ATC200716: Report of the Portfolio Committee on Employment and Labour on Adjusted budget Vote 31: Employment and Labour and the Revised Annual Performance Plan of the Department2020/21, Dated 15 July 2020

Employment and Labour

Report of the Portfolio Committee on EMPLOYMENT AND LABOUR on ADJUSTEDBudget Vote 31: EMPLOYMENT AND Labour AND the REVISED ANNUAL PERFORMANCE PLAN of THE DEPARTMENT2020/21, dated 15JULY 2020

 

The Portfolio Committee on Employment and Labour, having considered the revised budgets of the Department and its entities in line with Revised Annual Performance Planswhich were presented on 8 July 2020, reports as follows:

 

1.         INTRODUCTION

 

The Minister of Finance tabled the Adjustment Budget in accordance with the Public Finance Management Act read together with Money Bills Amendment Procedure and Related Matters Act on 24 June 2020. These adjustments were necessitated by the COVID-19 pandemic and economic downturn. The Minister is expected to table the second adjustment in October together with the Medium Term Budget Policy Statement.

The National Treasury and the South African Reserve Bank forecast 7% contraction of the economy by the end of 2020, which is expected to result in loss of 1.7 million jobs. These will lead to reduced government revenue resulting in reduced budget allocations. Therefore, the National Treasury Department requested most departments, except four, to identify budget cuts of up to 20%. However, the Department of Employment and Labour was able to motivate for lesser budget reduction of 7.2%, which translated to R261.9 million in monetary terms.

As a result of the COVID-19 pandemic, labour centres were temporarily closed, symptomatic employees put on quarantine, employees who tested positive were put on self-isolation, numbers of employees in offices when they finally opened had to be reduced to ensure social distancing.A total of 240 staff members were quarantined and 64 tested positive. Two departmental staff members, excluding staff of entities, have unfortunately died. These factors necessitated a downward revision of performance targets of the Department.

The COVID-19 pandemic exacerbated the already unfavourable economic conditions and the rising unemployment levels has resulted in increased demand for services of the Department of Employment and Labour. Some of the most affected programmes include the Public Employment Services and the Labour Policy and Industrial Relations, which transfers funds to the CCMA. The caseload of the CCMA has increased as a result of disputes related to retrenchments and lockdown. The demand for NEDLAC services as an institution for social dialogue has also increased and this is where a social compact to address economic issues arising from the COVID-19 pandemic has to be concluded.

 

This report focuses on the adjusted budget allocation for 2020/21 financial year and the amended annual performance plan for 2020/21 financial year. It is based on presentation made to the Portfolio Committee on Employment and Labour on 8 July 2020.

 

2.         BUDGET INFORMATION OF THE DEPARTMENT OF EMPLOYMENT AND LABOUR FOR 2020/21 FINANCIAL YEAR

The functions of the Department are structured into four programmes, namely:

• Programme 1: Administration
• Programme 2: Inspection and Enforcement Service
• Programme 3: Public Employment Services
• Programme 4: Labour Policy and Industrial Relations

 

2.1.       Budget information per programme

 

Table 1: Budget information per programme

PROGRAMME	MAIN APPROPRIATION	SUSPENSION OF FUNDS	ADJUSTED APPROPRIATION	%
	R’000	R’000	R’000	%
ADMNISTRATION	1 011 652	-72 838	938 814	-7.2
INSPECTION AND ENFORCEMENT SERVICES	676 893	-48 444	628 449	-7.2%
PUBLIC EMPLOYMENT SERVICES	643 467	-50 508	592 959	-7.8%
LABOUR POLICY AND INDUSTRIAL RELATIONS	1 305 737	-90 130	1 215 607	-6.9%
TOTAL	3 637 749	-261 920	3 375 829	-7.2%

Source: Presentation to the PC on Employment and Labour dated 8 July 2020

 

The main appropriation for Budget Vote 31 amounted to a total of R3.6 billion for 2020/21 financial year. The total budget was adjusted downwards by R261.9 million of 7.2% of the main appropriation. This resulted to an adjusted appropriation of R3.4 billion for 2020/21 financial year.

 

Administration budget was adjusted by R72.8 million or 7.2% from R1.0 billion to R938.8 million. Inspection and Enforcement Services budget was adjusted by R48.4 million or 7.2 % from R676.9 million to R628.4 million. Public Employment Services budget was adjusted by R50.5 million or 7.8% from R643.5 million to R592.9 million. Labour Policy and Industrial Relations programme was adjusted by R90.1 million or 6.9% from R1.3 billion to R1.2 billion.

 

2.2.       Budget Information per Economic Classification

 

Table 2: Budget Information per Economic Classification

ECONOMIC CLASIFICATION	MAIN APPROPRIATION	SUSPENSION OF FUNDS	ADJUSTED APPROPRIATION	%
	R’000	R’000	R’000	%
CURRENT PAYMETS	2 177 557	-192 067	1 985 490	-8.8%
TRANSFERS AND SUBSIDIES	1 391 364	-63 511	1 327 853	-4.6%
PAYMENTS FOR CAPITAL ASSETS	68 828	-6 342	62 486	9 2%
PAYMENTS FOR FINANCIAL ASSETS				*
TOTAL	3 637 749	-261 920	3 375 829	-7.2%

Source: Presentation to the PC on Employment and Labour dated 8 July 2020

 

Current Payments budget was adjusted downwards by R192.1 million or -8.8% from R2.2 billion to R1.98 billion. Current Payments comprises Compensation of Employees and Goods and Services budgets. Compensation of Employees budget was adjusted downwards by R96.6 million or -6.5% from R1.5 billion to R1.4 billion. Goods and Services budget was hardest hit by suspension of R95.2 million or -13.9%, resulting in budget reduction from R687.1 million to R591.7 million.

 

Transfers and Subsidies budget was revised downwards by R63.5 million or -4.6% from R1.4 billion to R1.3 billion. Transfers and Subsidies includes transfers to institutions such as Commission for Conciliation, Mediation and Arbitration (CCMA) and National Economic Development and Labour Council (NEDLAC).

 

Payments for Capital Assets budget was adjusted downwards by R6.3 million or -9.2% from R68.8 million to R62.5 million.

 

2.3.       Budget Adjustments of Programmes by Economic Classification

 

2.3.1.    Programme 1: Administration

 

Table 3: Administration Programme

ECONOMIC CLASSIFICATION	MAIN APPROPRIATION	SUSPENSION OF FUNDS	ADJUSTED APPROPRIATION	%
	R’000	R’000	R’000
COMPENSATION OF EMPLOYEES	457 337	-5 000	452 337	-1.1%
GOODS AND SERVICES	508 274	-64 860	443 414	-12.8%
TRANSFERS AND SUBSIDIES	978	0	978	0.0%
PAYMENTS FOR CAPITAL ASSETS	45 063	-2 978	42 085	-6.6%
TOTAL	1 011 652	-72 838	938 814	-7.2%

Source: Presentation to the PC on Employment and Labour dated 8 July 2020

 

Compensation of Employees for Administration programme was adjusted downwards by R5 million or -1.1% resulting in reduction from R457.3 million to R452.3 million. Administration programme was least affected by reduction in Compensation of Employees’ budget. Goods and Services budget of the Administration programme was revised downwards by R64.9 million or -12.8 % from R508.3 million to R443.4 million. Transfers and Subsidies budget of the programme was not affected by adjustments. Payments for Capital Assets budget was revised downwards by R2.97 million or -6.6% from R45.1 million to R42.1 million.

 

2.3.2.    Programme 2: Inspection and Enforcement Services

 

Table 4: Inspection and Enforcement Services Programme

ECONOMIC CLASSIFICATION	MAIN APPROPRIATION	SUSPENSION OF FUNDS	ADJUSTED APPROPRIATION	%
	R’000	R’000	R’000
COMPENSATION OF EMPLOYEES	565 562	-40 720	524 842	-7.2%
GOODS AND SERVICES	94 266	-7 724	86 542	-8.2%
TRANSFERS AND SUBSIDIES	80	0	80	0.0%
PAYMENTS FOR CAPITAL ASSETS	16 985	0	16 985	0.0%
TOTAL	676 893	-48 444	628 449	-7.2%

Source: Presentation to the PC on Employment and Labour dated 8 July 2020

 

Compensation of Employees budget for IES was revised downwards by R40.7 million or -7.2% from R565.6 million to R524.8 million. This adjustment is equal to the average reduction in budget allocation and the budget for labour inspectors come from this allocation. Goods and Services budget was adjusted downwards by R7.7 million or -8.2% from R94.3 million to R86.5 million. Both Transfers and Subsidies and Payment of Capital Assets budgets of Programme 2 remained unchanged.

 

2.3.3.    Programme 3: Public Employment Services

 

Table 5: Public Employment Services Programme

ECONOMIC CLASSIFICATION	MAIN APPROPRIATION	SUSPENSION OF FUNDS	ADJUSTED APPROPRIATION	%
	R’000	R’000	R’000
COMPENSATION OF EMPLOYEES	350 079	-40 000	310 079	-11.4%
GOODS AND SERVICES	36 049	-7 181	28 868	-19.9%
TRANSFERS AND SUBSIDIES	250 686	0	250 686	0.0%
PAYMENTS FOR CAPITAL ASSETS	6 653	-3 327	3 326	-50.0%
TOTAL	643 467	-50 508	592 959	-7.8%

Source: Presentation to the PC on Employment and Labour dated 8 July 2020

 

Table 5 reflects a downward revision in Compensation of Employees budget for PES by R40 million or -11.4% from R350.1 million to R310.1 million. This programme was most negatively affected by the adjustments in Compensation of Employees’ budget. Goods and Services budget was reduced by R7.2 million or -19.9% from R36.0 million to R28.9 million. Budget for Transfers and Subsidies remained unchanged at R250.7 million. Payments for Capital Assets budget went down from R6.7 million to R3.3 million or by -50.0%. In monetary terms, this translated to a reduction of R3.3 million.

 

2.3.4.    Programme 4: Labour Policy and Industrial Relations

 

Table 6: Labour Policy and Industrial Relations Programme

ECONOMIC CLASSIFICATION	MAIN APPROPRIATION	SUSPENSTION OF FUNDS	ADJUSTED APPROPRIATION	%
	R’000	R’000	R’000
COMPENSATION OF EMPLOYEES	117 498	-10 919	106 579	-9.3%
GOODS AND SERVICES	48 492	-15 663	32 829	-32.3%
TRANSFERS AND SUBSIDIES	1 139 620	-63 511	1 076 109	-5.6%
PAYMENTS FOR CAPITAL ASSETS	127	-37	90	-29.1%
TOTAL	1 305 737	-90 130	1 215 607	-6.9%

Source: Presentation to the PC on Employment and Labour dated 8 July 2020

 

Table 6 reflects a downward revision of Compensation of Employees budget for Programme 4 by R10.9 million or -9.3% from R117.5 million to R106.6 million. Goods and Services budget of programme 4 was reduced by R15.7 million or -32.3%. This is the largest reduction in the Goods and Services programme budget and in monetary terms it translates to a reduction from R48.5 million to R32.8 million. The budget for Transfers and Subsidies was reduced by R63.5 million or -5.6%. This is below the average adjustment of 7.2% in the Department of Employment and Labour. In monetary terms it translates to a reduction from R1.1 billion to R1.08 billion. This programme transferredR970.5 million to CCMA and R57.1 million to NEDLAC. This was a reduction of R55.4 million or -5.4% from the R1.025 million that was the main appropriation for CCMA and a downward revision of R5 million or -8.0% from the R62.1 million that was originally allocated to NEDLAC. Payments for Capital Assets budget was reduced by R37 000 or -29.1% from R127 000 to R90 000.

 

3.         REVISED ANNUAL PERFORMANCE PLANS PER PROGRAMME

 

3.1.       Administration

Only one additional output with a focus on outreach initiatives to change behaviour in relation to gender based violence, will be added to the APP outcomes for the Administration programme.

This will be done through awareness campaigns and amendment of the Department’s Sexual Harassment Policy by 31 March 2021.

 

3.2.       Inspection and Enforcement Services

There are only two changes in IES programme APP targets, which are:

• The number of employers inspected per year to determine compliance with employment law is revised downwards from 220 692 to 188 323.
• Percentage of non-compliant employers referred for prosecution within 30 calendar days is reduced from 65% to 50%.

 

These adjustments are informed by, amongst others, the following factors:

• Time that has been lost from 1 April to 30 May 2020 with only OHS inspectors that were working during level 5 and 4 lockdowns.
• The letter issued by the EE Commission to all designated employers to revise their EE Plans, which will have an adverse effect on the EE targets for IES. The EEA inspectors will have to wait for that process to unfold, which has been set for 31 July 2020.
• The Department of Employment and Labour budget reduction of 7.2%.
• A number of workplaces that have been closed and will continue to be closed or partially operating during the lockdown period. This will necessitate a revision of IES inspection targets.
• Limited operation of Courts due to the COVID-19 pandemic.

 

3.3.       Public Employment Services

PES programme proposes the following changes to three of the APP 2020/21 indicators:

• Number of work and learning opportunities registered decreases from 95 000 to 50 000.
• Number of registered work and learning opportunities filled by registered work seekers per year is revised downwards from 47 500 to 15 000.
• Number of partnership agreements concluded with various stakeholders is adjusted from 30 to 15.

 

This review of PES Annual Performance Plan targets considered the following factors:

• The number of new employment opportunities in a depressed economy are likely to remain very low.
• A large number of businesses were closed permanently and many continue to retrench workers.
• The economy is growing at a lower rate.
• South African Reserve Bank predicts an economic contraction of 7% this year.
• Stats SA figures reflect economic contraction of 2% in Q1 of 2020 prior the impact of COVID-19.

 

3.4.       Labour Relations and Industrial Relations

LP & IR proposed the following adjustments to APP targets:

• The 2019/20 Annual Employment Equity Report and public register to be published by 30 September 2020 and not 30 June 2020.
• The National Minimum Wage investigation report published by 30 September 2020 instead of 30 June 2020.

 

The following factors had an influence on the amendments of the APP indicators for LP & IR:

• Delays in publication of reports due to the closure of Government Printers as a result of COVID-19 lockdown.
• The lockdown delayed the finalisation of both qualitative and quantitative research.

 

4.         SUPPORTED EMPLOYMENT ENTERPRISES

The indicators of the Annual Performance Plan of the SEE have been revised as follows:

• Additional persons with disabilities employed by the end of March 2021 has been revised from 100 to 25.
• Annual increase in sales revenue by end of March 2021 has been revised from 15% to 5%.
• Memoranda of Understanding entered into with key customers by the end of March 2021 has been revised from five to three.

 

The achievement of the SEE Annual Performance Plan indicators will depend on the following:

• Securing additional funding from National Treasury to sustain the establishment.
• Securing a special dispensation from National Treasury in relation to the following:
  • Procurement of raw materials.
  • Sales to government departments.
  • Department of Employment and Labour and its entities to procure items from SEE.

 

1. COMMITTEE OBSERVATIONS

Having engaged with the Department of Employment and Labour, the Committee made the following observations:

5.1.       Department of Employment and Labour

The budget of the Department of Employment and Labour has been revised downwards by R261.9 billion or 7.2% from the main appropriation of R3.6 billion to R3.4 billion adjusted appropriations. Compensation of Employees budget was reduced by 6.5% and the Goods and Services budget by 13.9% respectively.

5.1.1.    Administration Programme

Only one additional output with a focus on outreach initiatives to change behaviour in relation to gender based violence, will be added to the APP outcomes for the Administration programme.

This will be done through awareness campaigns and amendment of the Department’s Sexual Harassment Policy by 31 March 2021. This is a commendable initiative considering the high level of gender inequality in the country that manifests in gender-based violence as reported before and during the COVID-19 pandemic.

 

5.1.2.    Inspection and Enforcement Service Programme

The number of employers inspected per year to determine compliance with employment law has been reduced from 220 692 to 188 323.

Percentage of non-compliant employers referred for prosecution within 30 calendar days has been revised downwards from 65% to 50%.

This is understandable considering time lost due to the COVID-19 lockdown and budget reduction.

However, the adjusted budget has not affected the process of recruiting additional 500 Occupational Health and Safety inspectors.

 

5.1.3.    Public Employment Service Programme

The main function of this programme is to match work-seekers with available work opportunities. This programme had to reduce three of its APP 2020/21 indicators.

This is understandable considering the economic downturn that started before COVID-19 and was exacerbated by lockdown, which has resulted in the reduction in the number of available work-opportunities.

5.1.4.    Labour Policy and Industrial Relations

Two reports under this programme are going to be published at the end of September instead of end of June 2020. The delay is due to closure of Government Printers as a result of the COVID-19 lockdown.

5.2.       Supported Employment Enterprises

Achievement of SEE Annual Performance Plan targets depends, among other things, on securing a special dispensation form National Treasury and on government departments including DEL and entities procuring items from SEE. The COVID-19 pandemic has resulted in the increased demand for hospital beds, which is an opportunity for SEE as it produces, among other things, hospital linen. There is also an increased demand for Personal Protective Equipment such as masks, protective suits and sanitising stands, the SEE factories produce.

 

1. COMMITTEE RECOMMENDATIONS

In view of the above observations, the Committee recommends that the Minister of Employment and Labour considers the following:

 

6.1.       Department of Employment and Labour

Engage with social partners at NEDLAC to develop a strategy to mitigate the impact of the COVID-19 pandemic and budget suspensions on employment levels.

Closely assess budget expenditure so as to be able to intervene timeously by approaching the National Treasury to motivate for movement of funds to where they are needed most.

Review the manner in which work has been conducted in the past so as to be more efficient or do more with fewer resources.

 

1. Administration Programme

Addressgender-based violence through strict enforcement of fines for non-compliance to employment equity targets.

 

1. Inspection and Enforcement Services Programme

Ensure that the currently running process of appointing 500 Occupational Health and Safety inspectors is fast-tracked so that they reach full productive capacity when the economy is fully opened. Protection of workers against arbitrary treatment during this health and life-threatening prevailing conditions as well as an economic crisis is crucial.

 

1. Public Employment Services

Advertise the services of PES to potential users in Public and Private sector to boost placement of registered work-seekers in registered work-opportunities.

 

1. Labour Policy and Industrial Relations

Move funds from other programmes that need them less to ensure that the CCMA employ more commissioners as its workload is expected to increase dramatically. National Treasury must also be approached for increased funding of NEDLAC, whose workload is expected to increase since it is where lockdown regulations are consulted and the social compact to address economic issues arising from the COVID-19 pandemic has to be concluded.

 

1. Supported Employment Enterprises

The Department of Employment and Labour must speed up and quickly conclude its engagements with National Treasury, which must ensure that a special dispensation does exist that, amongst others, propels all government departments and State Owned Entities to procure goods and materials, produced by SEE factoriesthat are relevant for them.

 

Having satisfied itself in its engagement with the Department of Employment and Labour on its budget adjustments, the Committee recommends that the House approves adjusted Budget Vote 31: Employment and Labour.

[The Democratic Alliance, the Economic Freedom Fighters and the Freedom Front Plus objected to the Report.]

 

Report to be considered.