invoices for Employment Equity Awards Awareness campaigns in time to be paid at year end and Research Monitoring and Evaluation agenda four amounting to R19 958 000 which were aimed to start in the last quarter and failed to do so.

 

The AGSA reported on the predetermined objectives of Programmes 2, 3 and 4 as follows:

 

Programme 2: Inspection and Enforcement Services

  • There were no reasons for variance between planned and actual achievements reported in the annual performance report given for 86 per cent of the targets as required by the National Treasury’s Guide to the preparation of the Annual Report.
  • A total of 36 per cent of significantly important targets were not specific as required by the FMPPI.
  • The required performance for 57 per cent of significantly important targets could not be measured by AGSA.
  • A total of 21 per cent of the targets were not time bound as required by FMPPI.
  • A total of 21 per cent of the significantly important indicators were not well defined.
  • A total of 50 per cent of the significantly important indicators were not verifiable as required by FMPPI.
  • AGSA was unable to obtain the information and explanations they considered necessary to satisfy themselves as to the reliability of the reported performance information. This was due to absence of information systems and the fact that the auditee could not provide sufficient appropriate evidence in support of the reported performance information, presented with respect to the Inspection and Enforcement Services.

 

Programme 3: Public Employment Services

  • Reasons for variance between planned and actual achievements reported in the annual performance report were not supported by adequate and reliable corroborating evidence for 33 per cent of the targets.
  • A total of 22 per cent of significantly important targets were not specific.
  • AGSA could not measure the required performance for 33 per cent of significantly important targets.
  • A total of 22 per cent of significantly important indicators were not well defined.
  • A total of 44 per cent of the significantly important indicators were not verifiable.
  • AGSA was unable to obtain the information and explanations they considered necessary to satisfy themselves as to the reliability of the reported performance information.

 

Programme 4: Labour Policy and Industrial Relations

  • A total of 47 per cent of significantly important targets were not specific.
  • AGSA could not measure the required performance for 47 per cent of significantly important targets.
  • A total of 27 per cent of significantly important targets were not time bound.
  • A total of 43 per cent of significantly important indicators were not well defined.
  • A total of 29 per cent of the significantly important indicators were not verifiable. This was because management did not adhere to the requirements of the FMPPI due to a lack of proper systems and processes and inadequate technical indicator descriptions.
  • Adequate and reliable corroborating evidence could not be provided for 29 per cent of the significantly important targets to assess the reliability of the reported performance information.

 

On expenditure management, AGSA reported that the Accounting Officer did not take effective steps to prevent irregular expenditure as required by the PFMA and Treasury Regulations.

 

On consequence management, AGSA reported that effective and appropriate disciplinary steps were not taken against officials who possibly incurred and permitted irregular expenditure as required by the PFMA and the Treasury Regulations.

 

 

 

  1. Financial performance 2015/16

 

The Department received an appropriation of R2.7 billion in 2015/16, which represented a nominal increase of R140.6 million, or 5.5 per cent from 2014/15 allocation of R2 546.3 billion.

 

Transfers and Subsidies accounted for R956.2 million of the available budget and of this amount the Department had transferred R426.9 million, or 44.6 per cent during the first quarter of 2015/16, mainly to departmental agencies and accounts. This meant the Department had an available budget of R1.7 billion for operations. Of this, the Department had spent R351.8 million, or 20.3 per cent, the majority of which had been used on compensation of employees.

 

The largest element of operational expenditure to the end of the first quarter in 2015/16 was R151.4 million spent under the Administration programme mainly on compensation of employees as well as goods and services. The next largest element was R106.7 million under the Inspection and Enforcement Services (IES) programme, followed by R71.8 million under the Public Employment Services (PES) programme, primarily for compensation of employees.

 

Operational expenditure had grown at a nominal rate of 11.7 per cent, or R36.9 million, when compared to the same period in the previous financial year. Rand value expenditure growth had been greatest in the Administration programme, mainly driven by increased spending on goods and services for communication, computer services, contractors, operating leases, and consultants. These items reflected growth due to low spending last year. The Inspection and Enforcement Services and Labour Policy and Industrial Relations programmes showed the next highest growths primarily due to increases in spending on compensation of employees, and goods and services for communication, fleet services, travel and subsistence and compensation of employees respectively. These items showed growth due to low spending last year. Low spending was due to delays experienced in obtaining invoices on time as well as from funded vacancies.

 

Programme 1: Administration

 

A total of 43 per cent of operational expenditure from April to June was on Administration, representing R151.4 million, mainly for compensation of employees and goods and services. Expenditure under this programme had increased by R30 million or 24.8 per cent when compared with the same period last year primarily due to additional spending on goods and services.

 

The main cost drivers under this programme include compensation of employees due to staff in provinces under the Chief Operations Officer and due to capacitating the office of the Chief Information Officer in order to establish and enhance the IT operating model. Moreover, a Cabinet approved additional allocation of R25.7 million for this current financial year had been affected under this programme for capital expenditure and IT. A total of R5.8 million was being used to purchase 46 vehicles for inspections, and R11 million for purchasing 2 new mobile labour centres and R8.9 million for compensation of employees in the Office of the CIO.

 

Programme 2: Inspection and Enforcement Services

 

Operational expenditure to the end of the first quarter was R106.7 million, the majority of which was spent on compensation of employees. Expenditure under this programme had increased by R5.5 million, or 5.5 per cent, when compared with the same period last year primarily due to additional spending on these items. Although spending had increased on a quarter to quarter basis between 2014/15 and 2015/16, this programme was experiencing funding pressures on compensation of employees. This owed to baseline reductions which were effected during the 2014 Budget. A total of R67.6 million had been reduced for 2015/16 under compensation of employees and this had affected 98 inspector posts. To deal with this, the Department had put on hold the filling of funded vacancies on their establishment until April 2016.

Programme 3: Public Employment Services

Operational expenditure to the end of the first quarter was R71.8 million, the majority of which was spent on compensation of employees. Expenditure under this programme had increased by R353 000, or 0.5 per cent, when compared with the same period last year primarily due to additional spending on these items. This was not a significant increase however, spending under the programme for the first quarter was slightly less against projections due to transfers to non-profit institutions which had not been made. The agreement with the relevant institutions was initiated following procurement issues which had been resolved. All the agreements were expected to be signed within August thereafter the transfers would be done.

Programme 4: Labour Policy and Industrial Relations

Operational expenditure to the end of the first quarter was R21.9 million, the majority of which was spent on compensation of employees. Expenditure under this programme had increased by R938 000 or 4.5 per cent, when compared with the same period last year primarily due to additional spending on goods and services and compensation of employees. This was not a significant increase, however for the first quarter spending was less than projections due to funded vacancies which were put on hold and will only be filled during 2016/17. Under goods and services, low spending was due to events and roadshows which would be done during the second quarter. These include Child Labour Day which was postponed to August. Invoices for Travel with Flair (TWF) took longer to come through as the service provider had to collate the invoices from the provinces and then invoice the Department.

Transfers and Subsidies

Transfers to Provinces and Municipalities to the end of the first quarter were R95 000. This represented an increase of R17 000 or 21.3 per cent, when compared with the same period last year.

Transfers to Departmental Agencies and Accounts to the end of the first quarter were R396.3 million, the majority of which was for the CCMA: Operations transfer. This represented an increase of R11.9 million or 3.1 per cent, when compared with the same period last year. The majority of this increase was under the CCMA: Operations transfer.

Transfers to Non-Profit Institutions to the end of the first quarter were R29.6 million, all of which was to the Work-Centres for the Disabled: Operational Subsidy, and Strengthen Civil Society: Operations Transfers. This represented a decrease of R30.7 million or 51 per cent, when compared with the same time last year. The majority of this decrease was under the Work-Centres for the Disabled: Operational Subsidy Transfer due to reclassification of funds from transfers to compensation of employees. The Department reduced this transfer allocation and increased compensation of employees to cater for the agency arrangement for the payment of the salaries of staff from Supported Employment Enterprises (previously named Sheltered Employment Factories) on PERSAL following the absorption of these staff into the Public Service.

Transfers to Households to the end of the first quarter were R900 000, all of which was to the Employee Social Benefits: Post-Retirement Benefits. This represented a decrease of R388 000 or 30.1 per cent, when compared with the same period last year.

  1. 2016/17 MTEF financial allocations

 

The main allocation for 2016/17 is expected to increase to R2.9 billion, from R2.6 billion in 2015/16. The Labour and Industrial Relations is expected to receive the largest allocation at R972.1 million, from R922.7 million in 2015/16. It is followed by the Administration programme, which is expected to increase from R845.1 to R903.8 million from 2015/16 to 2016/17 respectively.

 

  1. Concluding comments on financial performance

 

The Department received an unqualified audit opinion in 2014/15 financial year. The matter of emphasis raised by the AGSA was material underspending of five per cent of the budget. According to National Treasury, the Department spent the majority of its budget on compensation of employees as well as goods and services.

 

By the end of the first quarter of 2015/16 financial year, the Department had already spent 20.3 per cent of its operational budget. Of this amount, 23.5 per cent was spent on compensation of employees and 16.1 per cent on goods and services. A total of 44.6 per cent of expenditure was under transfers and subsidies.

 

  1. Overview and assessment of service delivery performance for 2014/15

 

The performance of the Department was divided into three performance categories, namely:

  • Performance on ENE performance indicators.
  • Performance per strategic goals.
  • Performance per programme.

 

  1. Performance on Estimates of National Expenditure (ENE) performance indicator

 

The performance on ENE performance indicators was reported as follows:

 

ENE PERFORMANCE INDICATORS

OVERALL ACHIEVEMENTS

Number of work places inspected per year

180 818

Number of work-seekers registered on the Employment Services of South Africa system per year

616 570

Number of work-seekers registered on the system provided with employment counselling per year

246 744

Number of work-seekers placed in registered employment opportunities per year

14 634

Number of existing sectoral determinations reviewed

2

Source: Department of Labour (2015), Annual Report 2014/15

 

  1. Performance per strategic goal

 

The performance per strategic goal was reported as follows:

 

STRATEGIC GOALS

ACTUAL OUTPUT VALIDATED

Planned indicators

Achieved

Not Achieved

Overall Achievement

Promote occupational health services

This strategic goal was covered in terms of indicators that are applicable in strengthening occupational safety protection.

Contribute to decent employment creation

9

4

5

44%

Protect vulnerable workers

6

1

5

17%

Strengthen multilateral and bilateral relations

1

1

0

100%

Strengthen occupational safety protection

6

3

3

50%

Promote sound labour relations

2

0

2

0%

Monitor the impact of legislation

1

1

0

100%

Strengthen the institutional capacity of the Department

18

8

10

44%

Development of the occupational health and safety policies

This strategic goal is covered in terms of indicators that are applicable in strengthening occupational safety protection.

Promote equity in the labour market

5

2

3

40%

Total

48

20

28

 

Overall performance

42%

58%

 

               

Source: Department of Labour (2015), Annual Report 2014/15

 

  1. Performance per programme

 

The performance per programme was reported as follows:

 

PROGRAMME

Planned indicators

Achieved

Not achieved

Overall achievement

Administration

18

8

10

44%

IES

14

6

8

43%

PES

9

4

5

44%

LP & IR

7

2

5

29%

Overall performance

48

20

28

 

Performance %

42%

58%

 

Source: Department of Labour(2015), Annual Report 2014/15

 

Programme 1: Administration

 

The programme set a target of tabling the Strategic Plan and Annual Performance Plan by 31 March and these were as planned in Parliament. However, the programme did not achieve the planned target of achieving 50 per cent of total Department’s Management Performance Assessment Tool (M-PAT) standards per KPI at level 3 by 31 March 2015. Instead it achieved 30 per cent of M-PAT standards were achieved due to lack of controls as the result of systems inefficiencies. 

 

The programme had set to get the Service delivery Improvement Plan (SDIP) approved by 31 March 2015. However, the Department opted to continue with the already approved three-year plan. Therefore this target was not finalised on time as the SDIP was finalised in March 2015 but only approved on 16 April 2015.

 

The target to implement Public Sector Risk Monitoring Reports were discussed ad tabled during the National Risk Management Committee. Therefore the target was achieved.

 

The Department set a target of having 92 per cent of fraud cases received or detected finalised by the year end. However, 62 per cent, i.e. 39 of the 63 of fraud cases were finalised due to human resource challenges including expertise and effort offered by the employees. According to the Department, to address the challenge, there is an on-going training of Provincial investigators. The Department achieved the target of conducting 4 awareness campaigns, instead exceeded the target by conducting 5 campaigns.

 

The 65 per cent security breach reduction target could not be achieved, instead 53 per cent reduction could be achieved. According to the department, this was an ambitious target.

 

The Communication Strategy Annual Plan target was achieved. However, all Human Resource Management targets were not achieved. The integrated human resource strategy implementation targets could not be fully implemented, e.g. the 50 per cent target on the employment of women in Senior Management level could not be achieved as only 23 per cent (47 of the 114 posts) of women were employed by 31 March 2015. The target of employing the youth and people with disabilities were also missed due to suspension of filling of vacancies as a result of financial constraints. As such, the target to reduce vacancy rate was also missed.

 

The 87 per cent staff training in line with Workplace Skills Plan target was not achieve as 85.3 per cent of staff was trained due to decentralisation of the training budget. Due to postponements of misconduct hearing as a result of sick leave and unavailability of union representatives, the target of 100 per cent disciplinary cases resolved in 90 days could not be achieved. 

 

98 per cent, instead of 90 per cent litigation cases were attended to within 10 days of receipt. Therefore the target was achieved.

 

All targets related to ICT were achieved, for example, the annual ICT action plan was approved.

 

The 2013/14 annual report was developed and submitted to the National Treasury by 31 May 2014 and 3 Interim Financial Reports were compiled and submitted to the National Treasury on due dates as determined by the National Treasury. 

 

However, Supply Chain Targets were not achieved. 91.23 per cent instead of 100 per cent of all invoices were paid within 30 days of receipt due to systems errors when processing payments. According to the Department, one of the challenges relates to suppliers that do not have verified banking details. 

 

A 60 per cent reduction in irregular expenditure target was missed. Instead, an increase of 17 per cent in irregular expenditure was realised from 2013/14 to 2014/15. A total of 37 cases of irregular expenditure at an amount of R798 696.50 were reported. The department has focused on retraining and disciplinary action measures to curb future irregular expenditure.

 

Programme 2: Inspection and Enforcement

 

To promote employment equity in the labour market, the department set to review 523 employers but instead a total of 551 were reviewed. Therefore the target was exceeded due to the establishment of a focus group of specialists in order to focus on DG reviews. In addition, 100 per cent non-complying employers were dealt with. However, the department could not achieve targets on inspection of non-compliant employers, as 1 364 employers instead of 1 837 employers were inspected.  According to the Department, this was due to non-availability of employers resulting in rescheduling if appointments for inspections. In addition, 93 per cent instead of a 100 per cent was achieved for non-complying workplaces inspected during the financial year.

 

Protection of workers through inspection and enforcement of labour legislation targets were not fully achieved. A total of 149 847 workplaces were inspected instead of 150 684. In addition, 91 per cent of non-complying workplaces was dealt with, instead of a full 100 per cent as set by the Department. The targets related to advocacy and educational sessions conducted were achieved. Due to the current ineffective planning model for inspections for work permits, the Department could not achieve the target of 90 per cent requested investigations conducted within 5 days but only achieved 75 per cent. Of the planned 20 147 workplaces inspected for occupational health and safety protection, the Department achieved a total of 23 678 workplaces inspected. The department also exceeded the target of 100 per cent non-compliant cases dealt with in terms of the OHS legislation as it achieved 106 per cent achievement of the target. The department set a 60 per cent target for reported incidents investigated within 90 days but achieved 45 per cent achievement due to limited competency on OHS enforcement.

 

The Department achieved the target of registering applications for registration of entities and processed within 4 weeks. The Department could not finalise the processes related to the OHS amendment bill. The target of 13 440 employer payroll audit was not achieved as only a total of 5 378 audits were achieved due to resource constraints.

 

 

 

 

Programme 3: Public Employment Services

 

According to the Department’s annual report, a total of 618 570, i.e. 95 per cent, of work-seekers were registered on ESSA during the 2014/15 financial year. This target was not achieved as the planned target was to register a total of 650 000 work-seekers.  However, the Department met the set target of providing employment counselling to work-seekers, as the target of 220 000 was exceeded.  Limpopo, Gauteng and the Western Cape did not achieve the set target. A target of 20 000 work-seekers placed in registered work opportunities was not achieved as a total of only 14 634 (73 per cent) was placed. This is attributed to the challenge of skills mismatch.

 

A total of 74 057 employment opportunities were registered on ESSA during the financial year against 50 000set target. Therefore the target was exceeded and this is mostly due to the Strategic Infrastructure Projects (SIPS) from various provinces. However, Mpumalanga and the North-West provinces are the only provinces that could not meet the target. Due to stricter conditions being put on the registration of Private employment agencies and temporary employment agencies, the Department experienced some delays in the completion of PES and TES application processing. The set target was therefore not met but a total of 354 applications were received and 363 were approved and registered.

 

On foreign nationals and corporate work visas the target was not met due to delays in verification processes and that the skills applied for were not part of the scarce skills list.

 

Programme 4: Labour Policy and Industrial Relations

 

The Department achieved targets on employment equity as the Employment Equity Regulations were published in government gazette and stakeholder workshops were held in provinces on the regulations and the EE amendments.

The target on exemption on BCEA processes within 60 days was not achieved due to applications that did not comply with legislative requirements. However, the target on the review of Sectoral Determination was achieved as the domestic and cleaning workers sectoral determination were reviewed but failed to achieve the target on the investigation of the domestic workers and farm workers provident fund by the end of the financial year. In addition, the department investigated two new sector for possible setting of the minimum wages and conditions of employment, i.e. Gardening Service and Building Construction Sectors.

 

The target related to international obligations was also achieved, i.e. International Labour Organisations (ILO) report submissions. 98 per cent of labour organisations applications were processed within 90 days. Therefore the target was not met. The targets related to labour market trends research reports were met.

 

  1. Service delivery performance for 2015/16

 

This section is based on the presentation by the Department to the Committee on its first quarter performance.

 

In terms of strategic objectives, the Department reported that it has achieved 22 out of 47 indicators, translating to 47 per cent achievement.

 

The overall performance on its strategic objectives was as follows:

 

  1. Performance per strategic objective

 

The performance per strategic objective for the first quarter of 2015/16 was reported as follows:

 

Strategic Objectives

Annual Planned Indicators

Indicators reporting in Q1

Achieved

Not Achieved

Overall Achievement

Contribute to employment creation

9

9

4

5

44%

Promote equity in the labour market

6

6

3

3

50%

Protecting vulnerable workers

7

7

4

3

57%

Strengthen multilateral and bilateral relations

1

 

 

 

 

Strengthen occupational safety protection

6

5

3

2

60%

Promoting sound labour relations

2

2

1

1

50%

Monitoring the impact of legislation

1

1

1

0

100%

Strengthening the institutional capacity of DoL

18

17

6

11

35%

Total number of indicators

50

47

22

25

47%

Overall performance

 

47

47%

53%

Source: Department of Labour (2015): Presentation to the Portfolio Committee on Labour, 10 September.

 

The Department reported its performance per programme for the first quarter of 2015/16 as follows:

 

  1. Performance per programme

 

Branch

Annual planned indicators

Indicators with target reporting in Q1

Achieved

Not achieved

Overall achievement

Administration

18

17

6

11

35%

Inspection and Enforcement Services

16

15

7

8

47%

Public Employment Services

9

9

4

5

44%

Labour Policy and Industrial Relations

7

6

5

1

83%

Total number of indicators

50

47

22

25

47%

Source: Department of Labour (2015) Presentation to the Portfolio Committee on Labour, 10 September.

 

The Department reported its overall performance during the first quarter to be 47 per cent.

 

  1. Other service delivery performance findings

 

Some of the service delivery challenges identified by committee members during oversight visits include:

 

  • Shortage of staff, especially labour inspectors in Labour Centres.
  • Shortage of cars for labour inspectors, which makes it difficult for them to execute their duties.
  • Inspectors are not provided with other tools of trade, including but not limited to, laptops and 3G cards.

 

  1. Concluding comments on service delivery performance

 

There is a lot of room for improvement in terms of service delivery. The Committee members identified constraints in terms of staffing and tools of trade at service delivery points during oversight visits.

 

  1. COMMITTEES Observations and response

 

  1. Technical issues

 

The Department and all entities tabled their reports as per requirements. There were no technical errors identified in the reports. The information in the reports was found to be of required quality and there were no complaints of inaccessibility of any kind.

 

  1. Governance and operational issues

 

The Committee is satisfied with the filling of the position of the Head of the Department (Director-General).The Committee is also satisfied with the filling of top management positions such as the Deputy Director-General for Labour Policy and Industrial Relations Branch. The Committee welcomes the restructuring in the Department, which resulted in the former Commissioner for Compensation Fund being appointed in the Chief Operations Officer post.

 

  1. Service delivery performance

 

The Committee is concerned about the failure of the Department to achieve 58 per cent of the targets that it set itself for 2014/15 financial year. This despite spending 95 per cent of the budget for the financial year. Of more concern is the dismal performance of 44 and 17 per cent in contribution to decent employment creation and protection of vulnerable workers, respectively, given that these are the core functions of the Department.

 

  1. Financial performance including funding proposals

 

The Committee commends the Department for receiving, once again, an unqualified audit opinion. However, the Committee would like to encourage the Department to address the issues raised by the AGSA under matters of emphasis.

 

  1. Recommendations

 

After considering the presentation of the Department on its annual report and the input from the Auditor-General as well as the presentation from the staff of the Appropriations Committee, the Committee recommends that the Minister of Labour takes steps to ensure that:

 

  • The Department reports quarterly to the Committee to ensure that the quarterly expenditure improves.
  • The vacant funded posts, especially those of the inspector, employment services officer and client services officer, are filled with suitably qualified personnel.
  • The Department set its performance targets in line with its human and financial resources.
  • The newly adopted legends be reviewed to accurately reflect the performance of the Department.
  • The Department urgently address issues raised by the Auditor-General, especially under emphasis of matter and predetermined objectives and report back to the Committee before the end of the financial year.
  • The Department urgently addresses leadership as well as financial and performance management issues in the Compensation Fund and Supported Employment Enterprises and provide quarterly progress report to the Committee.
  • The Department of Labour and its entities develop procedures so that there are measures implemented for all poor performing individuals and that all transgressions are speedily investigated and resolved and all guilty parties are held accountable for their actions.
  • The Department tightens financial controls to prevent mismanagement of funds and to introduce tougher measures to deal with financial mismanagement by officials.
  • Slow response in addressing root causes of poor audit outcomes by management is addressed in the performance contracts between the entity and the employees. The employees are held accountable to their performance contracts.
  • Management attend training to better equip themselves in understanding the relevant accounting standards that affect the entity.
  • The Department of Labour should simplify the procedures for accessing the Training Layoff Funds
  • The Department urgently resolves the discrepancy with National Treasury and organisations representing the disabled so that people with disabilities receive benefits due to them.
  • National Treasury compels government departments to procure a certain percentage of goods from the Supported Employment Enterprises.
  • The CCMA allocation is increased to employ more commissioners so as to assist in dealing with strikes thus mitigating against job losses.
  • The Department improves the speed of approving or declining individual or corporate visas.

 

 

 

  1. Appreciation

 

The Committee appreciates the cooperation it received from the Department and its entities. The Committee also acknowledges the assistance of the Auditor-General and National Treasury in providing information necessary for compiling this report.

 

 

Report to be considered.

 

 

 

 

 

Documents

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