ATC181017: Budgetary Review and Recommendation Report of the Portfolio Committee on Labour, dated 17 October 2018

Labour

Budgetary Review and Recommendation Report of the Portfolio Committee on Labour, dated 17 October 2018
 

The Portfolio Committee on Labour, having considered the performance of the Department of Labour and its entities on 12 September and 10 October 2018, reports as follows:

 

  1. INTRODUCTION

The Budgetary Review and Recommendation Report of the Portfolio Committee on Labour has been compiled in compliance with the Money Bills Amendment Procedure and Related Matters Act, No 9 of 2009.  This report provides an assessment of the Department of Labour and its entities’ service delivery performance given available resources; effectiveness and efficiency of the use and forward allocation of available resources; and recommendations on the forward use of resources.

 

  1. The mandate of the Committee

All parliamentary committees have a mandate to legislate, conduct oversight over the executive and facilitate public participation.

As such, the mandate of the Portfolio Committee on Labour (the Committee) is governed by the strategy of Parliament and the Constitution. 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; and recommending through Parliament, what actions the Department should take in order to attain its strategic goals and contribute to service delivery.

The National Assembly, through its committees, is required by section 5 of the Money Bills Amendment Procedure and Related Matters Act, No. 9 of 2009 to annually assess the performance of each national Department and submit Budgetary Review and Recommendation Reports (BRRR) for tabling in the National Assembly. These reports should be submitted to the Minister of Finance and the relevant Ministers.

 

 

  1. The mandate of the Department of Labour

The Department of Labour derives its mandate from the Constitution and gives effect thereto through a number of Acts which regulate labour matters in South Africa. Such legislation includes the following:

  • Basic Conditions of Employment Act (1997)
  • Employment Equity Act (1998)
  • Employment Services Act (2014)
  • Labour Relations Act (1995)
  • Occupational Health and Safety Act (1993)

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:

  • Improving economic efficiency and productivity
  • Creation of decent employment
  • Promoting labour standards and fundamental rights at work
  • Providing adequate social security nets to protect vulnerable workers
  • Promoting sound labour relations
  • Eliminating inequality and discrimination in the workplace
  • Enhancing occupational health and safety awareness and compliance in the workplace
  • Giving value to social dialogue in the formulation of sound and responsive legislation and policies to attain labour market growth

The Department of Labour’s legislative framework is informed by the South African Constitution, Chapter 2: Bill of Rights.

  • Section 9, to ensure equal access to opportunities
  • Section 10, promotion of labour standards and fundamental rights at work
  • Section 18, freedom of association
  • Section 23, to ensure sound labour relations
  • Section 24, to ensure an environment that is not harmful to the health and wellbeing of those in the workplace
  • Section 27, to provide adequate social security nets to protect vulnerable workers
  • Section 28, to ensure that children are protected from exploitative labour practices and not required or permitted to perform work or services that are inappropriate for a person of that child’s age or their wellbeing, education, physical or mental health or spiritual, moral or social development is placed at risk.
  • Section 34, access to courts and access to fair and speedy labour justice

 

  1. Purpose of the BRRR

The Money Bills Amendment Procedure and Related Matters 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 BRR Reports 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 reports are also source documents for Standing/ Select Committees on Appropriations/ Finance when they make recommendations to the House of Parliament on the Medium Term Budget Policy Statements (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

In reviewing the work of the labour portfolio (Department and its entities) for the 2017/18 financial year, the Committee placed emphasis on the following:

  • Overall performance in lieu of allocated budget as reflected in the annual reports of the portfolio;
  • Presentations by the labour portfolio to the Committee on their annual reports;
  • Reports of the Auditor-General on the labour portfolio;
  • Reports of the SARB and SSA; and
  • Responses of the Department to the BRRR recommendations of 2016/17 financial year.

The source documents used by the Committee are: 2018 Estimates of National Expenditure; presentations by the labour portfolio during the course of the year; and the State of the Nation Address.

The Committee invited the Auditor-General to brief it on its assessment of performance of the labour portfolio. This was followed by meetings with the Department and entities comprising the portfolio to receive presentations on their performance against their annual performance plans.

 

  1. Outline of the contents of the Report

The content of the Report is as follows:

  • Overview of the key relevant policy focus areas;
  • Summary of previous key financial and performance recommendations of the Committee;
  • Overview and assessment of financial performance;
  • Overview and assessment of service delivery performance for 2017/18;
  • Service delivery performance for the first quarter of 2018/19;
  • Committee Observations;
  • Committee Recommendations; and
  • Appreciation.

The sections below expatiate on the content outlined above.

 

  1. OVERVIEW OF THE KEY RELEVANT POLICY FOCUS AREAS

According to the Quarterly Labour Force Survey (household-based sample survey) conducted by Statistics South Africa, the number of employed people went down by 90 000 between the first and the second quarter of the year 2018, lowering total employment to 16.3 million at the end of June 2018. Formal sector (non-agricultural) employment decreased by 35 000, lowering total employment in this sector to 11.3 million. The informal sector (non-agricultural) contributed more to job losses by shedding 73 000 jobs, lowering total employment in this sector to 2.8 million. The agricultural sector lost 3 000 jobs, lowering total employment in this sector to 843 000 at the end of June 2018. Employment in the private household sector increased by 22 000, pushing the number of employed people in this sector up to approximately 1.3 million. However, the number of employed people increased by 188 000 compared to the end of June 2017. Formal sector employment contributed significantly to the increase in year-on-year total employment by creating 127 000 jobs. Private households sector lost 15 000 jobs between end of June 2017 and end of June 2018.

The majority of jobs were lost in the Manufacturing; Community and Social Services; and Trade industries at 105 000, 93 000 and 57 000 respectively. Increases in the number of jobs were recorded in Transport, Construction and Mining industries at 54 000, 45 000 and 38 000 respectively.

The number of unemployed people increased by 102 000 to approximately 6.1 million unemployed people, translating to an unemployment rate of 27.2% at the end of the second quarter of 2018. The year-on year unemployment rate decreased from 27.7% to 27.2%. The unemployment rate for the youth was 38.8% compared to 17.9% for adults at the end of June 2018.

According to the Quarterly Employment Statistics (enterprise-based sample survey) conducted by Statistics South Africa the number of people employed in the formal sector (non-agricultural) decreased by 69 000, lowering total employment to 9.7 million. This survey reflected that Community Services, Manufacturing and Mining industries shed 67 000, 13 000 and 2 000 jobs at the end of second quarter respectively. However, this survey reflected an increase in the number of jobs by 13 000 between June 2017 and June 2018.

According to the Quarterly Economic Review conducted by the South African Reserve Bank (SARB), remuneration per worker in the formal non-agricultural sector of the economy increased by 4.5% in the first quarter of 2018 compared to an increase of 5.9% in the fourth quarter of 2017. Public sector remuneration growth per worker decreased from 8.4% in the fourth quarter of 2017 to 3.0% in the first quarter of 2018. When excluding the temporary Independent Electoral Commission workers, public sector remuneration growth per worker decreased from 8.4% to 6.1% over the same period. The growth rate in private sector remuneration per worker remained unchanged at 4.9% in the first quarter of 2018.Wage growth per worker increased in the following subsectors: non-gold mining (from 3.2% to 7.3%); trade, catering and accommodation services (from 3.3% to 4.7%); manufacturing (from 4.1% to 4.3%); construction (from 3.7% to 3.8%); and private transport, storage and communication services (from 2.9% to 4.3%). On the other hand, wage growth per worker decreased in finance, insurance, real estate and business services (from 6.7% to 5.3%); community social and personal services (from 5.7% to 4.4%); and gold mining (from 8.5% to 4.1%).

The average wage settlement rate in collective bargaining agreements was 7.3% in the first half of 2018, compared with 7.8% in the same period of the previous year. The number of working days lost due to strike action increased from 230 000 in the first half of 2017 to 550 000 in the corresponding period of 2018, largely attributable to the nationwide three-week wage strike in the transport sector which began in April 2018.

Quarterly Economic Review conducted by SARB further reported that labour productivity growth rate in the formal non-agricultural sector of the economy decreased from a year-on-year rate of 1.4% in the fourth quarter of 2017 to 0.3% in the first quarter of 2018, as year-on-year growth in employment accelerated while that in output decreased.

Statistics South Africa reported a decrease of 0.7% in Gross Domestic Product (GDP) for the second quarter of the year 2018, following a decrease of 2.6% in the first quarter of 2018. The largest negative contributors to growth in GDP in the second quarter were agriculture, transport and trade. The agriculture, forestry and fishing industry decreased by 29.2% and contributed -0.8 of a percentage point to GDP growth. The transport, storage and communication industry decreased by 4.9% and contributed -0.4 of a percentage point. The trade, catering and accommodation industry decreased by 1.9% and contributed -0.3 of a percentage point. The main positive contributions came from the mining industry and finance, real estate and business services.

In response to this contraction of the economy in the first two quarters of the year 2018, government introduced the economic stimulus and recovery plan. The plan involves measures to ignite economic activity; restore investor confidence; prevent further job losses and create new jobs; and address some urgent challenges that affect the conditions faced by vulnerable groups.

The broad parts of the economic stimulus and recovery plan involves the implementation of growth enhancing economic reforms; reprioritisation of public spending to support job creation; the establishment of an infrastructure fund; addressing urgent and pressing matters in education and health; and investing in municipal social infrastructure improvement. The plan is expected to result in prioritised expenditure and new project level funding of around R50 billion. Government contribution towards the Infrastructure Fund over the medium-term expenditure framework period is expected to be in excess of R400 billion.

Subsequent to the introduction of the economic stimulus and recovery plan, the Job Summit was held on the 4th and 5th October 2018. Some of the proposals that came out of the summit includes:

  • Investment of R100 billion (over 5 years) in black enterprises and firms in the industrial sector.
  • R1.5 billion for a new Smallholder Support Fund and R1.5 billion for the Township Enterprise Fund.
  • Up-scaling the implementation of the 30% set aside of government spend for SMMEs and co-operatives.
  • Extension of the Employment Tax Incentive for further 10years.
  • The framework agreement called for businesses and the country at large to enter the “Buy local circle” where they procure and buy local products.

It is hoped that these measures would help to speed up economic growth and thus absorb more people into the labour market resulting in reduction in unemployment.

 

  1. SUMMARY OF PREVIOUS KEY FINANCIAL AND PERFORMANCE RECOMMENDATIONS OF THE COMMITTEE

 

  1. 2017/18 BRRR recommendations and responses of the Department

In the BRRR of the previous financial year, after considering the presentation of the labour portfolio on their annual reports and inputs from the Auditor-General, the Committee made recommendations to the Minister of Labour. Below are recommendations made by the Committee and responses of the Department of Labour (in italics)

The Committee recommended that the Minister of Labour take steps to ensure that:

  • The performance information provided to the Portfolio Committee on Labour on a quarterly basis has been verified by Internal Audit and Audit Committee for credibility and completeness.

As recommended by the Portfolio Committee on Labour, Internal Audit verified the Department’s performance information in Q1 and Q4, whilst the performance information for Q2 and Q3 was reviewed in selected Provincial offices and Labour Centres. The identified discrepancies were discussed with management and recommendations made. The reports were presented to the Audit Committee and the Committees’ recommendations were communicated at an executive level.

 

  • The action plans developed by the Department and its entities to address challenges identified by the auditors are adequately implemented and regularly monitored, as well as holding staff accountable for poor performance and non-implementation or inadequate implementation of the action plans so as to prevent repeat findings. Internal audit and risk need to monitor the action plans and give regular feedback to the leadership on the progress of implementation and the adequacy thereof.

The implementation of Audit Action Plans is monitored by the Chief Operations Officer and Chief Financial Officer. Progress on the implementation of the audit action plans are discussed in executive management meetings and adjustments made.

The UIF audit action plan is closely monitored by the office of the UI Commissioner whilst Internal Audit reviews the progress and validity of evidence provided on a quarterly basis. The Commissioner reports progress to the Director General on a regular basis.

Internal Audit at the CF conducts the verification of portfolios of evidence submitted to support progress made in the implementation of the action plans. This takes place on a quarterly basis. The report generated is presented at the Executive Committee of the Fund. The CF Commissioner reports progress to the Director General on a regular basis.

Consequences management has been effected where applicable.

 

  • The human resource capacitation project shifts focus from senior management services level to operational level so as to improve service delivery.

A number of training interventions that targeted middle management (e.g. Heads of Labour Centres) took place. These include the following:

  • Twenty-two women in middle management and one person with a disability have attended the Accelerated Development Programme. This programme focusses on preparing middle managers for senior management roles. The programme runs over a year and three modules have been finalised.
  • Project Khaedo has been designed to empower managers to bring about change within their areas of operational control and to improve service delivery and 14 managers have attended the programme.
  • The Executive Development Programme (EDP) aims at improving competencies and closing skills gaps of senior and middle managers. Five managers completed the programme in the 2017/18 financial year with 16 managers (including 2 people with disabilities) having been enrolled on the programme for the 2018/19 financial year.

 

  • The Unemployment Insurance Fund and the Compensation Fund develop proper accounting systems and processes to accurately report on investments in terms of the required accounting standards.

The CF has developed a standard operating procedure to ensure accurate reporting and consolidation of investments in terms of the GRAP standards.

The UIF implemented the AG recommendations and adapted GRAP 6, 7, 8 and 104 for reporting of unlisted investments. Proper accounting systems, processes and reporting were implemented in the 2017/18 financial year resulting in the Fund receiving an unqualified audit opinion.

 

  • The Department regularly provides feedback on progress with cases referred to the South African Police Services (SAPS).

Consolidated reports on fraud cases that were referred to the SAPS are discussed at senior management meetings. Progress on these cases is monitored through the national Risk Management and Audit Committees. In addition, the CF prepares an investigation report on a monthly basis that is presented to the Risk and Audit Committees. These reports will, in future, on a quarterly basis be included in presentations made to the Portfolio Committee.

Progress in all fraud cases under investigation at the UIF are discussed on a quarterly basis at the Risk and Audit Committees.

 

  • In its labour market regulation, the Department balances employment protection with creation of an enabling environment for job creation so as to realise the job creation potential of small businesses.

The South African labour laws are premised on regulated flexibility. There is a small business Ministerial Determination which varies certain provisions of the Basic Conditions of Employment Act (BCEA) so as to provide automatic flexibility for small businesses. The BCEA allows for distressed employers to apply for exemptions on conditions of employment and wages in order to balance employment security and the need for job creation when necessary.

Again, South Africa’s labour laws require that any collective agreement concluded by parties in the Bargaining Council (BC) system must provide for exemptions to accommodate the needs of small enterprises as well as struggling employers.

A BC cannot extend a collective agreement to non-parties if a collective agreement does not provide for an exemption clause in order to cater for the needs of small enterprises and struggling employers. The intention is to allow small employers and struggling enterprises to vary certain conditions of employment (including wages) so that they remain viable.

It is Government policy that any legislation introduced should be subjected to a Socio-Economic Impact assessment so as to ascertain the impact of such legislation on the economy, employment and society as a whole. This is done to ameliorate the impact of our laws against the unintended consequences on the economy, employment and society in general.

 

  • The Decent Work Commission is adequately resourced to ensure timeous implementation of the National Minimum Wage with minimum unintended consequences.

In order to ensure that the NMW Commission is well resourced, the Department approached the DPSA to approve a structure for human capital in order to capacitate and ensure a well-functioning secretariat for the Commission and the structure was approved.

Furthermore, the National Treasury was approached to ensure the budget for the Commission is adequate so that it can be able to dispose all of its functions and responsibilities without hindrances. The outcome of this consultation is awaited.

 

  • The Department briefs the Committee on progress regarding the appointment of additional Client Service Officers (CSO) with special focus on UIF activities as well as CF focused CSOs.

Two hundred and fifty-eight UIF focused CSO posts were approved by the Executive Authority, distributed to various Provinces and 251 filled with suitable candidates. The remaining seven posts are in the recruitment and selection phase.

The structure creating 268 CF focused posts across all provinces has been approved. The process of recruitment is dependent on finalizing the placement of current CSOs in Provinces.

 

  • The Department briefs the Committee on work done in areas of enterprise development and upskilling of co-operatives since the Director Generals of Labour and Small Business signed the Memorandum of Understanding to collaborate through leveraging the resources at the disposal of the UIF for this purpose.

In terms of enterprise development, UIF reports that the following action has been taken and/or is being planned for implementation in the 2018/19 financial year.

  • A workshop was held with Government Financial Institutions (GFI) on 17 April 2018 for the UIF to provide GIF with information on Enterprise Development. The GFIs presented their approach and the UIF decided to set aside funds to promote Enterprise Development through the GFIs. The estimated budget will be R233 mullion.
  • Specifications for partnerships with GFIs will be sent out on 25 September 2018 with a closing date of 12 October 2018.
  • Pre-screening is anticipated to take place from 15 - 17 October 2018 and the LGAC Evaluation to take place on 15 - 17 October 2018.
  • The drafting of submissions and vetting of the Funding Agreement will take place from 18 – 26 October 2018.
  • Induction and Training will commence from 29 October 2018.

 

  • The Department briefs the Committee on the reviewed Business Model of the Productivity SA, which aims to reposition the entity to become a centre of excellence and authority to lead the national agenda for a productivity driven growth and development.

The Board of Productivity SA approved the Business Model in February 2018.

 

  • The Department report back to the Committee on progress with the stabilisation of IT systems.

A number of improvements in IT-systems were undertaken or currently being implemented. These are:

  • Internet Line and Migration of Web Facing Applications
    • The internet link was upgraded to 100 Mbps, with 60 Mbps dedicated to internet browsing and e-mails, and 40 Mbps dedicated to Web Facing applications.
    • Hardware required for firewalling and redundancy has been set up and provided to SITA.
    • The Hardware is configured and migration of Web services is in progress.
  • Network infrastructure upgrade
    • Thirty-two sites have been installed with new switches and routers which will enable Wi-Fi access to DoL clients.
    • The Procurement process for additional 96 sites has started.
  • Data Centre Migration to SITA
    • The migration of data to the new infrastructure is 100% complete and the systems are faster than before.
    • The final data centre migration date is expected to take place between the 3rd of October 2018 and the 22nd October 2018.
  • DoL Kiosks
    • Self-service kiosks to access DoL services have been configured in twenty-five sites.
  • Managed Private Lines (MPLS) and Regional Datalines
    • As separate but related initiatives, all labour centres and provincial dataline were upgraded to a minimum of 2 Mbps.
    • Forty-two sites have been upgraded to fibre.
  • Physical LAN Cabling
    • The cabling proposal has been approved and an order issued to SITA.
  • Queue management
    • The Department is currently busy with the implementation of a queue management system in all labour centres and the project is estimated to be completed by 31 December 2018.

 

  • The Inspection and Enforcement Services programme is adequately resourced so that appropriately qualified inspectors can be appointed and retained to monitor implementation of labour laws.

The inspectorate is still inadequately resourced. Further pressure is due to the unavailability of funds. To circumvent this, the Branch has done the following:

  • Conversion of 24 BCEA inspectors to EEA inspectors to close the gap of inadequate numbers of EE inspectors. This was done especially in the face of the extremely poor implementation of the EEA prescripts.
  • The CF has committed to funding an additional 500 OHS inspectors whose work is effectively to serve as a preventive arm for the work that is done by the CF. The process to have this approved is at an advanced stage.
  • There are 99 new additional posts for CF auditors as well as statutory services to enhance capacity. These posts are at a very advanced stage of being filled.
  • The Branch has intensified on capacity development to build and improve the competence of inspectors. This includes the appointment of mentors to particularly assist newly appointed inspectors.

 

  1. Committee Report on Budget Vote 28: Labour 2018

The Committee was generally satisfied with the budget plans of the labour portfolio. However, the Committee made the following recommendations:

  • That the budget of Inspection and Enforcement Services programme be increased so that more inspectors are hired and provided with relevant tools of trade.
  • That the budget of the CCMA be reviewed to reflect the increased responsibilities that will come with the implementation of the labour law amendments currently being considered by Parliament.
  • That the Department of labour markets the services provided by the Public Employment Services programme so as to increase the placement rate of job seekers. This might include encouraging other government departments to use the services offered by the programme.
  • That the Department and entities address issues raised by the Auditor-General of South Africa (AGSA).
  • Managers of programmes of Department and entities that are not performing must be called to account to give effect to consequence management.
  • The Department and entities must fill all vacant funded posts without delay, and report progress to the Committee on quarterly basis.

 

4.   OVERVIEW AND ASSESSMENT OF FINANCIAL PERFORMANCE OF THE DEPARTMENT OF LABOUR

4.1.       Overview of Vote allocation and spending (2016/17 TO 2017/18)

The activities of the Department of Labour are structured into four programmes, namely Administration, Inspection and Enforcement Services, Public Employment services and Labour Policy and industrial Relations. Table 1 below reflects the allocation and expenditure per programme.

Table 1

Programmes

2017/18

2016/17

Final Appropriation

Actual Expenditure

Over/ Under Expenditure

Expenditure

Final Appropriation

Actual Expenditure

Over/ Under Expenditure

R’000

R’000

R’000

%

R’000

R’000

R’000

Administration

860 734

768 677

92 057

89.3

847 105

819 070

28 035

Inspection and Enforcement Services

545 115

520 165

24 950

95.4

500 355

464 269

36 086

Public Employment Services

562 574

485 543

77 031

86.3

525 698

524 879

819

Labour Policy and Industrial Relations

1 087 398

1 069 634

17 764

98.4

969 719

953 367

16 352

Total

3 055 821

2 844 019

211 802

93.1

2 842 877

2 761 585

81 292

Source: Annual Report 2017/18 (Department of Labour)

The final appropriation for the Department of Labour amounted to R3.055 billion in 2017/18 financial year, which is an increase of R212.9 million from the R2.842 billion allocated in 2016/17. The Department spent R2.844 billion or 93% of the final appropriation and achieved 60% of its targets, resulting in under-expenditure of R211.8 million or 7% of the final appropriation. This reflects an increase in under-expenditure from the 3% recorded in the previous financial year. The larger portion of the final appropriation was allocated to the Labour Policy and Industrial Relations programme at R1, 087 billion, followed by the Administration programme at R860.7 million. The Inspection and Enforcement Services programme received the least allocation at R545.1 million.

 

4.2.       Expenditure per programme DoL 2017/18

4.2.1.    Administration

The purpose of the Administration programme is to provide management, strategic and administrative support services to the Ministry and the Department, with a goal of building institutional capacity. To carry out this objective the activities of the programme are structured into five sub-programmes, namely: Ministry, Management, Corporate Services, Office of the Chief Financial Officer and Office Administration.

The total allocation for the programme amounted to R860.7 million, which is approximately 28% of the final appropriation to the Department. This allocation is an increase of R13.6 million from the R847.1 million allocated in 2016/17 financial year. The programme spent R768.7 million or 89.3% of the allocation and achieved 75% of the predetermined targets, resulting in under-expenditure of R92.1 million or 11% of its budget. This reflects an increase in under-expenditure from the 3% recorded in the previous financial year. The major reasons for under-expenditure were vacancies that resulted in underspending by R19.4 million on Compensation of Employees; delays in payments for Computer Services (license payments) and property payments that resulted in underspending by R56.8 million on Goods and Services; and delayed payments for buildings and other fixed structures that resulted in R15.8 million underspending on Payment for Capital Assets.

Corporate Services programme received the largest share of the programme allocation at R258.3 million or 30% of the programme allocation. It spent R200.9 million or 78% of its allocation, contributing significantly to the increased under-spending of the programme. The Management programme received the second largest allocation of R256.6 million or 29.8% of the programme budget and spent almost the total allocation in the year under review.

 

4.2.2     Inspection and Enforcement Services (IES)

The purpose of this programme is to realise decent work by regulating non-employment and employment conditions through inspection and enforcement, to achieve compliance with all labour market policies.

IES programme comprise the following sub-programmes: Management and Support Services; Occupational Health and Safety; Registration; Compliance, Monitoring and Enforcement; Training od Staff; and Statutory and Advocacy Services.

The final appropriation for the programme amounted to R545.1 million, which is an increase of R44.8 million from the R500.4 million allocated in the previous financial year. The programme spent R520.2 million or 95.4% of the programme allocation and achieved 50% of the predetermined targets resulting in under-expenditure of R24.9 million. The major reasons for variance on this programme were vacancies that resulted in R18.7 million underspending on Compensation of Employees and lower than anticipated expenditure on venues and facilities that resulted in R6.2 million underspending.

The larger portion of the programme budget was allocated to Compliance, Monitoring and Enforcement sub-programme at R432.3 million or 79.3%. This sub-programme spent R414.8 million or 95.9% of its allocation, resulting in under-expenditure of R17.5 million.

Registration: IES sub-programme received the second largest allocation at R62.5 million and spent R61.1 million or 97.7%, resulting in under-expenditure of R1.4 million. Occupational Health and Safety sub-programme received R29.8 million and spent R25.9 million or 86.9% of its allocation, resulting in under-expenditure of R3.9 million.

 

4.2.3.    Public Employment Services (PES)

The purpose of the PES programme is to provide assistance to companies and workers to adjust to changing labour market conditions, and to regulate private employment agencies.

This programme comprise the following sub-programmes: Management and Support Services: PES; Employer Services; Work-Seeker Services; Designated Groups Special Services; Supported Employment Enterprises; Productivity South Africa; Unemployment Insurance Fund; Compensation Fund; and Training of Staff: PES.

The final appropriation for this programme was R562.6 million and it spent R485.5 million or 86.3% of its allocation and achieved 100% of its predetermined targets, resulting in under-expenditure of R77 million. The major reasons for variance on this programme were vacancies and delays in restructuring the programme that resulted in R70.1 million underspending and lower than anticipated expenditure on travel and subsistence expenses that resulted in R6.4 million underspending.

Employer Services and Work-Seeker Services sub-programmes received R104.3 million and R177.3 million respectively. The Employer Services sub-programme spent R76.8 million or 73% of its allocation, resulting in under-expenditure of R27.5 million. Work-Seeker Services spent R130.6 million or 73.6% of its allocation, resulting in under-expenditure of R46.8 million. Supported Employment Enterprises was allocated R147.5 million and spent R145.9 million or 98.9% of its budget, resulting in under-expenditure of R1.5 million.

 

4.2.4.    Labour Policy and Industrial Relations (LP&IR)

The purpose of the LP&IR programme is to facilitate the establishment of an equitable and sound labour relations environment; support institutions of social dialogue and promote South Africa’s interests in international labour matters; conduct research, analysis and evaluate labour policy; and provide statistical data on the labour market.

The LP&IR programme comprise the following sub-programmes: Management and Support Services: LP&IR; Strengthen 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 LP&IR programme was allocated R1.087 billion and spent R1.069 billion or 98.4% but achieved only 38% of its predetermined targets, resulting in under-expenditure of R17.7 million. The major reasons for variance were vacancies that resulted in R3.5 million underspending on Compensation of Employees; lower than anticipated expenditure on travel and subsistence expenses as well as consultants and advisory services that resulted in underspending by R9.9 million; and improved exchange rate at time of payments made to the ILO and ARLAC that resulted in underspending by R3.9 million.

The larger portion of the programme allocation went to CCMA at R864.1 million or 79.5%. NEDLAC was allocated R39.8 million in the 2017/18 financial year. International Labour Matters and Labour Market Information and Statistics sub-programmes received R48.2 million and R43.2 million respectively.

4.3.       Expenditure by Economic Classification

The Department reported its expenditure by Economic Classification as follows:

Table 2

Economic Classification

Final Appropriation

2017/18

R’000

Actual Expenditure

2017/18

R’000

Variance

(Over)/ Under

2017/18

R’000

 

 

 

%

Compensation of Employees

1 171 319

1 059 512

111 807

90.5

Goods and Services

591 240

511 872

79 368

86.6

Transfers and Subsidies

1 184 049

1 179 632

4 417

99.6

Payments for Capital Assets

108 986

92 780

16 206

85.1

Payments for Financial Assets

227

223

4

98.2

TOTAL

3 055 821

2 844 019

211 802

93.1

Source: Presentation to the Portfolio Committee on Labour dated 10 October 2018

Table 2 reflects expenditure of the Department by Economic Classification. The larger portion of the budget went to Transfers and Subsidies; and Compensation of Employees at R1.184 billion and R1. 171 billion respectively. A total of R1.059 billion or 90.5% of the allocation was spent on Compensation of Employees, resulting in underspending by R111.8 million. Transfers and Subsidies item spent R1.179 billion or 99.6% of its budget, resulting in underspending by R4. 4 million. Goods and Services item received R591.2 million and spent R511.9 million or 86.6% of its budget, resulting in underspending by R79.4 million.

 

  1. REPORT OF THE AUDITOR-GENERAL

The Department of Labour, Commission for Conciliation Mediation and Arbitration (CCMA), Supported Employment Enterprises (SEE) and Unemployment Insurance Fund (UIF) received unqualified audit with findings in the 2017/18 financial year. This amounts to 66% of the Portfolio receiving unqualified audit with findings in 2017/18. NEDLAC received a qualified audit with findings in the year under review and the Compensation Fund (CF) received a disclaimer with findings. It is worth noting that the Department and the CCMA have received the unqualified audit with findings for the past five financial years. On the other hand, the CF has received a disclaimer with findings over the past five financial years. The SEE improved from the qualified audit opinion with findings in 2016/17 financial year to unqualified audit opinion with findings in 2017/18 financial year. NEDLAC regressed from unqualified audit opinion with findings in the previous financial year to qualified audit opinion with findings in the year under review. UIF improved from a disclaimer with findings in 2016/17 to unqualified audit opinion with findings in 2017/18 financial year.

 

The portfolio registered irregular expenditure of R113 million in 2017/18 financial year, which is an increase from the R65 million registered in 2016/17 financial year. Fruitless and wasteful expenditure for the portfolio amounted to R14 million in 2017/18 financial year, which was a regression from the R781 000 recorded in 2016/17 financial year.

 

Irregular expenditure for the Department relating to the year under review was R1.2 million, which was an improvement from the R4.2 million recorded in the 2016/17 financial year. Fruitless and wasteful expenditure of the Department increased from R300 000 to R4. 0 million between 2016/17 and 2017/18 respectively.

Under emphasis of matter, AGSA noted that the Department materially underspent the budget by R211 802 000 (R211.8 million) primarily on Administration programme (R92.0 million) and Public Employment Services (R77.0 million). AGSA also raised concern that the Department and its entities entered into an updated SAP contract in February 2017 without a developed SAP utilisation roadmap. Furthermore, the commitment was made to renew SAP and migrate the databases without a migration costing being performed, prior to the renewal of the licences that may result in increased ICT costs over the implementation period. The Department was also found to have over-reported achievements on two indicators under Inspection and Enforcement Services programme. In one indicator (% of non-compliant employers who failed to comply with the served notice referred for prosecution within 30 calendar days) it reported 35% achievement, while the audited value was 18% and in the other (% of reported incidents investigated and/or finalised within the prescribed time) the reported value was 75% and the audited value was 63%. AGSA further reported that effective steps were not taken to prevent irregular expenditure of R1.2 million; and fruitless and wasteful expenditure of R4.0 million.

 

  1. Statement of Financial Performance for the year ended 31 March 2018

The total revenue of the Department for 2017/18 financial year amounted to R3.0 billion (R3 072 626 000) comprising R3.0 billion (R3 055 821 000) annual appropriation and R16.8 million (R16 805 000) departmental revenue. This is an increase of R218.0 million (R218 047 000) from the total revenue of R2.8 billion ((R2 854 579 000) in the previous financial year. The annual appropriation portion increased from R2.8 billion (R2 842 877) in 2016/17 financial year to R3.0 billion in the year under review.

 

The total expenditure amounted to R2.8 billion (R2 844 019 000) comprising total current expenditure of R1.5 billion (R1 571 384 000), transfers and subsidies of R1.1 billion (R1 179 632 000), total expenditure on capital assets of R92.7 million (R92 780 000) and payment for capital assets of R223 000. This resulted to an under-expenditure of R228.6 million (R228 607 000), which was reduced to R211.8 million (R211 802 000) after reconciliation. Under-expenditure increased by R130.5 million (R130 510 000) from R81.2 (R81 292 000) underspent in 2016/17 financial year.

The larger portion of current expenditure (R1 059 512 000 or 67%) went to Compensation of Employees. A total of R511.8 million (R511 872 000 or 33%) was spent on Goods and Services.

Of the R1.1 billion spent on Transfers and Subsidies, R979.9 million ((R979 936 000) was on Departmental agencies and accounts. Of this amount R864.0 million (R864 090 000) was transferred to the CCMA, R60.0 million (R60 064 000) to Productivity SA, R39.8 million (R39 833 000) to NEDLAC and R15.9 million (R15 917 000) to Compensation Fund. The International Labour Organisation (ILO) and African Regional Labour Administration Centre (ARLAC) were transferred R22 648 000 and R1 165 000 respectively. A total of R173.3 million (R173 351 000) was transferred to non-profit institutions.

 

  1. Statement of Financial Position for the year ended 31 March 2018

The total assets of the Department for the year ended 31 March 2018 amounted to R224.7 million (R224 745 000) comprising R209.3 million (R209 368 000) current assets and R15.3 (R15 377 000) non-current assets. This is an increase from the total assets of R188.6 million (R188 699 000) in 2016/17, which comprised Current assets of R166.1 million (R166 137 000) and non-current assets of R22.5 million (R22 562 000).

Total liabilities increased from R182.5 million (R182 555 000) in 2016/17 to R216.8 million (R216 805 000) in the year ended March 2018, comprising mainly voted funds to be surrendered to the Revenue Fund (R211 802 000), departmental revenue and NRF receipts to be surrendered to the Revenue Fund (R2 586 000) and payables (R2 417 000). The voted funds to be surrendered to the Revenue Fund contributed significantly to an in increase in liabilities at R130.5 million (R130 510 000). This was followed by departmental revenue and NRF receipts to be surrendered to the Revenue Fund, which increased by R2.0 million (R2 024 000).

This resulted to net assets of R7.9 million (R7 940 000), which is an increase from R6.1 million (R6 144 000) in 2016/17 financial year.

 

 

6.         FINANCIAL PERFORMANCE FOR Q1 OF 2018/19 FINANCIAL YEAR

6.1        Expenditure analysis

The main appropriation for the Department amounted to R3.3 billion (R3 295 200 000) in 2018/19 financial year. By the end of the Q1 the Department had spent R683. 3 million or 20.7% of the total budget. This is lower by R133.5 million or 16.3% than the projected Q1 expenditure of R816.8 million. The slow spending is mainly under compensation of employees, goods and services and payments for capital assets.

A total of R1.3 billion was allocated for compensation of employees and R260.4 billion or 19.8% was spent at the end of Q1 against a projection of R326.3 million. This resulted in underspending of R65.9 million or 20.2% of the projected spending. Goods and services spent R87.7 million or 14.0% of an allocation of R628.9 million, against a projection of R147.o million resulting in underspending of R59.3 million or 40.3% of the projected spending. Of the R75.0 million allocated to payment for capital assets, R4.1 million or 5.5% was spent by the end of Q1 against a target of R12.5 million resulting in under-expenditure of R8.4 million or 67.1%.

The budget for transfers and subsidies amounted to R1.3 billion and R331.0 million or 26.0% was transferred by the end of Q1 as per spending projection.

6.2.       Expenditure per programme

6.2.1.    Administration

Administration programme was appropriated R917.4 million and it had spent R151.1 million or 16.5% of the allocation by the end of Q1 against the projection of R220.8 million, resulting in under-spending of R69.7 million or 31.6% of the budget.

The slow spending was as a result of under-spending in compensation of employees due to vacant finance, supply chain, security and management posts at provincial offices and labour centres and IT posts at head office. The cost of living adjustments for salary levels 1 to 12 came into effect and was paid in July also contributing to the slow spending under compensation of employees. The slow spending on goods and services was due to delays in invoicing by service providers for the procurement of departmental cars in the province as well as delays in the issuing of invoices for office accommodation leases and municipal services by the Department of Public Works.

 

6.2.2.    Inspection and Enforcement Services (IES)

IES programme was appropriated R598.2 million in the 2018/19 financial year and R112.2 or 18.8% was spent by the end of Q1 against a projection of R142.9 million, resulting to an under-expenditure of R30.7 million or 21.5% of the allocation.

Compensation of employees was the main contributor to slow spending because of vacant labour inspector posts as well as the cost of living adjustments for salary levels 1 to 12, which came into effect and was paid in July. The Department struggled to attract and retain labour inspectors as they are offered higher salaries in the private sector. Having fewer inspectors than budgeted for, also accounts for the slow spending under goods and services on travel and subsistence and staff training and development. Invoices for cell phones and data were also received late resulting in slow spending under goods and services.

 

6.2.3.    Public Employment Services (PES)

PES was appropriated R582.6 million in 2018/19 financial year and had spent R123.1 million or 21.1% by the end of Q1 against a projection of R146.4 million, resulting to under-expenditure of R23.3 million or 15.9% of the allocation.

Slow spending was mainly under transfers and subsidies arising from delays in the transferring of funds to workshops for placement of people with disabilities. The slow spending on compensation of employees arose from delays in creating the critical posts needed for accelerating service delivery to work seekers, which was only approved in the last quarter of 2017/18 as well as the cost of living adjustments for salary levels 1 to 12 which came into effect and was paid in July. The Department has advertised the posts and are in the process of interviewing and filling these posts. These newly created posts have been funded from savings arising from the revision of the percentage split for shared staff with the UIF and CF at labour centres and provincial offices, which resulted in a reduction in the portion paid by the Department. Slow spending on goods and services was due to delays in the issuing of invoices by DPW for property payments as well as delays in the issuing of invoices by suppliers to provincial offices for travel

 

6.2.4.    Labour Policy and Industrial Relations (LP&IR)

LP&IR programme was appropriated R1.2 billion in the 2018/19 financial year and had spent R296.9 million or 24.8% by the end of Q1 against a projection of R306.7 million, resulting to an underspending of R9.8 million or 3.2% of the allocation.

Slow spending under compensation of employees was due to vacant posts as a result of delays in establishing the National Minimum Wage Commission as well as the cost of living adjustment for salary levels 1 to 12 which came into effect and was paid in July. Slow spending under goods and services was due to delayed invoicing for property payments as well as delayed invoicing by service providers to provincial offices for fleet services. The slow spending under transfers and subsidies was due to internal delays in the Department obtaining authorisation to make transfer payments to various civil society and labour organisations with respect to strengthening civil society.

 

7.         OVERVIEW AND ASSESSMENT OF SERVICE DELIVERY PERFORMANCE FOR 2017/18 FINANCIAL YEAR

The overview and assessment of service delivery performance is classified into three categories, namely: Performance on Estimates of National Expenditure (ENE), Performance per Strategic Goals and Performance per programme.

 

7.1.       Service Delivery Performance of the Department on ENE

The Department reported performance on ENE goals as follows:

Table 3

ENE Performance Indicator

Related Programme

Outcome to which it contributes

Target

Overall Achievement

No. of employers inspected per year to determine compliance with employment law

IES

Outcome 4: Decent employment through inclusive growth

217 008

214 946

Percentage of reported incidents investigated and/or finalised within prescribed time frames.

IES

 

65%

75%

No. of work-seekers registered on ESSA per year.

PES

 

500 000

890 000

No. of work and learning opportunities registered on ESSA per year.

PES

 

60 000

109 917

Work-seekers provided with employment counselling.

PES

 

140 000

193 573

No. of registered work and learning opportunities filled by registered work-seekers per year.

PES

 

8 000

21 076

No. of pay scales assessed per year to reduce gaps in minimum wage determination.

LP&IR

 

2

Replace in APP with introduction of NMW.

Source: Annual Report 2017/18, Department of Labour

The Department achieved most of its targets on ENE performance indicators, except for the number of employers inspected per year to determine compliance with employment law. The Department inspected 214 946 employers against a target of 217 008, resulting in a shortfall of 2 062 employers not inspected. The Department did not meet the target in the previous financial on this indicator.

The Department kept the target of filling 8 000 registered work and learning opportunities with registered work-seekers despite exceeding this target in the 2016/17 financial year.

7.2.       Performance of the Department per Strategic Goals

The Department reported its performance per strategic goals as follows:

Table 4

Strategic Goals

Performance Indicators

Achieved

Overall Achievement %

Strengthen occupational safety protection

This strategic objective is covered in terms of indicators that are applicable in protecting vulnerable workers.

Promote equity in the labour market

1

0

0

Protecting vulnerable workers

5

2

40

Strengthen multilateral and bilateral relations

1

1

100

Contribute to employment creation

4

4

100

Promote sound labour relations

3

0

0

Monitor the impact of legislation

2

2

100

Strengthen the institutional capacity of the Department

4

3

75

Overall Performance

20

12

60%

Source: Annual Report 2017/18, Department of Labour

The Department did not achieve its targets on promoting equity in the labour market (0%), protecting vulnerable workers (40%) and promoting sound labour relations (0%). It achieved 75% on strengthening its institutional capacity.

 

7.3.       Performance of the Department per programme

The Department reported its performance per programme as follows:

Table 5

Programme

Performance Indicator

Achieved

Overall Achievement                         %

Administration

4

3

75

Inspections and Enforcement Services

4

2

50

Public Employment Services

4

4

100

Labour Policy and industrial Relations

8

3

38

Overall Performance

20

12

60%

Source: Annual Report 2017/18, Department of Labour

The Department achieved 12 of its 20 planned indicators, translating to an overall achievement of 60%. This reflects a regression from the 74% achieved in 2016/17 financial year.

 

 

8.         OVERVIEW OF PERFORMANCE OF ENTITIES OF THE DoL: 2017/18

8.1.       Productivity South Africa (PSA)

PSA had 28 annual planned indicators for 2017/18 financial year and achieved 18, translating to 64% achievement. This is a regression compared to the 68% achievement recorded in 2016/17 financial year.

 

8.1.1.    Annual performance per strategic objective: 2017/18 PSA

Performance per strategic objective is reflected in the following table.

Table 6

Strategic objective

Annual planned indicators

Achieved

Overall achievement

                        %

Strengthen the institutional capacity of PSA to deliver on its mandate and be financially sustainable

11

5

45%

Provide support to programmes aimed at sustainable employment and income growth

4

3

75%

Provide support to companies facing economic distress to retain jobs

2

1

50%

Contribute to employment and income growth through research, information generation and dissemination

3

2

67%

Promote social dialogue and a culture of productivity and competitiveness in the workplace and community life

8

7

87%

Overall Performance

28

18

64%

Source: Presentation to the Portfolio Committee on Labour dated 12 September 2018

 

PSA under-achieved on “strengthen the institutional capacity of PSA to deliver on its mandate and be financially sustainable”. Out of 11 planned indicators, it achieved 5 translating to 45% achievement. The entity achieved 87% in “Promote social dialogue and a culture of productivity and competitiveness in the workplace and community life. It achieved 50% in “Provide support to companies facing economic distress to retain jobs”.

8.1.2.    Annual performance per programme: 2017/18 PSA

PSA reported performance per programme as follows:

Table 7

Programme

Annual planned indicators

Achieved

Overall achievement %

Corporate Services

5

2

40%

Human Resource Management

5

3

60%

Marketing and Communication

5

4

80%

Productivity Organisational Solutions

3

2

67%

Value Chain Competitiveness

8

6

75%

Turnaround Solutions

2

1

50%

Overall Performance

28

18

64%

Source: Presentation to the Portfolio Committee on Labour dated 12 September 2018

Corporate Services programme had 5 annual panned indicators for 2017/18 but achieved 2, translating to 40% achievement. The programme that achieved the most of its targets was Marketing and Communications at 80% achievement. Productivity Organisational Solutions and Turnaround Solutions programmes achieved 67% and 50% respectively. The Turnaround Solutions programme had a target of assisting 150 companies facing economic distress through turnaround solutions. It managed to support 71, translating to 47% achievement. However, this is an improvement from the 26% achieved in 2016/17 financial year on this target. The entity saved 8 504 jobs in companies facing economic distress against a target of 7 500, thereby saving 1 004 more jobs than planned in 2017/18. This is also an improvement compared to 2016/17 where 5 240 less jobs were saved against the planned 10 000 jobs. It is, however, worth noting that the target was reduced from 10 000 in 2016/17 to 7 500 in 2017/18.

The Productivity Organisational Solutions programme had a target of supporting 5 500 small enterprises on Enterprise and Supplier Development (ESD) programmes and Cooperatives through productivity and operational efficiency enhancing programmes. It managed to support 5 523 companies, which is 23 more companies supported than planned. The programme trained 327 productivity champions across the business, labour and government against a target of 200, thereby overachieving by 127 more champions trained. However, it is not clear why the target was lowered from 300 in 2016/17 to 200 in 2017/18 since it was exceeded by 95.

 

8.2.       Commission for Conciliation Mediation and Arbitration (CCMA)

The CCMA had 15 planned indicators for 2017/18 financial year and achieved 13, translating to a performance of 87%. This is a regression from the 91% achieved in 2016/17 financial year.

 

8.2.1.    Annual performance per strategic objective: 2017/18 CCMA

Table 8

Strategic Objective

Planned indicators

Achieved

Overall achievement %

Enhancing the labour market to advance stability and growth

4

4

100%

Advancing good practices at work and transforming workplace relations

4

4

100%

Building knowledge and skills

1

1

100%

Optimising the organisation

6

4

65%

Overall performance

15

13

87%

Source: Presentation to the Portfolio Committee on Labour dated 12 September 2018

The two planned indicators that were not met fall under the “Optimising the organisation” strategic objective. The entity heard 148 263 registered cases’ first event within thirty days out of 148 403 cases, translating to 99.90% achievement on this planned indicator. Under-performance on this indicator was attributed to system errors, staff negligence and capacity constraints.

The entity sent 18 905 arbitration awards to parties by the fourteenth day after completion of the arbitration process out of 18 942 awards, translating to 99.80% achievement. Under-performance on this indicator was attributed to system outages and in certain instances, staff negligence as a result of capacity constraints.

 

 

8.3.       Compensation Fund (CF)

8.3.1.    Annual performance per strategic objectives: 2017/18 CF

CF reported its annual performance per strategic objective as follows:

Table 9

Strategic Objective

Planned Indicators

Achieved

Overall Performance %

Provide an effective and efficient client oriented support services

4

3

75%

Provide faster, reliable and accessible COID Services by 2020

5

3

60%

Overall Performance

9

6

67%

Source: Presentation to the Portfolio Committee on labour dated 12 September 2018

CF had four indicators on “Provide an effective and efficient client oriented support services” strategic objective and achieved 3, translating to 75% achievement. This is an improvement from the 25% achievement in 2016/17 financial year. On “Provide faster, reliable and accessible COID Services by 2020” strategic objective, it achieved three out of five planned indicators, translating to 60% achievement, which is a regression from the 70% achieved in 2016/17 financial year. Overall, six out of nine planned objectives were achieved, translating to an overall achievement of 67%, which is an overall improvement from the 50% achieved in the previous financial year.

 

8.3.2.    Annual performance per programme: 2017/18 CF

CF reported annual performance per programme as follows:

Table 10

Programme

Planned Indicators

Achieved

Overall Performance %

Administration

4

3

75%

Head Office Operations

3

1

33%

Provincial Operations

2

2

100%

Overall Performance

9

6

67%

Source: Presentation to the Portfolio Committee on labour dated 12 September 2018

The Head Office Operations programme had three planned indicators and achieved one, translating to 33% achievement. This is a regression from the 60% achieved in 2016/17 financial year. Provincial Operations programme achieved all its planned indicators, which is an improvement from the 80% achieved in 2016/17 financial year. Administration programme achieved three out of four planned indicators, translating to 75% achievement, which is an improvement from the 25% achievement recorded in the previous financial year.

 

8.3.3.    Overview of CF Budget and Expenditure 2017/18 CF

CF budget and expenditure was presented as follows:

Table 11

2017/18 Expenditure Budget

2017/18 Approved Budget

017/18 Revised Allocation

Actual Expenditure at 31 March 2018

Variance

Under/ Over

Total Spent

 

R’000

R’000

R’000

R’000

%

Administration

1 431 175

1 616 058

1 679 282

-63 225

104

Operations Management

7 810 777

7 611 629

2 507 004

5 104 625

33

Provincial Operations COIDA

65 101

79 367

64 622

14 745

81

Total Budget

9 307 053

9 307 053

4 250 908

5 056 145

46

Source: Presentation to the Portfolio Committee on labour dated 12 September 2018

The total approved budget of the CF amounted to R9.307 billion, which was allocated to programmes as follows: Administration-R1.431 billion, Operations Management-R7. 810 billion and Provincial Operations-R65. 1 million. The total budget remained unchanged after adjustments but programme allocations were adjusted as follows: Administration-R1. 616 billion, Operations Management-R7.611 billion and Provincial Operations-R79.4 million.

The total expenditure per programme amounted to R4.250 billion, which translates to 46% of the budget allocated to programmes spent. This resulted in under expenditure of R5.056 billion. The Operations Management programme spent only 33% of its budget in 2017/18, resulting in under-expenditure of R5.104 billion. Provincial Operations programme spent 81% of its budget, resulting in R14.7 million under-spending.

 

8.3.4.    Overview of CF Budget and Expenditure by Economic Classification 2017/18

CF budget was allocated per Economic Classification as follows:

Table 12

Economic Classification

Approved Budget

Actual Expenditure at 31 March 2018

Variance

Under/ Over

Total Spent

 

R’000

R’000

R’000

%

Compensation of Employees

658 744

723 507

-64 762

110

Goods and Services

882 625

3 774 517

-2 891 893

428

Capital Expenditure

54 745

8 646

46 099

16

Total Administrative Budget

1 596 114

4 506 670

-2 910 556

282

 

 

 

 

 

Compensation Claims

4 656 796

-1 264 765

5 921 561

-27%

Medical Claims

3 054 144

1 009 003

2 045 140

33

Total Benefits

7 710 939

-255 762

7 966 701

-3

 

 

 

 

 

Total Budget

9 307 053

4 250 908

5 056 145

46

Source: Presentation to the Portfolio Committee on labour dated 12 September 2018

There were no approved adjustments in the 2017/18 financial year, therefore the revised allocation was similar to the approved budget. The total administrative budget was R1.596 billion or 17% of the total budget. Compensation of employees’ item was allocated R658.7 million or 41% of the total administrative budget. A total of R723.5 million was spent on compensation of employees, which is in excess of R64.8 million of the budget allocated for this item. Goods and Services item was allocated R882.6 million or 55% of the total administrative budget. A total of R3.774 billion was spent on this item, translating to an over-expenditure of R2.891 billion. Capital Expenditure item was allocated R54.7 million and spent R8.6 million or 16% of the allocated budget by 31 March 2018, resulting in under-expenditure of R46 million.

 

 

 

8.4.       Unemployment Insurance Fund (UIF)

The UIF had 12 planned indicators for 2017/18 financial year and achieved 7 translating to 58% overall achievement.

8.4.1.    Annual Performance per Strategic Objective 2017/18: UIF

UIF reported its performance per strategic objective as follows:

Table 13

Strategic Objective

Planned Indicators

Achieved

Overall Achievement   %

Improve financial management

3

3

100

Improve service delivery

5

2

40

Improve compliance to the unemployment insurance acts

2

1

50

Fund poverty alleviation schemes

2

1

50

Overall performance

12

7

58%

Source: Presentation to the Portfolio Committee on labour dated 10 October 2018

The entity performed consistently at 100% from quarter 2 to quarter 4 of 2017/18 financial year on improving financial management strategic objective. It under-performed at 40% throughout the financial year on improving social delivery strategic objective. On improving compliance to the unemployment insurance acts, the UIF performed at 50% throughout the financial year. The entity performed at 50% from quarter 2 to quarter 4 of 2017/18 financial year on funding poverty alleviation schemes objective.

 

8.4.2.    Annual performance per programme 2017/18: UIF

The work of the UIF is structured into three programmes, namely: Administration, Business Operations and Labour Activation Programme. Performance per programme was reported as follows:

 

 

 

Table 14

Programme

Planned Indicators

Achieved

Overall Achievement %

Administration

3

3

100

Business Operations

7

3

43

Labour Activation Programme

2

1

50

Overall Performance

12

7

58%

Source: Adapted from the Presentation to the Portfolio Committee on labour dated 10 October 2018

The Administration programme achieved all its planned indicators in 2017/18 financial year. Business operations programme had seven planned indicators and achieved 3, translating to 43% achievement. The indicators that were not achieved by the Business operations programme were the following:

  • It approved/ rejected 83% of valid unemployment benefits claims with complete information by 31 March 2018 against a target of 90%.
  • It approved/ rejected 71% valid in-service, maternity, illness and adoption benefits with complete information by 31 March 2018 against a target of 90%.
  • It approved/ rejected 75% valid deceased claims benefits with complete information as at 31 March 2018 against a target of 90%.
  • It achieved 2.65% increase in revenue as at 31 March 2018 against a target of 7.2% increase.

Labour activation programmes had two indicators and achieved one, translating to 50% achievement. The indicator that was not achieved was to transfer all funds to partners after receipt of accurate invoices within ten working days by 31 March 2018. The programme received 72 invoices and paid 5 within 10 working days by 31 March 2018.

 

8.5.       National Economic Development and Labour Council (Nedlac)

Nedlac had 47 annual planned indicators for 2017/18 financial year and achieved 42, translating to an overall achievement of 89%.

 

8.5.1.    Annual performance per strategic objective Nedlac: 2017/18

Nedlac’s strategic objectives are as follows:

  • Effective governance and strategic leadership.
  • Provision of efficient and reliable back office support services.
  • Improved risk management and financial oversight.
  • Improved facilities management.
  • Office administration systems enhanced and monitored.
  • Strengthen organisational culture and performance.
  • Effective engagement of draft policy and legislation within the framework of the Nedlac Act, Constitution and Protocols.
  • Conclude matters under consideration within the framework of the Nedlac Protocol.
  • Promote social dialogue through communication, information and capacity building.
  • Compliance with the Nedlac policy on Constituency Capacity Building, Budgeting and Expenditure.

Nedlac did not report its annual performance by strategic objectives in its annual report tabled before Parliament. On its presentation to the Portfolio Committee on Labour it reported quarterly performance per strategic objective.

Nedlac’s work to realise the above-mentioned objectives is undertaken through three programmes, namely: Administration, Core-Operations and Constituency Capacity Building. Its performance per programme is discussed below.

 

8.5.2.    Annual performance per programme Nedlac:2017/18

Nedlac reported its annual performance as follows:

Table 15

Programme

Annual Planned Indicators

Achieved

Overall Achievement %

Administration

14

12

86

Core Operations

30

27

90

Constituency Capacity Building Funds

3

3

100

Performance Summary

47

42

89%

Source: Presentation to the Portfolio Committee on Labour dated 10 October 2018

The Administration programme had 14 planned targets for the 2017/18 financial year and achieved 12, translating to 86% achievement. The Core Operations programme had 30 targets and achieved 27, translating to 90% achievement. Constituency Capacity Building Funds programme had three annual planned targets and achieved all them.

 

8.5.3.    Nedlac expenditure per programme 2017/18

Nedlac expenditure per programme was reported as follows:

Table 16

Programme

Annual Budget

R

Actual Expenditure

R

Under/Over-expenditure

R

Actual Expenditure %

Administration

25 354 182

25 390 048

-35 866

100.1

Core-Operations

10 934 400

7 140 850

3 793 550

65

Constituency Capacity Building Funds

4 113 018

2 817 951

1 295 067

69

Total Expenditure

40 401 600

35 348 849

5 052 751

87.5%

Source: Adapted from the Presentation to the Portfolio Committee on labour dated 10 October 2018

The total budget of Nedlac for 2017/18 financial year amounted to R40.4 million. Of this amount, R35.3 million or 87.5% was spent by the end of 2017/18 financial year.

A total of R25.5 million or 62.7% was allocated to the Administration programme. This programme’s expenditure exceeded the allocation by R35 866. Nedlac reported that it received additional budget allocation of R8 million on 29 March 2018 to cover the costs of National Minimum Wage (NMW) and related activities (e.g. National Health Insurance and Comprehensive Social security). Out of this amount, R3.5 million was allocated to Administration programme, on expenditure line items which had a direct link with NMW and related activities.

Core-operations programme allocation amounted to R10. 9million and R7.1 million or 65% was spent by 31 March 2018. Out of the R8 million indicated above, R4.5 million was allocated to this programme on expenditure line items which had direct link to the NMW and related activities. The amount of R4.5 million could not be fully utilised during the 2017/18 financial year as the total additional funding was received on the 29 March 2018. However, Nedlac reported that the remaining amount will be fully utilised during the 2018/19 financial year as the engagement on NMW related activities will continue beyond 31 March 2018. These activities are expected to be completed during 2019/20 financial year.

Constituency Capacity Building Funds programme received R4.1 million and spent R2.8 or 69% of the allocation by the end of 2017/18 financial year. Nedlac reported that part of the 31% under-expenditure is an amount of about R800 000, which had been committed towards Eskom Business Model from the Business Constituency budget allocation as at 31 March 2018. The rest of the under-expenditure was reported to be due to cost containment measures implemented by Nedlac. Further, Nedlac reported that there was an effect of actual costs being less than initially anticipated in some of the activities undertaken during the year.

 

8.5.4.    Nedlac expenditure by Economic Classification

The table below reflects Nedlac expenditure by economic classification:

Table 17

Economic Classification

Budget

2017/18

Actual Exp. as at 31 March 2018

Variance

2017/18

Compensation of Employees

R13 905 000

R17 512 764

R3 607 764

Goods and Services

R26 296 600

R18 266 794

R8 029 806

Payments for Capital Assets

R200 000

R104 075

R95 925

Payments for Financial Assets

R0

R0

R0

TOTAL

R40 401 600

R35 883 633

R4 517 967

Source: Presentation to the Portfolio Committee on labour dated 10 October 2018

Compensation of Employees item budget amounted to R13.9 or 34% of the total Nedlac budget. Expenditure on this budget item exceeded the allocation by R3.6 million in the 2017/18 financial year. Goods and Services budget received R26.3 million or 65% of the total Nedlac budget. Of this amount R18.3 million or 69% was spent by the end of March 2018, resulting in under-expenditure of R8.0 million.

8.6.       Supported Employment Enterprises (SEE)

SEE was established in 1943 to provide employment for people with mental and physical disabilities that prevented them from entering the open labour market due to the nature of their afflictions.

The Employment Services Act 4 of 2014 makes provision for the establishment of the SEE. The SEE will be established in terms of the Public Services Act as a Government Component.

There are currently 12 factories across the country in seven of the nine provinces. Income from the factories is generated from sales of manufactured goods that include wood and metal furniture, hospital commodities, linen, protective clothing, garments, upholstery and screen printing.

Services rendered by SEE include supplying a significant number of government hospitals with hospital linen and protective clothing; and supplying different government departments with office furniture, as well as school furniture.

 

8.6.1.    Performance per strategic objective

SEE reported performance per strategic objectives as follows:

Table 18

Strategic Objective

Planned Indicators

Achieved

Overall Achievement %

Provide work opportunities for persons with disabilities

1

0

0

Develop and implement programmes that promote the employability of persons with disabilities.

4

3

74

Overall performance

5

3

60%

Source: Developed from information in the Annual Report of DoL

SEE had five planned indicators during the 2017/18 financial year and achieved three, translating to an overall performance of 60%. On the first strategic objective, SEE planned to provide 150 persons with disabilities with employment opportunities in the SEE by the end of March 2018, but managed to appoint 85 persons in the period under review.

The four planned indicators under the second strategic objectives were:

  • 9 product exhibitions to showcase products manufactured by persons with disabilities within the SEE conducted by end of March 2018.
  • 2 Radio campaigns conducted by the end of March 2018 to create awareness of the existence of the SEE.
  • 4 print media campaigns conducted by the end of March 2018 to create awareness of the existence of the SEE.
  • 100 special schools visited nationally and made aware of the existence of the SEE by the end of March 2018.

All the above targets were achieved except that one radio campaign was conducted against a target of two, translating to an achievement of 75% on this strategic objective.

 

9.         COMMITTEE OBSERVATIONS

After considering the presentations made by the Department and its entities on their annual reports and the input from the Auditor-General, the Committee made the following observations:

9.1.       The Department materially underspent the allocated budget by R211 802 000 primarily on Administration programme (R92.0 million) and Public Employment Services (R77.0 million).

The major reason for variance between appropriated funds and expenditure was reported to be the vacancies in the Department that resulted in underspending on Compensation of Employees.

9.2.       The Auditor-General found that the financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework as required by the Public Finance Management Act. Furthermore, the Department did not adhere to recommendations made by the Internal Audit and Audit Committee.

9.3.       The Auditor-General found that effective steps were not taken by the Department to prevent irregular expenditure amounting to R1 236 000.

The Auditor-General found that effective steps were not taken, by the department to prevent fruitless and wasteful expenditure amounting to R4 024 000.

9.4.       Inspection and Enforcement Services programme has been struggling to attract and retain labour inspectors for the past few years. Many labour inspectors leave the Department for higher salaries in the private sector and to departments such as the Department of Mineral Resources.

9.5.       Productivity South Africa has developed a proposal that seeks to shift away from the current multi-party funding structure (viz. UIF, DTI, Transnet and DoL) to a single funder mechanism.

9.6.       Labour Policy and Industrial Relations programme spent 98.4% of its allocated budget but achieved 38% of its pre-determined targets. However, the larger portion of this programme’s budget goes to Transfers and Subsidies, mainly transfers to the CCMA.

9.7.       The Supported Employment Enterprises identified a need to review its current approved structure in order to capacitate the entity and ensure the smooth running of the organisation.

 

10.        COMMITTEE RECOMMENDATIONS

After considering the presentation of the Department and its entities on their annual reports and input from the Auditor-General, the Committee recommends that the Minister takes steps to ensure that:

10.1.     The vacant funded posts within the Labour portfolio are filled with suitably qualified persons without delay, priority be given to critical posts.

10.2.     The services of the Internal Audit and the Audit Committee of the Department are fully utilised and their reports implemented to avoid negative findings by the Auditor-General.

10.3.     Incidents of Irregular Expenditure and Fruitless and Wasteful Expenditure are investigated and officials who are found to have flouted regulations are timeously subjected to remedial action.

10.4.     The Inspection and Enforcement Services programme is adequately resourced so that suitably qualified inspectors can be appointed; provided with relevant tools of trade to monitor implementation of labour laws and that the retainment strategy is developed.

10.5.     The funding of Productivity SA is timeously addressed in line with the proposed single funder mechanism to enable the entity to fulfil its mandate.

10.6.     Additional funding is made available to the CCMA to enable it to fully implement its statutory obligations in terms of the National Minimum Wage, Basic Conditions of Employment Act and Labour Relations Act.

10.7.     The current approved structure of the Supported Employment Enterprises is reviewed in order to capacitate the entity and government departments are encouraged to procure goods from the entity.

 

11.        APPRECIATION

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

 

Report to be considered.

 

Documents

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