ATC201126: Budgetary Review and Recommendation Report of the Portfolio Committee on Employment and Labour, dated 25 November 2020

Employment and Labour

Budgetary Review and Recommendation Report of the Portfolio Committee on Employment and Labour, dated 25 November 2020

 

The Portfolio Committee on Employment and Labour, having considered the performance of the Department of Employment and Labour and its entities (excluding Unemployment Insurance Fund and Compensation Fund) in meetings held on 13 and 18 November 2020, reports as follows:

 

1. INTRODUCTION

The Budgetary Review and Recommendation Report of the Portfolio Committee on Employment and 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 Employment and Labour (DEL) and its entities’ service delivery performance given available resources;effectiveness and efficiency of the use and forward allocation of available resources; andrecommendations 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 Employment and 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 Employment and Labour

The Department derives its mandate from the Constitution and gives effect thereto through a number of Acts which regulate employment and 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);
• National Minimum Wage Act (2018).

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:

• Section9, 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 BRRReports 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 2019/20 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;
• Report of the Auditor-General on the labour portfolio;
• Report of Statistics South Africa on employment statistics; and
• Responses of the Department to the BRR report of 2019.

The source documents used by the Committee are: 2020 Estimates of National Expenditure; presentations by the labour portfolio during the course of the year;annual reports of the Department and entities; and the State of the Nation Address.

 

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 of the Department of Labour;
• Report of the Auditor-General;
• Financial Performance for the first quarter of the 2020/21 financial year;
• Overview and assessment of service delivery performance for 2019/20 financial year;
• Overview of Performance of Entities of the Department of Labour;
• Committee Observations;
• Committee Recommendations; and
• Appreciation.

The sections below expatiate on the content outlined above.

 

1. OVERVIEW OF THE KEY RELEVANT POLICY FOCUS AREAS

Poverty, unemployment and inequality are three major challenges facing the country. The National Planning Commission developed the National Development Plan whose aim is, amongst others, to eliminate poverty and reduce inequality by 2030. In its diagnostic report, the Commission identified unemployment as one of the primary challenges confronting the country. Therefore, raising employment through faster economic growth is one of the three priorities to remedy the situation the country finds itself in. The key measures of economic success were identified as achieving an average growth of over 5% of Gross Domestic Product (GDP) and the reduction in unemployment rate to 6% by 2030.

However, even before COVID-19, the country’s economic indicators did not look good. The real Gross Domestic Product (GDP measured by production) decreased by 1.4% in the fourth quarter of 2019, following a decrease of 0.8 in the third quarter of 2019. The largest negative contributors to growth in GDP in the fourth quarter were the transport, storage and communication industry and the trade, catering and accommodation industry. The transport, storage and communication industry decreased by 7.2% and contributed -0.6 of a percentage point to GDP growth. The trade, catering and accommodation industry decreased by 3.8% and contributed -0.5 of a percentage point to GDP growth. Agriculture, manufacturing and construction each contributed -0.2 of a percentage point to GDP growth. Positive contributions to GDP growth came from the finance, real estate and business services industry and the mining and quarrying industry.

Real GDP decreased by 2.0% in the first quarter of 2020. The two largest negative contributors to growth in GDP in the first quarter were the mining and manufacturing industries. The mining industry decreased by 21.5% and contributed -1.7 percentage points to GDP growth. The manufacturing industry decreased by 8.5% and contributed -1.1% percentage points to GDP growth. Positive contributors to GDP growth in the first quarter were agriculture (27.8% and contributing 0.5 of a percentage point), finance (3.7% and contributing 0.8 of a percentage point) and general government services (1.0% and contributing 0.1 of a percentage point.

Real GDP decreased by a record 51.0% in the second quarter of 2020 as a result of the impact of the COVID-19 lockdown restrictions since the end of March 2020. The largest negative contributors to growth in GDP in the second quarter of 2020 were the manufacturing, trade and transport industries. The manufacturing industry decreased by 74.9% and contributed -10.8 percentage points to GDP growth. The trade, catering and accommodation industry decreased by 76.6% and contributed -10.5 percentage points. The transport, storage and communication industry decreased by 67.9% and contributed -6.6 percentage points. The agriculture, forestry and fishing industry was the only positi.ve contributor to GDP growth.

In its September statement, the Monetary Policy Committee announced that the Reserve Bank forecast a GDP contraction of 8.2% in 2020, compared to the 7.3% contraction forecast in July. The Banks forecast consumer price inflation on average 3.3% in 2020. By keeping the interest rates low, the monetary policy mitigated financial conditions of households and firms against COVID-19 pandemic.

The Quarterly Labour Force Survey (QLFS), which is a household-based sample survey conducted by Statistics South Africa, reported the unemployment rate to be 30.1% in the first quarter of 2020 (Jan –Mar), which represent a quarter-to-quarter increase of 1.0% from the 29.1% reported in the last quarter of 2019 (Oct-Dec) and a 2.5% year-on-year increase from the 27.6% reported in the first quarter of 2019 (Jan-Mar 2019). The actual number of unemployed people increased from 6.7 million in the last quarter of 2019 to 7.0 million in first quarter of 2020. The number of discouraged work-seekers increased from 2.85 million in the last quarter of 2019 to 2.91 million in the first quarter of 2020. Therefore, the number of unemployment people increased from 9.58 million to 9.98 million when using the expanded definition of unemployment. The unemployment rate increased from 41.4% in the last quarter of 2019 to 42.6% in the first quarter of 2020 when using the expanded definition of unemployment.

The number of the unemployed decreased from 7.07 million in the first quarter to 4.29 million in the second quarter of 2020, which represents a quarter-to-quarter decrease 2.77 million or 39.2% and a year-on-year decrease of 2.36 million or 35.5%. The number of discouraged work-seekers went down from 2.91 million in the first quarter to 2.47 million in the second quarter of 2020, which represents a quarter-to-quarter change of 447 000 or 15.3% and year-on-year change of 278 000 or 10.1%. The unemployment rate decreased from 42.6% in the first quarter of 2020 to 36.6% in the second quarter of 2020 when using the expanded definition of unemployment.

However, the number of the employed also decreased from 16.4 million in the first quarter to 14.1 million in the second quarter of 2020. This represents a loss of 2.2 million jobs in the second quarter of 2020. The number of jobs in the formal sector (non-agricultural) decreased from 11.3 million in quarter one to 10.1 million in the second quarter of 2020. This represents a loss of 1.2 million jobs in the formal sector during the second quarter. The number of jobs in the informal sector (non-agricultural) decreased from 2.9 million in the first quarter to 2.3 million in the second quarter of 2020. This represents a loss of 640 000 jobs in the informal sector. The number of jobs in the Agriculture sector went down from 865 000 in the first quarter to 799 000 in the second quarter, representing a loss of 66 000 jobs in the sector. The number of jobs in Private households went down from 1.3 million in the first quarter to 1.0 million in the second quarter of 2020, representing a loss of 311 000 jobs in the sector.

It is worth noting that Stats SA suspended face-to-face data collection for all its surveys on 19 March 2020 as a result of the COVID-19 pandemic and restricted movement of its personnel. This was to ensure that the field staff and respondents were not exposed to the risk of contracting coronavirus and to contain its spread. As a result, some 2.0% of those households who would have been interviewed were not. For those households that were not visited as a result of lock down, imputations were done where possible using data from the previous quarter. For respondents who were not visited in the first quarter of 2020 but had information from the fourth quarter of 2019, their responses were carried over to the first quarter of 2020. For second quarter Stats SA introduced Computer Assisted Telephone Interviewing (CATI) for collecting QLFS data. However, not all household units on the sample had contact numbers. As a result, the data was only collected from part of the sample for which contact numbers were available for QLFS Q2:2020. The households for which contact numbers were not available as of Q2: 2020 retained the status that they had in Q1: 2020.

On the 15th October 2020 the President of the Republic of South Africa introduced the Economic Reconstruction and Recovery Plan to restore the economy following the devastation caused by COVID-19 to people’s lives and livelihoods. One of the objectives of the plan is to create jobs, primarily through aggressive infrastructure investment and mass employment programmes. The President put the creation of jobs at the centre of the plan. The employment stimulus to create jobs and support livelihoods was identified as the third of the four key interventions. Government committed R100 billion over the next three years to create jobs through public and social employment.

The Employment Equity Amendment Bill was referred to the Portfolio Committee on Employment and Labour on 21stJuly 2020 and its main purpose is to provide for the Minister to identify sectoral numerical targets in order to ensure the equitable representation of suitably qualified people fromdesignated groups at all occupational levels.

The Compensation for Occupational Injuries and Diseases Amendment Bill was referred to the Portfolio Committee on Employment and Labour on the 10th September 2020. The purpose of the amendment is to, amongst others, extend the coverage for occupational injuries and diseases to previously excluded vulnerable workers as well as to improve compensation benefits to employees. The Bill also seeks to introduce rehabilitation, reintegration and return to work in order to address the tendency of some employers to dismiss employees on the basis of occupational injuries or diseases.

 

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

 

1. 2019 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 the responses of the Department of Labour are captured in italics.

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

Department of Employment and Labour (DEL)

1. The DEL must step up its initiatives and programmes that support an enabling environment for job creation.

Response

• The Department established a Technical Committee to work closely with the International Labour Organisation Pretoria Office and the Treasury’s Government Technical Advisory centre on the implication of addition of Employment on its mandate.
• The Department has initiated a process that will culminate in the country developing and implementing a National Employment Policy.
• The Department continues to use all its current entities such as NEDLAC, CCMA, Employment Services Board, Productivity SA to address labour and related employment issues.
• The Department Programs such as the Unemployment Insurance Fund; the Compensation Fund; Public Employment Services; Labour Relations and Employment Relations; and Inspection and Enforcement Services to cushion unemployment effect, to facilitate entry into employment, to maintain peace and stability in the labour market and to prevent possible loss of employment through injuries or occupational diseases.

3.1.2.    The implementation of consequence management in the Department and entities must be prioritised and enforced.

Response

• Anyone implementing consequence management in this country must be well vest with the labour laws of the Republic. And as such, any institution busy with consequence management must ensure that the country’s labour laws are not flouted. So, it becomes imperative that when implementing consequence management, everybody starts from the first step of the process till the logical conclusion of such a corrective management. And that is what the Department of Employment and Labour is doing.

3.1.3.    Recommendations of Internal Audit Committee are implemented.

Response

• The Internal Audit Committee is one of those internal organs that help us to ensure that we do the right things right, in other words there is efficiency in the organisation. As a result, all what they recommend the Department strives to implement it.

3.1.4.    The Department, in consultation with the Department of Public Service and Administration (DPSA), develop a strategy to retain labour inspectors within the Department.

Response

• The Department of Employment and Labour (DEL) does not only work hard in retaining the labour inspectors but the Department increased their number by 500.

Supported Employment Enterprises (SEE)

3.1.5.    The DEL engages with National Treasury regarding preferential procurement by government departments and State-owned Enterprises (SOEs) from SEE.

Response:

• The Department approached the National Treasury to afford SEE preferential procurement status from government departments or for the entity to charge least 50% upfront payment from departments. The Treasury is still in a process of developing a preferential framework for government entities.
• The SEE reviewed and developed a comprehensive marketing strategy targeting government departments at National, Provincial and Local level including the private sector and the general public.
• The SEE is diversifying its product range to meet the requirements of the private sector and members of the public and will be producing access stocks on fast selling products to avoid high prices in the procurement of raw materials and delivery delays lead time to customers.

 

Commission for Conciliation, Mediation and Arbitration (CCMA)

3.1.6.    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.

Response

• It should be noted that the current budget cuts are found across all government departments and this is owed to tight fiscal envelope that government has to operate within. In order to address the ever increasing reality of reduced funding the Department of Employment and Labour (DEL) has implemented a number of initiatives

• DEL has engaged with National Treasury on various occasions, in order to address budget cuts and intentions for further budgetary cuts.  The reality of the matter however is that the fiscal outlook of government has not improved and will not do so in the short to medium term.
• In order to bolster the CCMA’s funding model, a number of legislative amendments in terms of the BCEA has been effected so that the CCMA could charge for services in certain minimum wage cases. This model must still be implemented in the CCMA.
• In addition to these, we have proposed to the entity that in terms of the intellectual capital that they hold and the provide freely to universities, etc, they should charge for this.

 

Productivity South Africa (PSA)

3.1.7.    The mandate of the Productivity SA is fully funded.

Response

• The National Treasury could not increase Productivity South Africa’s allocation during the MTEF period given the current economic climate. Treasury has not reduced the entity’s allocation to fund the Covid-19 shortfall and has over the years approved DEL’s applications to top up the entity’s budget through virements’ savings from other programs.
• The Department managed to secure R104 million for Productivity SA’s Turn Around Solution program and is working on the mechanisms to provide funding from a single source from the Department during the MTEF period.

 

Unemployment Insurance Fund (UIF)

3.1.8.    The UIF develops a plan to address internal controls deficiencies and a mechanism to monitor the implementation of the plan.

Response

The root-cause analysis was performed on all audit findings received from AGSA. The Fund then developed an action plan which is a control-driven corrective action. The following controls were enhanced:

• Verification process of ID database with other government institutions in place;
• Improved bank verification for registered companies and non-profit organisations; and
• Salaries of each employee applied for is verified against declaration information.

The implementation of the action plan is being monitored through Executive Committee meetings on a monthly basis.

 

3.1.9.    Through the Nedlac selection processes, gender equity is promoted at the UIF Advisory Board.

Response

The term of office for the current UIF Advisory Board will expire on the 31st of October 2020 and the nomination process by relevant constituencies has started. UIF sent a letter to Nedlac on the 21st of August 2020 requesting that the gender equity be prioritised during the nomination process.

 

3.1.10. The UIF Board reports to the Ministry on a regular basis and to the Portfolio Committee on a quarterly basis.

Response

            The UIF Board already has had two meetings with the Minister between August and September 2020. The meeting calendar for the Minister and the UIF Board has been drafted and UIF is awaiting inputs.

 

3.1.11. The DEL, through the Minister of Employment and Labour, conduct skills auditon the members of the Board of Directors and present the skills audit report to the Portfolio Committee.

Response

            The skills audit was not performed due to the fact that the term of office for the current Board members expires on the 31st of October 2020, however as part of the appointment process, the UIF has included the following skills required for appointment:

• Experience in Labour matters;
• Experience in investment matters;
• Exposure and experience in finance;
• Exposure to risk management;
• Exposure to community work and development;
• Exposure and understanding of corporate governance.

 

Compensation Fund (CF)

3.1.12. The CF develops an action plan that responds to the recommendations of the Auditor-General. The action plan has to clearly indicate the short, medium and long-term milestones. Depending on the implementation of the action plan or the lack thereof, the Committee may commission an investigation around weaknesses in the running of the entity.

Response

The Compensation Fund has developed an Action Plan that is aimed at addressing the root causes of the audit disclaimers and bringing in the much needed control improvements. The Action Plan is made up of activities to be undertaken in the Short, medium and Long term. It is being monitored through the recently established Clean Audit Steering Committee and Clean Audit Task Team comprising officials from Internal Audit, Risk Management and Internal Control. The Activities in the Action Plan are broken down as follows:

Pillar	Short term Actions	Medium Term Actions	Long Term Actions
Financial Management and Governance	45	4	3
Service Delivery and Performance Improvement	74	8	3
Anti-Corruption and Integrity Management	18	2	5
Organisational Culture  Renewal and Capacity Building	25	2	3
Total	162	16	14
	84,4%	8,3%	7,3%

 

The Fund has already implemented 46% of the identified Actions and other Actions are in progress and reported on a monthly basis.

 

3.1.13. The appointment of personnel based on a conducted skills audit in the CF is cascaded down to the operational staff level.

Response

In 2017 the Fund has implemented a new organisational structure which was focusing on increasing capacity of the Fund and creating new positions in the medical claims and financial management functions in order to close the gaps that had been identified in the Skills Audit done in 2016. The Fund is also in the process of implementing an Accountant Training Programme with the South African Institute of Chartered Accountants in order to bring in skills in the Financial Management unit. This will see the fund recruiting accounting graduates who will train to be Chartered Accountants while working at the Fund.

A similar restructuring exercise has been dome in the provincial offices and in the LabourCentres in order to bring in additional skills in the medical claims and rehabilitation functions of the Fund.

 

3.1.14. The CF Board reports to the Ministry on a regular basis and to the Portfolio Committee on a quarterly basis.

Response

            The Board submits reports to the Minister of Employment and Labour on a quarterly basis on the work of the board with recommendations for management on improvements that can be implemented in the Fund.

The Board report will also be submitted to the Portfolio Committee on a quarterly basis, where the Portfolio committee invites the Board to present its report such a presentation will be submitted.

 

3.1.15. The DEL, through the Minister of Employment and Labour, conduct a skills audit on the members of the Board of Directors and present the skills audit report to the Portfolio Committee.

Response

            The report will be commissioned before the end of the financial year. The COVID-`19 lockdown regulations delayed the kick starting of the process, however with the economy going back to full activity the process will now commence.

 

3.1.16. The ICT system inefficiencies at the CF are addressed to strengthen the internal control environment.

Response

            The Compensation Fund commenced its modernisation journey in 2018 with the focus being on the overhauling of its systems which are in the claims, revenue and financial management space. Concurrently there are control improvement projects being undertaken in the current financial management system (SAP ECC6).

The modernisation journey will result in the Fund migrating all its operation into SAP Hana which is more robust with adequate controls and process efficiencies. The first phase was the development of the claims management system (CompEasy) which is developed on SAP for Insurance (S4i) and it closes all the control weaknesses that had been identified in the uMehluko system.

The second phase will be to migrate the revenue functions (premiums and underwriting) into the SAP for Insurance system which will make CompEasy a seamless fully integrated operational system. This will close all the disclaimers issued by the Auditor General on revenue management functions of the Fund.

 

3.1.17. Through the Nedlac selection processes, gender equity is promoted at the CF Advisory Board.

Response

            The current term of the board expires on 31 December 2021. The Minister will engage with the social partners at NEDLAC to ensure that nominations that are made for the new board promote gender equity while at the same time also bringing in the much needed skills into the board.

 

3.1.18. The Compensation Fund and other entities with adverse audit opinions put in place Audit Action Plans to address issues raised by the Auditor-General. Such plans have to be submitted to the Committee and entities have to report quarterly to the Committee on progress with implementation.

Response

            The Compensation Fund has developed an Action Plan that is aimed at addressing the root causes of the audit disclaimers and bringing in the much needed control improvements. The Action Plan is made up of activities to be undertaken in the Short, medium and Long term. It is being monitored through the recently established Clean Audit Steering Committee and Clean Audit Task Team comprising officials from Internal Audit, Risk Management and Internal Control. The Activities in the Action Plan are broken down as follows:

Pillar	Short term Actions	Medium Term Actions	Long Term Actions
Financial Management and Governance	45	4	3
Service Delivery and Performance Improvement	74	8	3
Anti-Corruption and Integrity Management	18	2	5
Organisational Culture  Renewal and Capacity Building	25	2	3
Total	162	16	14
	84,4%	8,3%	7,3%

 

The Fund has already implemented 46% of the identified Actions and other Actions are in progress and reported on a monthly basis. The Progress report on the implementation of the Action Plan will be presented to the Portfolio Committee on a regular basis.

 

3.2.       Further recommendation to the Minister of Finance

3.2.1 The Committee further recommends that the Minister of Finance takes steps to ensure that the budget allocation of the Department of Employment and Labour is adjusted to accommodate the expanded mandate of the Department, thus enabling for the capacitation of its inspectorate.

Response

            The National Treasury recognises the Department of Employment and Labour’s contribution to creating jobs. The Department has a budget allocation of R3.6 billion in 2020/21; R3.9 billion in 2021/22; and R4 billion in 2022/23. As noted at the beginning of this section, there is little scope to provide additional funding at this time.

 

1. Committee Report on Budget Vote 28: Labour 2020

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

 

1. Department of Employment and Labour
   1. The Department must provide a clear plan on how the employment focus will be incorporated into the Department’s formal structures and programmes.

4.1.2.    A process of repatriating the Public Employment Programmes from all over the places to a single point of coordination and importantly an impact may have to be seen moving, with Department of Employment and Labour playing a major role.

4.1.3.    Public Employment Services branch needs to undergo restructuring that should enable it to be one of the depositories of some or all of the Public Employment Programmes.

4.1.4.    Skills Training Programmes need to also move to the Department of Employment and Labour for the country to have a clearer picture and a better grip, more importantly for the positive impact.

4.1.5.    In relation to the development of Labour Migration Policy and Employment Policy, the Department of Employment and Labour may have to generate better speed.

4.1.6.    The Department must continue to inspect and enforce the adherence to all labour laws.

4.1.7.    COVID-19 means that joint operations with other departments and entities should be regularised to ensure effective coordination.

1. The Department should ensure that the newly appointed labour inspectors are thoroughly trained and deployed to provinces based on needs. Their immediate focus should be to monitor compliance to the Covid-19 Directives issued by the Minister of Employment and Labour.
2. The Department should ensure that the mismatch of skills is correctly matched and addressed through internships by reskilling, training, mentoring and coaching, among others. The new socio-economic situation the country is entering into, makes this one of the focal duties.
3. Other government departments, entities of government and other levels of government should be informed and encouraged to use the ESSA resource to source unemployed work-seekers.
4. In relation to procurement of goods and materials, like furniture, hospital linen and PPEs, the Department must rush to conclude its discussions with National Treasury and other parties, giving first preference to those produced by the SEE.
5. The Department and its entities should give first preference to the SEE when procuring PPEs and market the service of the SEE to other government departments
6. There are Departments and possibly entities that the Department of Employment and Labour ought to partner with, given its now explicit Employment element. Those departments are Department of Trade and Industry, Higher Education, Science and Technology, among others, which the Portfolio Committee is interested to see partnership taking shape in action. Also, the DEL may have to work closer with Statistics South Africa (STATSSA) among others.

 

4.2.       Commission for Conciliation Mediation and Arbitration (CCMA)

4.2.1.    In dealing with vulnerable workers like domestic workers and farmworkers, the CCMA needs to adopt an integrated approach that includes Inspection Services of the Department.

4..2.2    Means must be devised to capacitate and empower vulnerable workers through workshops, roadshows and outreach programmes, among others.

4.2.3.    The Department should make space available for the CCMA to conduct its business in labour centres for free instead of paying to use privately owned buildings.

4.2.4     In the advancing and deepening of digitalisation CCMA should develop clear and concise strategy in such a manner that ensures agility of this entity to the changing world.

4.2.5     Monitor the implementation of CCMA’s Enforcement Strategy.

4.2.6     Monitor the progress that shall be made to improving compliance with arbitration awards.

 

4.3.       NEDLAC

4.3.1.    The government task team that was established to review NEDLAC’s structure should table its report for consideration without further delay.

4.3.2.    NEDLAC partners should develop an employment centred economic recovery plan.

4.3.3     NEDLAC may have to ensure that decisions taken on its platform do filter through and down to the ground.

 

4.4.       Productivity South Africa

4.4.1.    Productivity SA should focus on marketing its consulting services as a sustainable revenue generating stream.

4.4.2     Productivity SA should be utilised and encouraged to work with other entities to intervene in submerging State Owned Entities and others, that are struggling to stay afloat.

 

4.5.       Unemployment Insurance Fund (UIF)

4.5.1     In the normalisation of the new normal UIF should not only be repositioned and repurposed but must also be reinforced and further capacitated to effectively play a role in social security net.

4.5.2     Electronic systems aimed at rendering services to the clients must be effectively developed, administered and utilised in order to meet their intended missions.

4.5.3     UIF must improve its communication with the fellow South Africans it serves.

4.5.4     Investments that are developmental in nature must be the ones to be considered.

4.5.5     In view of the anticipated large scale retrenchments, the budget allocation of the LAP has to be revised.

 

4.6.       Compensation Fund (CF)

4.6.1.    Compensation Fund (CF) must ensure that it does not slide back, but keep on improving.

4.6.2.    Commit to closely monitor the implementation of the CF Action Plan.

4.6.3.    Provide an appropriate investigation and probe the recurring audit outcomes that are dismal and depressing at the CF.

4.6.4.    All the Supply Chain Management findings should be investigated.

4.6.5.    Ensure that a systems support is available and that staff is adequately trained for the newly introduced COMPEASY ICT system.

4.6.6.    CF must improve its communication with the fellow South Africans it serves.

4.6.7.    Investments that are developmental in nature must be the ones to be considered.

 

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

5.1.       Overview of Vote allocation and spending for 2019/2020

The activities of the Department of Employment and 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 in 2019/20 financial year.

Table 1: Revenue and Expenditure for 2019/20financial year

PROGRAMMES		2019/20
		FINAL APPROPRIATION	ACTUAL EXPENDITURE	OVER/ UNDER EXPENDITURE	EXPENDITURE
		R’000	R’000	R’000	%
1.	ADMINISTRATION	952 859	871 069	81 790	91.4
2.	INSPECTION AND ENFORCEMENT SERVICES	631 583	560 597	70 986	88.8
3.	PUBLIC EMPLOYMENT SERVICES	628 712	605 630	23 082	96.3
4.	LABOUR POLICY AND INDISTRIAL RELATIONS	1 220 045	1 178 581	41 464	96.6
TOTAL		3 433 199	3 215 877	217 322	93.7

Source: Annual Report 2019/20 (Department of Labour)

Table 1, reflects that the final appropriation for the Department of Labour amounted to R3.4 billion in 2019/20 financial year. The Department spent R3.2 billion or 93.7% of the final appropriation, resulting in under-expenditure of R217.3 million. The larger portion of the final appropriation was allocated to the Labour Policy and Industrial Relations programme at R1.2 billion, followed by the Administration programme at R952.9 million. The Inspection and Enforcement Services programme received R631.6 million and Public Employment Services programme received R628.7 million.

 

5.2.       Expenditure per programmeof DEL in 2019/20

5.2.1.    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 R952.9 million, which is approximately 28% of the final appropriation to the Department. The programme spent R871.1 million or 91.4% of the allocation resulting to under-expenditure of R81.8 million. The reason for underspending was attributed to vacancies resulting in under-expenditure of R9.9 million on Compensation of Employees; delays in payments for computer services and property payments resulting in R69.0 million under-expenditure on Goods and Services; and delayed payments for buildings and other fixed structures resulting in R2.7 million under-expenditure on Payments for Capital Assets.

 

5.2.2     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 of Staff; and Statutory and Advocacy Services.

The final appropriation for the programme amounted to R631.6 million. The programme spent R560.6 million or 88.8% of the programme allocation, resulting in under-expenditure of R70.9 million.Vacant posts that were not filled during the financial year resulted to under-expenditure of R52.8million on Compensation of Employees; lower than anticipated expenditure on venues and facilities resulted to under-expenditure of R3.9 million on Goods and Services; and delays procurement of machinery and equipment resulted in the delivery of ICT equipment for inspectors resulted in under-expenditure on Payment of Capital Assets.

 

5.2.3.    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 R628.7 million and it spent R605.6 million or 96.3% of its allocation,resulting to a variance of R23.0 million.Vacant posts that were not filled during the financial year resulted to under-expenditure of R15.4 million on Compensation of Employees; failure by non-profit institutions to take subsidies allocated resulted to under-expenditure of R2.3 million on Transfers and Subsidies; and delays in the procurement of other machinery and equipment resulted in under-expenditure of R5.1 million of Payments for Capital Assets.

 

5.2.4.    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 R1.2 billion or 35.5% of the entire budget of the Department, which is the largest programme allocation. It spent R1.18 billion or 96.6%, resulting in under-expenditure of R41.5 million. The vacancies that were not filled resulted to under-expenditure of R12.3 million on Compensation of Employees; less than anticipated expenditure on advertising as well as Consultant Services and Travel and Subsistence resulted in under-expenditure of R27.6 million on Goods and Services; and fluctuations in exchanges rates relating to payments to International Organisations resulted to under-expenditure of R1.4 million on Transfers and Subsidies.

 

5.3.       Expenditure by Economic Classification

The Department reported its expenditure by Economic Classification as follows:

Table 2: Expenditure of the Department by Economic Classification

ECONOMIC CLASSIFICATION	FINAL APPROPRIATION 2019/20 R’000	ACTUAL EXPENDOITURE 2019/20 R’000	VARIANCE (Over)/ Under 2019/20 R’000	EXPENDITUREAS % OF FINAL APPROPRIATION %
CURRENT PAYMENTS	2 024 696	1 833 326	134 920	90.5
Compensation of employees	1 343 884	1 253 326	100 812	85.2
Good and services	680 812	580 000	34 108	94.2
TRANSFERS AND SUBSIDIES	1 342 036	1 338 288	3 748	99.7
PAYMENT FOR CAPITAL ASSETS	65 349	43 145	22 204	66.0
PAYMENT FOR FINANCIAL ASSETS	1 118	1 118	-	100.0
TOTAL	3 433 199	3 215	217 322	93.7

Source: Annual Report 2019/20 (Department of Labour)

Table 2 reflects expenditure of the Department by Economic Classification.Current Payments received R2.0 billion or 58.97% of the total budget of the Department, which is the largest share. A total of R1.8 billion or 90.5% of the Current Payments budget was spent by the end of the financial year resulting to a variance of R134 million. Compensation of Employees received R1.343 billion or 66.4% of the Current Payments budget. Of that amount R1.253billion or 93.3% was spent by the end of the financial year, resulting to a variance of R90.6 million. Goods and Services was appropriated R680 8 million or 33.6% of the Current Payments budget. Of that amount R580.0 or 85.2% was spent by the end of the financial year resulting in a variance of R100.8 million.

Transfers and Subsidies was allocated R1.342 billion and R1.338 billion or 99.7% was spent by the end of the financial year resulting to a variance of R18.4 million.

Payments for Capital Assets was appropriated R65.3 million and R43.1 million or 66.0% was spent by the end of the financial year resulting to a variance of R22.2 million.

Payments for Financial Assets was appropriated R1.1 million and 100% of the allocated amount was spent by the end of the financial year.

6.         REPORT OF THE AUDITOR-GENERAL

The Department of Employment and Labour (DEL);Commission for Conciliation Mediation and Arbitration (CCMA);National Economic Development and Labour Council (NEDLAC); and Productivity South Africa received unqualified audit opinion in 2019/20 financial year. The audit opinion had no emphasis of matter on the annual report of the Department. However, the Director-General pointed out that it was not a clean audit report.

AGSA was unable to obtain sufficient appropriate audit evidence for the reported achievements of all the indicators relating to Inspection and Enforcement Services programme due to lack of accurate and complete records.

The Department incurred irregular expenditure amounting to R1 367 000 in the year ended 31 March 2020. The majority of irregular expenditure was caused by non-adherence to procurement and contract management regulations. The fruitless and wasteful expenditure incurred by the Department amounted to R698 00. The majority of the fruitless and wasteful expenditure was caused by damages to departmental vehicles.

AGSA was unable to obtain sufficient appropriate evidence that disciplinary steps were taken against officials who had incurred irregular expenditure as required by the PFMA. AGSA was also unable to obtain sufficient evidence that disciplinary steps were taken against officials who had incurred fruitless and wasteful expenditure as required by PFMA.

Productivity SA did not clear 12 external audit findings in 2019/20, which is an increase from the nine in 2018/19. There was no external expenditure reported in 2019/20 and 2018/19.

CCMA reported improvement in the overall quality of the submitted financial statements and performance information. CCMA has deployed steps to prevent irregular expenditure by addressing the root causes that lead to the irregular expenditure in order to improve audit outcomes. CCMA irregular expenditure amounted to R91.2 million in 2019/20 financial year. Incurred in the current period relating to non-compliant contracts that were entered into in prior years and awaiting condonation.

 

1. Statement of Financial Performance for the year ended 31 March 2019

The total revenue of the Department increased from R3.29 billion in 2018/19 to R3.44 billion in 2019/20 financial year, which comprised annual appropriation of R3.43 and Departmental revenue of R12.3 million.

Total expenditure increased from R3.08 in 2018/19 to R3.22 in 2019/20 financial year, which was comprised as follows:

• Total current expenditure: R1.83 billion
  • Compensation of employees - R1.25 billion
  • Goods and services – R580 million
• Transfers and subsidies: R1.34 billion
• Total expenditure for capital assets: R43.1 million
• Payments for financial assets: R1.11 million

The surplus of the Department amounted toR229.7 million in the year under review.

 

1. Statement of Financial Position for the year ended 31 March 2019

The total assets of the Department amounted to R356.2 million in 2019/20 financial year, which comprised:

• Current assets: R346.7 million
• Non-current assets: R9.5 million

Total liabilities amounted to R346.1 million.

Net assets of the Department amounted to R10.1 million.

 

7.         FINANCIAL PERFORMANCE FOR Q1 OF 2020/21 FINANCIAL YEAR

7.1        Expenditure analysis

By the end of June 2020, the Department of Employment and Labour had spent R746.3 million or 20.5 % of the total budget of R3.6 billion for the year. The Department recorded low spending against projections for the first quarter by R137 million or 15.5%. The low spending is mainly under Compensation of Employees, Goods and Services and Transfers and Subsidies with the lowest spending against projections in Programme 1: Administration.

7.2.       Expenditure per programme

7.2.1.    Administration

Low spending by this programme amounts to R65.8 million or 27.6% mainly under 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 low spending on Goods and Services is mainly as a result of delayed invoicing by SITA for computer services; delayed invoicing by GCIS; whilst low spending on external audit costs is due to the delayed start of the audit process as a result of the national lockdown and restrictions on movement; and low spending on travel as a result of the national lockdown and the hosting of virtual meetings.

7.2.2.    Inspection and Enforcement Services (IES)

Spending by this programme was low than projected for the quarter by R27.6 million or 18.9%. The lowest spending by this programme was on Compensation of Employees due to vacant funded posts. The low spending on Goods and Services is attributed to the COVID-19 lockdown, which reduced spending on travel, training and development, and communication with the largest item of underspendingin Goods and Services being on travel due to the national lockdown and the restriction on movements

 

7.2.3.    Public Employment Services (PES)

Spending by the programme was lower for the quarter than projected by R29.9 million or 19.0% mainly under Compensation of Employees due to vacancies. The process of recruitment and selection for these posts is in progress. It is anticipated that some of these vacancies will be filled during the second quarter. The low spending on Goods and Services is attributed to the national lockdown and restrictions on movement which slowed spending on travel. Delayed invoicing by the Compensation Fund for civil servants’ injury on duty claims resulted in low spending on Transfers and Subsidies against projections whilst delays in finalising the wage subsidies to the Workshops for the Blind resulted in lower spending under transfers to Non-Profit Institutions. The latter was delayed due to the lockdown.

 

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

Slow spending of R13.3 million or 4.0 % is mainly under Compensation of Employees due to delayed invoicing by DIRCO for the Labour Attaché in Geneva. Slow spending was also recorded under Transfers to Non-Profit Institutions due to delays in transferring funds to strengthen civil society organisations as a result of the lockdown. More than 50% of the projected transfer was made in June. Higher spending on Goods and Services is attributed to the invoices for the previous financial year only being received from GCIS in June.

7.3.       Personnel

Expenditure on Compensation of Employees during the first quarter was R303.1 million or 20.3% of the available budget of R1.5 billion, against the projected spending of R359.7 million. The headcount target for 2020/21 as per the Estimates of National Expenditure is 3 527 with only 2 633 posts filled by the end of the first quarter. The slow spending and lower headcount is due to delays in the filling of vacant posts, mainly in programme 1,2 and 3 as explained above.

7.4.       COVID-19 spending

Quarter 1 spending on COVID-19 amounted to R15.1 million mainly by Programme 1 for personnel protective equipment, decontamination and deep cleaning of the buildings occupied and sanitisers. Spending was made against the items minor assets and consumable supplies in line with Treasury Circular No. 30 on classification of COVID-19 relaxed expenditure.

7.5.       Issues for the Committee to note

The Department is struggling to retain labour inspectors for the past six financial years. Many labour inspectors leave the Department for higher salaries in the private sector and departments such as Mineral Resources. The Department needs to develop a strategy to retain inspectors within the IES baseline in consultation with the Department of Public Service and Administration (DPSA).

8.         OVERVIEW AND ASSESSMENT OF SERVICE DELIVERY PERFORMANCE FOR 2019/20 FINANCIAL YEAR

The overview and assessment of service delivery performance is classified into two categories, namely: Performance per Strategic Objectives and Performance per Programme.

8.1.       Performance of the Department per Strategic Objective

The Department reported its performance per strategic goals as follows:

Table3: Performance of the Department per Strategic Objective

STRATEGIC OBJECTIVE	PLANNED INDICATORS	ACHIEVED	OVERALL ACHIEVEMENT
Strengthen occupational safety	This strategic objective is covered in terms of indicators that are applicable in protecting vulnerable workers
Promote equity in the labour market	1	1	100%
Protecting vulnerable workers	5	4	80%
Strengthen multilateral and bilateral relations	1	1	100%
Contribute to employment creation	4	4	100%
Promote sound labour relations	3	1	33%
Monitoring the impact of legislation	2	1	50%
Strengthen the institutional capacity of the Department	3	3	100%
OVERALL PERFORMANCE	19	15	79%

Source: Presentation by the Department to the PC on Employment and Labour on 13October 2020

The Department achieved its targets except for promoting sound labour relations strategic objective. It achieved 33% of performance on this strategic objective. The Department achieved 50% in Monitoring the impact of legislation. It achieved 15 of the 19 annual planned indicators, translating to an overall achievement of 79%.

 

8.2.       Performance of the Department per programme

The Department reported its performance per programme as follows:

Table4: Performance of the Department per programme

Programme	Annual Planned Indicator	Achieved	Overall Achievement%
1. Administration	3	3	100%
2. Inspections and Enforcement Services	4	4	100%
3. Public Employment Services	4	4	100%
4. Labour Policy and industrial Relations	8	4	50%
Overall Performance	19	15	79%

Source: Presentation by the Department to the PC on Employment Labour on 13October 2020

The Department achieved 15 of its 19annual planned indicators, translating to an overall achievement of 79%. The Administration programme achieved all three annual planned indicators, translating to an overall achievement of 100%.

The Inspection and Enforcement Services achieved all four annual planned indicators translating to an overall achievement of 100%

Public Employment Services achieved all four planned annual indicators translating to an overall achievement of 100%.

The Labour Relations and Industrial Relations programme is the only programme that did not achieve all its indicators. It achieved 4 of the 8 annual planned indicators translating to 50% overall achievement. The programme did not achieve the target of reviewing the national minimum wage by 1 January 2020. The national minimum wage was only reviewed on the 1st March 2020. The National Minimum Wage Commission experienced delays as there is an unavoidable time lag in the release of the quarterly labour force survey by Statistics South Africa. The Commission sent a request to the Statistician General for an early release of the 2018/19 Labour Market Dynamic Survey Data and 2019/20 Quarterly Labour Force Survey.

This programme approve/ refused 99% of labour organisation applications for registration within 90 calendar days of receipt against a target of 100%. One percent of the applications were refused outside the 90 calendar days of receipt.

 

9.         OVERVIEW OF PERFORMANCE OF ENTITIES OF THE DEL: 2018/19

9.1.       Supported Employment Enterprises (SEE)

SEE is a business entity of the Department of Employment and Labour and it resides under the Public Employment Services programme.

The SEEs were established in 1943 to provide employment for people with mental and physical disabilities that prevented them from entering the open labour market, due to their afflictions. The factories provide employment to people with disabilities of all races and employed a total of 1044 by the 31st March 2029. Initially SEE recruited personnel from the military and the police that were referred by psychiatrists and other specialists. The company is now recruiting mainly from special schools. As a result, the establishment of the SEE is becoming more reflective of the demographics of the country. There are able bodied personnel seconded by DEL to SEE.

The factories have operated without an enabling legislation since inception, except for a Cabinet Memorandum, first compiled in 1943. The Employment Services Act 4 of 2014 formally established the Supported Employment Enterprises.

There are currently 13 factories across the country in seven of the nine provinces. Income from the factories is generated from the sales of manufactured goods that include furniture, hospital linen, protective clothing, garments, upholstery, screen printing and recently PPEs.

 

9.1.1.    SEE Performance against indicators

SEE reported its performance per Strategic Objective as follows:

Table 5: SEE Performance per Strategic Objective

PROGRAMME PERFORMANCE INDICATOR	ANNUAL PLANNED TARGET	ACTUAL PERFORMANCE	REASON FOR VARINCE	REMEDIAL ACTION
1.Number of additional persons with disabilities provided with work opportunities in the SEE by the end of March 2020	150	64	Shortage of cash to pay salaries for new factory employees, due to factories not having enough work to generate sales.	New sales orders to be secured by Business Development in 2020/21 financial year
2. Percentage annual increase of sales revenue from goods and services by end of March 2020	10%	90%	Sales revenue increase due to resumption of the ECDOE project and sales generated towards the end of the financial year as a result of emergency procurement for COVID-19.	None

Source: Presentation to the PC on Employment and Labour dated 13 November 2020

Table 5 above reflects that SEE provided 64 additional persons with disabilities with employment opportunities against a target of 150. The reason for the variance was reported to be the shortage of cash to pay salaries for new factory employees due to factories not having enough work to generate sales. The remedy is for Business Development to secure new sales orders in the 2020/21 financial year.

The entity achieved 90% or R136 687 616 increase of sales revenue from goods and services by the end of March 2020.

 

1. Financial Performance of SEE in 2019/20

The total transfer revenue of the SEE amounted to R148 923 000. Of this amount R145 896 439 was the transfer from the Department of Employment and Labour. The entity registered a surplus (deficit) of R11.6 million during the year under review. The employee costs amounted to R140 238 869nduring the year under review.

The Auditor-General issued a qualified audit opinion for the regularity audit performed for the 2019/20 financial year on the following areas:

• Inventories
• Cost of sales
• Property plant and equipment
• Cash flow statement
• Service in kind

 

9.2.       National Economic Development and Labour Council (NEDLAC)

NEDLAC was established through the NEDLAC Act, No. 35 of 1994. It operates in terms of the NEDLAC constitution. NEDLAC’s mandate is derived from the NEDLAC Act, Labour Relations Act, NEDLAC constitution and NEDLAC protocols.

NEDLAC’s objectives in terms of the Act are to:

• Strive to promote the goals of economic growth, participation in economic decision-making and social equity.
• Seek to reach consensus and conclude agreements on matters pertaining to social and economic policy.
• Consider all proposed labour legislation relating to labour market policy before it is introduced in Parliament.
• Consider all significant changes to social and economic policy before it is implemented or introduced in Parliament.
• Encourage and promote the formulation of coordinated policy on social and economic matters.

 

9.2.1.    Highlights of the year under review

NEDLAC report on highlights of the year under review as follows:

• The establishment of structures including a Presidential Working Committee to ensure that the commitments of the Presidential Job Summit are implemented.
• Progressing Job Summit Agreements including in respect of water use licences, expansion of business processing, unblocking visas for tourism, improving the efficiency of the Temporary Employer/ Employee Relief Scheme.
• Ongoing processing of legislation and policy on issues including in respect of land and energy.
• Establishment of an Eskom leadership group and drafting of a social compact to support Eskom.
• Increasing the nature and tempo of engagements on the budget process.
• Concluding a number of key internal policies and strategies relating to ICT, supply chain and facility management.
• Stabilising the senior leadership of NEDLAC.

 

9.2.2.    NEDLAC’s overall annual performance per programme in 2019/20

NEDLAC reported its performance per programme as follows:

Table 6: NEDLAC annual performance per programme in 2019/20

PROGRAMME	ANNUAL PLANNED INDICATORS	TARGETS ACHIEVED	OVERALL ACHIEVEMENT (%)
Administration	9	8	89%
Core Operations	13	12	92%
Constituency Capacity Building Funds	3	3	100%
Summary of Performance	25	23	92%

Source: Presentation to the PC on Employment and Labour dated 18 November 2020

Table 6 above reflects that NEDLAC had 25 annual planned indicators and achieved 23, translating to an overall performance of 92%. The entity achieved 89% in Administration and programme and 92% in Core Operations programme. It achieved 100% in programme 3.

 

9.2.3.    NEDLAC’s overall annual performance per strategic objectives in 2018/19

NEDLAC reported its performance per strategic objectives as follows:

Table 7: NEDLAC annual performance per Strategic Objective

STRATEGIC OBJECTIVES	ANNUAL PLANNED INDICATORS	TARGETS ACHIEVED	OVERALL ACHIEVEMENT %
Effective governance and strategic leadership	3	3	100%
Provision of efficient and reliable back office support services	1	1	100%
Improved risk management and financial oversight	2	2	100%
Improved facilities management	1	1	100%
Office administration systems enhanced and monitored	1	1	100%
Strengthen organisational culture and performance	2	1	50%
Effective engagement on draft policy and legislation within the framework of the NEDLAC Act, Constitution and Protocols	9	8	89%
Conclude matters under consideration within the framework of the NEDLAC Protocols	1	1	100%
Resolution of section 77 notices as and when these may arise in terms of section 77 protocol	1	1	100%
Promote  social dialogue through communication, information and capacity building	2	2	100%
Compliance with NEDLAC policy on Constituency Capacity Building, Budgeting and Expenditure	3	3	100%
Summary of Performance	25	23	92%

Source: Presentation to the PC on Employment and Labour dated 18 November 2020

Table 7 above reflects that NEDLAC achieved 100% overall performance in all strategic objectives, except on strategic objective 6 and 7. Strategic objective 6 is to strengthen organisational culture and performance and strategic objective 7 is effective engagement on draft policy and legislation within the framework of the NEDLAC Act, Constitution and Protocols.

 

9.2.4.    Human Resources Overview

Table 8: NEDLAC Human Resource employment and vacancies as at 31 March 2020

LEVELS	2019/20 NO. OF EMPLOYEES	2019/20 APPROVED POSTS	2019/20 VACANCIES	% VACANCIES
Top Management	1	1	0	0
Senior Management	4	4	0	0
Professional	17	18	1	5.55%
Skilled	7	7	0	0
Semi-skilled	5	5	0	0
Unskilled	4	4	0	0
TOTAL	38	39	1	2.56%

Source: Presentation to the PC on Employment and Labour dated 18 November 2020

Table 8 above reflects that NEDLAC had a vacancy rate of 2.56% at the of March 2020.

 

9.2.5.    Annual financial performance results for period ended 31 March 2020

Revenue notes

As at 31 March 2020, NEDLAC recorded total income of R45 912 254 which is made up of:

• Grant received from Department of Employment and Labour – R40 741 000
• Interest received from call account – R1 430 446
• Sundry income – R165 861
• Jobs summit conditional grant recognised – R3 574 947

Budgeted income was R41 532 000

 

Expenditure notes

Expenditure per programme was reported as follows:

Administration: R33 661 536

Core Operations: R6 757 046

Capacity Building: R3 570 768

TOTAL: R43 989 350

 

9.3.       Productivity SA

9.3.1.    Legislative mandate of the Productivity SA

Productivity SA is established in terms of section 31 of the Employment Services Act, No. 4 of 2014, as a juristic person, with the mandate to promote employment growth and productivity, thereby contributing to South Africa’s socio-economic development and competitiveness.

The Act enjoins Productivity SA to develop relevant productivity competencies and competitiveness in workplaces, with a focus on the following core functions:

• To promote employment and income growth, and workplace productivity;
• To improve the employment and reemployment prospects of employees facing retrenchments and those retrenched, which include schemes to provide for turnaround strategies, layoffs, retraining or alternative employment opportunities;
• To conduct research on productivity and competitiveness related matters, provide productivity improvement and competitiveness measures; and
• To promote social dialogue and a culture of productivity and competitiveness in the workplace and all spheres of the nation’s economic and community life.

The value proposition of Productivity SA is to provide Productivity and Operational Efficiency Enhancement Solutions to improve the competitiveness and sustainability of enterprises throughout the business lifecycle to accelerate the creation of wealth and decent work.

 

9.3.2.    Annual performance per Strategic Objective of the Productivity SA in 2019/20

Productivity SA Performance per Strategic Objective is reflected in the following table.

Table 9 Productivity SA performance per Strategic Objective

STRATEGIC OBJECTIVES	ANNUAL PLANNED INDICATORS	ACHIEVED	OVERALL ACHIEVEMENT %
Strengthen the institutional capacity of PSA to deliver on its mandate and be financially sustainable	2	2	100%
To support government programmes aimed at sustainable employment and income growth	1	1	100%
To support enterprises facing economic distress and initiatives aimed at preventing job losses.	-	-	-
Generation and dissemination of productivity related research and statistics	2	2	100%
To promote a culture of productivity and competitiveness in the workplace and community life	2	2	100%
Overall Performance	7	7	100%

Source: Presentation to the PC on Employment and Labour dated 18November 2020

Table 9 above reflects that Productivity SA had a total of 7 annual planned indicators and achieved all of them, translating to an overall performance of 100% by the end of March 2020. Strategic objective 3, which is to support enterprises facing economic distress and initiatives aimed at preventing job losses was suspended in 2018.

 

9.3.3.    Annual performance per programme of the Productivity SA in 2019/20

Productivity SA reported performance per programme as follows:

Table 10 Productivity SA performance per programme

PROGRAMME	ANNUAL PLANNED INDICATORS	ACHIEVED	OVERALL ACHIEVEMENT %
Corporate Services	1	1	100%
Human Resource Management	1	1	100%
Marketing and Communication	1	1	100%
Productivity Organisational Solutions and workplace challenges	2	2	100%
Value Chain Competitiveness	2	2	100%
Turnaround Solutions	-	-	-
Overall Performance	7	7	100%

Source: Presentation to the PC on Employment and Labour dated 18November 2020

Table 10reflects that the entity achieved an overall performance of 100%. The turnaround solutions programme has not been funded since 2018. This is a crucial programme since its aim is to support companies facing economic distress. Corporate services programme paid all SMEs within 30 days of receipt of statement.

Programme 4 capacitated 3686 enterprises to improve productivity and business efficiency against a target of 3100. It trained 345 ETD practitioners and SDFs against a target of 200.

 

9.3.4.    Productivity SA Challenges

• Financial viability and the going-concern status of Productivity SA remains a challenge as the entity remains underfunded.
• Productivity SA’s current funding model does not allow adequate achievement of its national mandate of leading and inspiring a competitive and productive South Africa. The entity is also under-resources in human capacity, which hinders its ability to make a meaningful and desirable nationwide impact.
• Constraints and challenges include:
  • Insufficient funding to cover operational costs and fully implement the mandate of the entity;
  • Limited national footprint, resulting in inadequateprovincial coverage of service offering (Gauteng, KZN and Western Cape);
  • Inadequate resource and capability competitive advantages over competitors – inability to attract and retain competent skills; and
  • Fewer service delivery channels.
• Suspension of the Turnaround Solutions programme due to lack of funding.

 

9.3.5.    Annual financial performance of Productivity SA as at 31 March 2020

Productivity SA reported its financial performance as follows:

Table 11: Productivity SA Financial Performance

DESCRIPTION	2020	2019	VARIANCE %
Revenue
Transfers from Grants	77 000 997	77 505 795	(0.7%)
Income from services rendered	11 370 202	110 476 808	8.5%
Total revenue	88 371 199	87 982 603	0.4%
Operational Expenditure
Compensation of Employees	(62 484 534)	(64 595 215)	3.3%
Goods and services	(25 050 971)	(23 171 055)	(8.1%)
Total Operational Expenditure	(87 535 505)	(87 766 270)	0.3%
Surplus/ (Deficit)	835 694	216 333

Source: Presentation to the PC on Employment and Labour dated 18 November 2019

Table 11reflects that the Productivity SA total revenue increased from R87 982 603 in 2019 to R88 371 199 million in 2020, which is an increase of 0.4%. Transfers from Grants constitute the larger share of revenue. However, this portion went decreased from R77 505 795 in 2019 to R77 000 997 in 2020 which is a decrease of 0.7%.

The total operational expenditure decreased from R87 766 270 in 2019 to R87 535 505 in 2020, which is a decrease of 0.3%. Compensation of Employees constitute the larger share of operational expenditure. This expenditure item decreased from R64 595 215 in 2019 to R62 484 534 in 2020, which is a decrease of 3.3%.

The surplus of the entity increased from R216 333 in 2019 to R835 694 in 2020.

 

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

The CCMA’s constitutional mandate is drawn directly from section 23 of the Constitution that deals with labour relations. The CCMA is a national public entity in terms of schedule 3A of the PFMA.

The CCMA’s statutory functions are set out in section 115 of the LRA, and are divided into those that are mandatory and those that are discretionary.

 

9.4.1.    Annual performance of the CCMA byStrategic Objectives by 31 March 2020

The CCMA reported its annual performance per strategic objective as follows:

Table 12: CCMA annual performance per strategic objective in 2019/20 financial year

STRATEGIC OBJECTIVES	PLANNED INDICATOTS	ACTUAL ANNUAL ACHIEVEMENTS	OVERALL ACHIEVEMENTS %
1. Enhancing the labour market to advance stability and growth	5	5	100%
2. Advancing good practices at work and transforming workplace relations	5	5	100%
3. Building knowledge and skills	1	1	100%
4. Optimising the organisation	8	5	63%
Overall performance	19	16	84%

Source: Presentation to the PC on Employment and Labour dated 18November 2020

Table 12 reflects that CCMA had 19 planned targets for 2019/20 financial year and it achieved 16 targets, representing an overall performance of 84%. This is a decrease in overall performance from the 95% achieved on 2018/19.

The drop in overall performance was a result of low performance in strategic objective 4, which is to optimise the organisation. The entity achieved five of the eight planned indicators under this programme representing an achievement of 63%. This is the only strategic objective where CCMA did not achieve 100% performance.

One of the planned indicators under this objective was to conciliate 100% of cases at first event within 30 days of the date of receipt of the referral (excluding agreed extensions). The entity conciliated 145 611 of the 147 455 cases representing 98.75% achievement. Non-achievement of this target was attributed to failure by administrative staff to schedule matters to be heard within 30 days-time frame and the manner in which the technical indicator was drafted did not take into consideration aspects such as issuing of certificates.

The second planned indicator that was not achieved was to send 100% of arbitration awards rendered within 14 days of the conclusion of the arbitration proceedings (excluding extensions granted and heads of arguments filed). CCMA sent 21 963 of the 22 016 arbitration awards within 14 days representing an achievement of 99.76%. Non-achievement of this target was attributed to failure of commissioners to render their awards within 10 days after finalisation of matters and administrative errors.

The third planned indicator that was not achieved was to investigate 100% of section 71 cases within 21 days after the notice is published (as and when referred). No section 71 of the LRA cases were investigated within 21 days after notice was published. Non-achievement of the target was attributed to an oversight in drafting the target, wherein the operational practicalities around 21 day-time frame of investigation after publication of the notice was nor properly conceptualised.

 

9.4.2.    Referrals by the Act, Type and by Sectors (Top 8)

 

CCMA reported on cases referred by Act as follows:

Table13: Number of referrals by legislation

ACT	REFERRALS	%
Labour Relations Act	170 991	77.5%
Basic Conditions of Employment Act	38 342	17.4%
Employment Equity Act	3 619	1.6%
National Minimum Wage Act	7 715	3.5%
Skills Development Act	85	0.0%
Unemployment Insurance Act	4	0.0%
Employment Services Act	3	0.0%

Source: Presentation to the PC on Employment and Labour od 18 November 2020

Table 13above reflects that the bulk of referrals, which is 77.5% were related to the Labour Relations Act.

 

CCMA reported on referrals by Type as follows:

Table 14: referrals by Type

TYPE	%
Capacity Building	1%
Other	24%
Severance Pay	3%
Collective Bargaining	2%
Mutual Interest	2%
Unfair Labour Practice	9%
Unfair Dismissal	59%

Source: Presentation to the PC on Employment and labour dated 18 November 2020

Table 14 above reflects that 59% of all cases referred to the CCMA during 2019/20 financial year wear were for Unfair Dismissal.

 

CCMA reported on referrals by top8 sectors as follows:

Table 15: Referrals by top 8 sectors

SECTORS	%
Business/ Professional Services	29%
Safety/ Security (Private)	14%
Retail	11%
Building/ Construction	7%
Domestic	6%
Agriculture/ farming	4%
Food/ Beverage (Manufacturing)	4%
Mining	4%

Source: Presentation to the PC on Employment and Labour dated 18 November 2020

Table 15 reflects that the majority of cases referred in 2019/20 financial year were from the Business/ Professional Services sector.

 

9.4.3.    Annual Financial Performance results for the period ended 31 March 2020

 

1. Annual financial performance by strategic objective

Table 16: Spending by Strategic Objectives in 2019/20 Financial Year

STRATEGIC OBJECTIVES	BUDGET	ACTUAL EXPENDITURE	VARIANCE	EXPENDITURE %
	R’000	R’000	R’000
Enhancing labour market to advance stability and growth	13 190	10 826	2 364	82%
Advancing good practices at work and transforming workplace relations	14 992	9 573	5 419	64%
Building knowledge and skills	29 640	25 612	4 028	86%
Optimising the organisation	1 003 248	1 007 404	(4 156)	100.4%
TOTAL	1 061 070	1 053 415	7 655	99%

Source: Presentation to the PC on Employment and Labour dated 20 November 2020

The total budget of CCMA amounted to R1.061 billion and R1.053 billion was spent by 31 March 2020 representing 99% spending, resulting to a variance of R7.7 million.

Strategic Objective 1 spent R10.8 million or 82% of the R13.2 million resulting to underspending of R2.4 million by the end of 2019/20 financial year. The variance was as a result of timing difference in appointment of the Employment Security Unit (ESU) manager as well as the case disbursement costs related to the ESU activities which are as and when. The other contributing factor result from the intervention training and international travel costs that were planned but not incurred as anticipated.

Strategic Objective 2 spent R9.6 million or 64% of the allocated R14.9 million resulting to underspending of R2.5 million. The variance resulted from unfilled vacancies as well as less utilisation of part time commissioners for mediation activities. The other contributing factor is due to saving related to the advocacy of the National Minimum Wage that was planned for but not incurred as planned.

Strategic Objective 3 spent R25.6 million or 86% of the allocated R29.6 million resulting to a variance of R4.0 million. The variance resulted from training and training material costs that were planned for but not utilised as anticipated due to less number of estimated training containment measures on items such as catering, travelling and accommodation costs.

Strategic Objective 4 was allocated R1 003 billion and it spent R1. 007 billion, which was an over-expenditure of R4.2 million or 4%. The variance is a result of utilisation of part time commissioners, which was 4% more than the set target efficient of 60% as well as the travel costs incurred by the commissioners in executing cases at the outlying areas. The other contributing factor was the underestimated depreciation as a result of new acquisitions of assets.

 

1. Annual financial performance per programme

The table below reflects annual financial performance of the CCMA per programme.

Table17: CCMA Revenue and Expenditure per programme in 2018/19

PROGRAMME	BUDGET	ACTUAL SPENDING	VARIANCE	EXPENDITURE
	R’000	R’000	R’000	%
1. Administration	550 110	542 920	7 191	99%
2.Institution Development	38 949	31 547	7 402	81%
3.Corporate Governance	9 612	5 989	3 622	62%
4. Social Services	462 398	472 959	(10 561)	102%
Total	1 061 070	1 053 415	7 654	99%

Source: Presentation to the PC on Employment and Labour dated 18 November 2020

The Administration programme spent R542.9 million or 99% of the allocated R550.1 million resulting to variance of R7.1 million. The variance resulted from unfilled vacancies as well as under expenditure resulting from goods and services that were on demand basis and expenditure vary from month to month.

The Institution Development programme spent R31.5 million or 81% of the allocated R38.9 million resulting to a variance of R7. 4 million. The variance resulted from training and training materials costs that were planned for but not utilised as anticipate due to less numbers of estimated training interventions conducted. The other contributing factor is the implementation of cost containment measures on items such as catering, travelling and accommodation costs.

The Corporate Governance programme spent R5.9 million or 62% of the allocated R9.6 million resulting to a variance of R3.6 million. The variance resulted from the under-expenditure on board fees and training for the Board Committees.

The Social Services programme was allocated R462.4 million and it spent R472.9 million resulting to over spending by R10.6 million. The variance resulted from utilisation of part time commissioners which was 4% more than the set target efficiency of 60% as well as the travel costs incurred by the commissioners in executing cases at the outlying areas.

 

10.        COMMITTEE OBSERVATIONS

After considering the presentations made by the Department and its entities on their annual reports, the Committee made the following observations:

The Quarterly Labour Force Survey (QLFS), which is a household based sample survey conducted by Statistics SA, reported the unemployment rate to be 30.8% in the third quarter of 2020 (July – September 2020). In numerical terms there were 6.5 million unemployed persons in the third quarter of 2020. When 2.7 million discouraged work-seekers are added, the number of unemployed persons increases to 9.2 million. The Department of Labour was reconfigured in 2019 to include employment mandate to address this scourge.

 

10.1.     Department of Employment and Labour (DEL)

10.1.1.  The Department achieved an overall performance of 79% and spent 93.7% of the final appropriation during the year under review. The under-expenditure of the Department amounted to R217.3 million.

10.1.2.  AGSA was unable to obtain sufficient evidence for the reported achievements of all the four indicators relating Inspection and Enforcement Services programme. This was reported to be due to the lack of accurate and complete records.

10.1.3.  The Department incurred irregular expenditure amounting to R1 367 000 during the period under review. The majority of the irregular expenditure was caused by non-adherence to procurement and contract management regulations.

10.1.4.  The Department incurred fruitless and wasteful expenditure amounting to R698 00. The majority of the fruitless and wasteful expenditure was caused by damages to departmental vehicles.

10.1.5.  AGSA could not findsufficient and appropriate evidence that disciplinary steps were taken against officials who had incurred irregular expenditure; and fruitless and wasteful expenditure as required by the PFMA.

 

10.2.     Supported Employment Enterprises (SEE)

10.2.1   The Auditor General issued a qualified audit opinion for the 2019/20 financial year on the following areas:

• Inventories

• Cost of Sales
• Property, plant and equipment
• Cash Flow Statement
• Service in kind

10.2.2.  The total revenue of SEE increased from R145 896 439 in 2018/19 to R153 036 119 in 2019/20 financial year. This improvement in financial performance was attributed to an increase in sales revenue.

10.2.3.  SEE net assets are favourable for the entity to continue its operations as a going concern. Furthermore, this indicates the ability for the entity to pay its short term and long term obligations.

10.2.4.  The SEE must diversify its product range to meet the requirements of the private sector and members of the public and will be producing access stocks on fast selling products to avoid high prices in the procurement of raw materials and delivery delays lead time to customers.

 

10.3.     NEDLAC

10.3.1.  NEDLAC had 25 planned performance indicators for the 2019/20 financial year as per the Annual Performance Plan. Of those, 800 901.23 planned indicators were achieved representing 92% achievement.

10.3.2.  NEDLAC’s total employee costs amounted to R24 827 931. This constitutes a very high proportion of NEDLAC’s total expenditure at 56%. The average personnel cost per employee is R800 901.

 

10.4.     Productivity SA

10.4.1.  Productivity SA overall performance improved from 54% in 2018/19 to 100% in 2019/20 financial year.

10.4.2.  Productivity SA continues to experience funding challenges, which led to the suspension of the Turnaround Solutions programme.

10.4.3.  The entity generated over R11 million in additional revenue during the 2019/20 financial year compared to over R10 million in 2018/19 financial year, which reflects about 9% increase.

10.4.4.  The entity has footprint in Gauteng, KwaZulu-Natal and Western Cape, resulting in inadequate provincial coverage of service offering.

10.4.5.  The Committee notes the concern pronounced by Productivity SA with regards to the entity’s status as a going concern. Funds were allocated by the Department to the entity towards its turnaround strategy and the situation must be monitored closely.

 

10.5.     Commission for Conciliation, Mediation and Arbitration

10.5.1   The overall performance of the CCMA deteriorated from 95% in 2018/19 to 84% in 2019/20 financial year. The entity had spent 99% of its final appropriation by the end of 2019/20 financial year.

10.5.2.  CCMA received an unqualified audit opinion with findings on compliance. The entity reported an improvement in the overall quality of the submitted financial statements and performance information.

10.5.3.  CCMA incurred irregular expenditure amounting to R91.2 million in the 2019/20 financial year. However, the entity reported that it had put mechanisms in place to prevent irregular expenditure by addressing the root causes that lead to irregular expenditure in order to improve audit outcomes.

10.5.4.  The entity is being overwhelmed and the impact of a reduction in budget affects the ability of the entity to meet public expectations. Theseeffects include, but are not limited to,thatthe entity no longer accept walk-in clients and will not be conducting conciliations, which is going to be a major problem since about 75% of disputes are settled at conciliation and most disputes are from complainants with no access to technology.

10.5.5.  The mentioned strategy of improving financesof the entity by charging clients for services rendered might lead to exclusion of vulnerable workers.

 

11.        COMMITTEE RECOMMENDATIONS

Having considered the presentations of the Department and its entities on their annual reports, the Committee recommends that the Minister of Employment and Labourtakes steps to ensure that:

 

11.1.     Department of Employment and Labour

11.1.1.  Lack of accurate and complete records to support reported achievements of all four indicators relating to Inspection and Enforcement Services programme is addressed.

11.1.2.  Disciplinary steps are taken against officials who incurred irregular expenditure; and fruitless and wasteful expenditure as required by the PFMA.

11.1.3.  A clear plan is developed to deal with the internal control deficiencies identified by the Auditor General.

 

11.2.     Supported Employment Enterprises

11.2.1.  Engagement with National Treasury to afford preferential procurement status by government departments and state owned entities to Supported Employment Enterprises is concluded without delay.

11.2.2.  Follow up with National Treasury regarding the process of developing a preferential framework for government entities is made to ensure finalisation of this matter.

11.2.3.  SEE is supported in its move to diversify its product range to meet the requirements of the private sector and members of the public. This includes production of access stocks on fast selling products to avoid high prices in the procurement of raw materials and delivery delays lead time to customers.

 

11.3.     NEDLAC

11.3.1.  The government task team that was established to review NEDLAC structures should table its report for consideration without further delay.

11.3.2.  Action plan is developed on how to address high expenditure on salaries and the plan must be presented to the Committee.

 

11.4.     Productivity SA

11.4.1.  The funding challenges of Productivity SA are addressed to enable it to execute its mandate of, amongst others, assisting to turnaround companies in distress.

11.4.2.  The alternate funding mechanism that seeks to shift away from the current multisource funding structure must be finalised.

 

11.5.     Commission for Conciliation Mediation and Arbitration

11.5.1.  The effects of budget cutson service delivery by the CCMA such as charging of levy on services rendered to clients and stopping of walk-ins to access services is minimised to avert adverse impact on the vulnerable workers and employment of commissioners.

11.5.2.  The preventive controls that have been put in place to prevent irregular expenditure by addressing the root causes are implemented.

 

12.        APPRECIATION

The Committee appreciates the cooperation it received from the Department and its entities throughout the BRRR process.

 

Report to be considered.