ATC221104: Report of the Portfolio Committee on Employment and Labour on the Third Quarterly Report Regarding the Performance of the Department Of Employment and Labour and Its Entities in Meeting Strategic Objectives for 2021/22, Dated 2 November 2022

Employment and Labour

Report of the Portfolio Committee on Employment and Labour on the Third Quarterly Report Regarding the Performance of the Department Of Employment and Labour and Its Entities in Meeting Strategic Objectives for 2021/22, Dated 2 November 2022

 

The Portfolio Committee on Employment and Labour, having considered the Third Quarterly Report on the performance of the Department of Employment and Labour (DEL) and its entities in meeting strategic objectives for 2021/22, reports as follows:

 

1. INTRODUCTION

 

The Portfolio Committee on Employment and Labour considered the Third Quarterly Report on the performance of the Department of Employment and Labour and its entities in meeting strategic objectives for 2021/22 as presented in meetings held on 31 August 2022, 7 and 28 September 2022.

 

This report provides an overview of the presentations made by the Department of Employment and Labour (Department) and its entities, focusing mainly on its achievements, output in respect of the performance indicators and targets set for 2021/22 financial year and financial performance. The report also provides the Committee’s observations and recommendations relating to the Department’s and entities’ performance.

 

1. PERFORMANCE PER PROGRAMME

The Department reported on its performance per programme as follows:

 

Table 1: DEL Performance per Programme in Q3 of 2021/22

BRANCH		Annual Planned Indicators	Indicators with Q3 Targets	Achieved	Overall Achievement
1.	Administration	7	7	4	57%
2.	Inspections and Enforcement Services	4	4	3	75%
3.	Public Employment Services	5	5	4	80%
4.	Labour Policy and Industrial Relations	5	5	3	60%
OVERALL PERFORMANCE		21	21	14	67%

Source: Presentation to the Portfolio Committee on Employment and Labour dated 31 August 2022

 

Table 1 above reflects that the Department had 21 annual planned indicators in the 2021/22 financial year. Of those indicators, 21 have targets reporting in Q3. The Department achieved 14 of the 21 targets reporting in Q3. This translates to an overall performance of 67 per cent, which is a regression from the 75 per cent achieved in Q2.

 

Programme 1 (Administration) had seven planned indicators that have targets reporting in Q3. The programme achieved four of the seven reporting in Q3. This translates to an overall achievement of 57 per cent in Q3. This is a decline from the 63 per cent achievement of Q2. This programme did not achieve the target of maintaining vacant funded posts at 3 per cent or less for every quarter. Instead the vacant funded posts were at 9.62 per cent, which is an improvement from 10.41 per cent in Q2.

 

The reason for non-achievement was reported to be unavailability of panel members as well as delay in capturing of applications as a result of the new HRM circular on advertising all vacant posts in DPSA Public Service Vacancy Circular. As a remedial action, the Department has decided to appoint data capturers, working remunerative overtime as well as exploring securing services of a response handling company/service provider.

 

The programme did not achieve the target of resolving 93 per cent of reported incidents of corruption in the Department. The programme resolved 105 of the 138 reported incidents, translating to an achievement of 76 per cent. which is an improvement from the 67 per cent achieved in Q2.

The reason for non-achievement of this target was reported to be that the anti-fraud and corruption time frame in completing the investigation is 90 days and not integrated to the time frame with Employment Relations (ER) in terms of reaching the 90 days’ deadline.

To remedy the situation, the proposal made during the Corporate Services Strategic Planning session is to reconsider the target during the next financial year 2022/23 to ER as the unit specializes with resolution of cases.

 

The Administration programme did not achieve the target of compiling one Interim Financial Statement (IFS) on 31 October 2002. Instead the IFS was submitted on 12 November 2021. The delay in submission was attributed to the delay in AGSA concluding auditing of Annual Financial Statements (AFS) and in turn requested an extension for conclusion thereof. As a result of the aforementioned, the IFS (June 2021) and subsequent IFS (September 2021) was impacted by finalization of AFS whereby closing audited figures are required for the opening balances of IFS. DEL cannot implement corrective measures as the delay was attributed to AGSA.

 

 

 

 

Programme 2 (Inspection and Enforcement Services) had four indicators with targets reporting in Q3. Of the four targets, three were achieved in Q3. This translates to an overall achievement of 75 per cent, which is an improvement from the 50 per cent achieved in Q2. The overall performance of the Eastern Cape and Free State under this programme was 33 per cent in Q3. The other seven provinces achieved a performance of 67 per cent each.

 

A total of 177700 employers were inspected to determine compliance with employment law against a target of 222678, resulting to a variance of 44978. The total number of compliant employers was 134832 and non-compliant employers was 42868. Of the non-compliant employers, 42430 were issued with notices.

The reasons for non-achievement were reported to be:

• Inaccessibility of some workplaces due to the number of COVID positive cases. However, administrative inspections had been introduced. These were not as effective as they could have been due to process and system challenges.
• Some offices took longer than anticipated to fill vacancies and this had an effect on the achievement of targets.

The following remedial actions were proposed:

• The Branch established a national roving team and has developed national blitz inspections plan to cover backlog from previous quarters.

 

The programme inspected 1555 employers for compliance with Employment Equity Act against a target of 2574, resulting to a variance of 1019. Of the inspected employers, 644 were compliant and 911 were non-compliant. Of the non-compliant employers, 799 were issued with notices.

 

A total of 95643 employers were inspected for compliance with Basic Conditions of Employment Act against a target of 126261 resulting to a variance of 30618. A total of 89583 employers were found to be compliant and 1060 were non-compliant. All non-compliant employers were issued with notices.

 

The programme conducted 12144 employment procedural audits against a target of 12981, resulting to a variance of 837. A total of 6006 employers were compliant and 6138 were non-compliant. All non-compliant employers were issued with notices. A total of 6478 employer payroll audits (COID) were conducted against a target of 6927, resulting to a variance of 449. Of the audited employers, 2583 were compliant and 3895 were non-compliant. All non-compliant employers were issued with notices.

 

 

 

 

A total of 3361 cases were referred for prosecution and the majority of those were for non-compliance to UI Act. Monies recovered for non-compliance to COIDA and the NMWA amounted to R28.2 million and R19.7 million respectively.

 

Programme 3 (Public Employment Services) had five indicators with targets reporting in Q3. Of the five indicators reporting in Q3, four were achieved translating to an overall achievement of 80 per cent, which is a decline from 100 per cent achieved in Q2. A total of 197198 work-seekers were registered on Employment Services South Africa (ESSA) system against the target of 185280 resulting to a positive variance of 11918. The reason for the variance was reported to be high level of unemployment in the country and companies closing down due to Covid-19.

 

Of the work-seekers registered on ESSA, 118472 are young people aged 15-35 and 66808 are adults aged 36 years and above. Gender split of registered work-seekers is 54 per cent females and 46 per cent males. A total of 627 or 0.3 per cent of registered work-seekers have disabilities. Classification of work-seekers in terms of equity groups is as follows: African:159024 or 81 per cent, Coloureds: 19994 or10 per cent, Whites: 5243 or 3 per cent, Indians: 2099 or 1 per cent and unspecified: 10808 or 5 per cent.

 

A total of 105914 employment opportunities were registered on ESSA against a target of 75000 resulting to a positive variance of 30914. The reason for over achievement was reported to be an increase in registered employment opportunities. Only 23359 or 22 per cent registered work and learning opportunities are classified by economic sector and 82555 or 78 per cent are not. The sectors that registered most opportunities are agriculture (6609), safety and security (6253), financial accounting (2716), local government (2164) and education (2148). The challenge was negative impact of COVID-19 pandemic lockdown on the economy that led to closure of some businesses and reduced registration of opportunities.

Registration of opportunities by opportunity types is as follows:

Formal jobs-59875 or 57 per cent, projects-30993 or 29 per cent, learnerships-7557 or 7 per cent, internships-2451 or 2 per cent, UIF-LAP-2045 or 2per cent, apprenticeships-1641 or 2 per cent and will-programme-1240 or 1 per cent.

 

Opportunities registered by employment type is as follows:

Contract-82734 or 78 per cent, temporary-14279 or 13 per cent, permanent-5921 or 6 per cent and other-2980 or 3 per cent. A total of 209487 registered work-seekers were provided with employment counselling against a target of 170200 resulting to a positive variance of 39287. The reason for deviation was that high levels of unemployment necessitated that more people be provided with employment counselling. The following provinces provided the majority of counselling:

 

 

 

Gauteng (46803), KwaZulu-Natal (28114), Eastern Cape (25860) and Mpumalanga (25137).

A total of 1432 or 0.7 per cent registered work-seekers who received counselling have disabilities.

 

Placements: A total of 48638 registered work and learning opportunities were filled by registered work seekers against a target of 25000. The reason for deviation was reported to be improved employer confirmation of placement. Of the filled work and learning opportunities 27501 or 57 per cent were formal jobs, 16284 or 33 per cent were projects and 2938 or 6 per cent were learnerships.

 

Of all the placements, 38382 or 79 per cent are of contract type, 7254 or 15 per cent are temporary opportunities, 2026 or 4 per cent are permanent opportunities and 976 or 2 per cent are classified as other. Only 6902 or 14 per cent of filled opportunities are classified by economic sector and 86 per cent are not. The sectors with majority placements are agriculture (1892), safety and security (1205), local government (934) and education (763).

 

Challenges experienced were reported to be skills mismatch, number of work seekers lack required experience, negative impact of COVID-19 pandemic lockdown that led to closure of some businesses. Proposed interventions include profiling of work-seekers on ESSA database, collaboration with businesses and other departments to identify new employment opportunities and implementation of employment scheme as soon as budget becomes available.

 

In terms of age, 32743 or 67 per cent work-seekers placed are young people aged 15-35 years, 15871 or 33 per cent are people aged 36 years and above and the remaining 33 were not specified by age group. In terms of gender, 28428 or 58 per cent of placements are females and 20163 or 41 per cent are males.

 

The programme concluded 13 partnership agreements with various stakeholders against a target of 15. The reason provided for failure to meet the target was that the verification process was still in progress. Finalisation of the verification process is proposed as the remedial action.

 

Programme 4 (Labour Policy and Industrial Relations) had five indicators with targets reporting in Q3. This branch achieved three of the five targets reporting in Q3. This translates to an overall achievement of 60 per cent, which is a decline from the 100 per cent achieved in Q2.

 

 

 

 

 

The branch did not achieve the target of publishing the National Minimum Wage Investigation Report by 31 October 2021. The Report was published on 17 December 2021 in the Government Gazette No. 45649. The reason for variance was reported to be that:

• Researchers experienced challenges caused by the change in Statistics SA data collection method for the QLFS to a telephonic survey from 2020 Q2 onwards as a result of COVID-19 pandemic.
• Discrepancies on wage data from Statistics SA.

 

Large adjustments to hours of work in 2020 Q2 as a result of COVID-19 pandemic and this had an effect on calculations of hourly wages, which are important to NMW research.

To circumvent the delay, the NMW Commission published a notice on the government gazette no. 45128 on 10 September 2021 inviting written representations concerning possible adjustments to the NMW and to alert the public that it will publish its report and recommendations on the adjustment of the NMW later in 2021.

 

This programme did not achieve the target of submitting mid-term implementation report on bilateral cooperation and multilateral obligations to the Minister by 31 October 2021 for sign-off. It was reported that the report was delayed due to unforeseen new commitments, which impacted on submission date. As a remedial action, a revised early collation date for 2022 has been set to ensure consolidation is timeous.

 

This programme received 27 applications for registration from labour organisations in Q3, which is 29249 in terms of members of labour organisations that made applications. Of the received applications one was approved within 90 calendar days of receipt and 26 were rejected, which is 28820 in terms of membership. Three trade unions were deregistered in Q3.

 

3.         FINANCIAL REPORT OF DEL

3.1.      Expenditure information per Programme in Q3 of 2021/22

The Department reported its expenditure per Programme as follows:

 

Table 2: DEL Expenditure Information per Programme in Q3 of 2021/22

BRANCH	Q3 Budget	Q3 Expenditure	Available Budget	Expenditure
	R’000	R’000	R’000	%
Administration	254 250	229 606	24 644	90%
Inspection and Enforcement Services	166 673	132 539	34 134	80%
Public Employment Services	170 212	169 910	302	100%
Labour Policy and Industrial Relations	351 119	335 141	15 978	95%
Total	942 254	867 196	75 058	92%

Source: Presentation to the Portfolio Committee on Employment and Labour dated 31 August 2022

 

Table 2 above reflects that the Department spent R867.2 million or 92 per cent of the R942.3 million budget allocated for Q3, resulting to a variance of R75.1 million. The Administration programme received R254.3 million budget in Q3 and spent R229.6 or 90 per cent of the allocation by the end of the quarter. This resulted to a variance of R24.6 million by the end Q3 of 2021/22 financial year.

 

The Inspection and Enforcement Services programme received R166.7 million budget for Q3 of 2021/22, which is the lowest programme allocation. It spent R132.5 million or 80 per cent of the allocation by the end of the quarter, resulting to a variance of R34.1 million. The Public Employment Services programme spent R169.9 or 100 per cent of the R170.2 million allocated for Q3, resulting to a variance of R302 000 by the end of the quarter.

 

Labour Policy and Industrial Relations programme received a budget of R351.1 million in Q3, which is the largest programme allocation. It spent R335.1 million or 95 per cent of the allocation by the end of the quarter resulting to a variance of R15.9 million. The larger share of this programme budget goes to Transfers and Subsidies since it houses the CCMA, which is the entity that receives the largest allocation from the Department. This can be seen in expenditure by economic classification as reflected in the table below.

 

3.2.      Expenditure information by economic classification in Q3 of 2021/22

Table 3 below reflects the expenditure information by economic classification.

 

Table 3: Expenditure Information by Economic Classification in Q3 of 2021/22

ECONOMIC CLASSIFICATION	Q3 Budget	Q3 Expenditure	Available Budget	Expenditure
	R’000	R’000	R’000	%
Current Payments	517 664	469 849	47 815	91%
Compensation of Employees	351 503	323 976	17 527	95%
Goods and Services	176 161	145 873	30 288	83%
Transfers and Subsidies	395 230	382 167	13 063	97%
Payments for Capital Assets	29 360	15 180	14 180	52%
Payment for Financial Assets	-	-	-	-
Total	942 254	867 196	75 058	92%

Source: Presentation to the Portfolio Committee on Employment and Labour dated 31 August 2022

 

Table 3 above reflects that a total of R517.7 million was allocated for current payments in Q3 of 2021/22. Of this amount, R351.5 million was allocated to Compensation of Employees and R176.2 million to Goods and Services.

 

Of R517.7 million allocated for Current Payments, R469.8 million or 91 per cent was spent by the end of Q3 resulting to a variance of R47.8 million. A total of R323.9 million or 95 per cent of R341.5 allocated for Compensation of Employees was spent by the end of Q3 resulting to a variance of R17.5 million. A total of R145.9 million of R176.2 million or 83 per cent was spent on Goods and Services resulting to a variance of R30.3 million by the end of Q3 of 2021/22.

 

Transfers and Subsidies received R395.2 million and R382.2 million or 97 per cent was spent by the end of Q3 resulting to a variance of R13.1 million. Payment for Capital Assets received a budget allocation of R29.4 million and R15.2 million or 52 per cent was spent by the end of Q3 resulting to a variance of R14.2 million.

 

1. Q3 PERFORMANCE OF ENTITIES OF THE DEPARTMENT OF LABOUR (2021/22)

 

The entities that report to the Department of Employment and Labour are:

 

• Commission for Conciliation, Mediation and Arbitration

• Productivity South Africa
• National Economic Development and Labour Council
• Unemployment Insurance Fund
• Compensation Fund

 

4.1.      Commission for Conciliation Mediation and Arbitration (CCMA)

 

CCMA is a statutory body established in terms of section 112 of the Labour Relations Act of 1995 (LRA), as amended.

In terms of section 113 of the LRA, CCMA is independent of the State, any political party, trade union, employer, employers’ organisation, federation of trade unions or federation of employers’ organisations.

 

4.1.1.    Constitutional Mandate

CCMA’s Constitutional mandate is drawn directly from section 23 of the Constitution of the Republic of South Africa that deals with labour relations.

 

4.1.2.    Mandatory Functions

Mandatory functions of the CCMA are to:

• Conciliate and arbitrate workplace disputes.
• Assist with the establishment of workplace forums.
• Compile and publish statistics and information about its activities.
• Administer the Essential Services Committee (ESC).
• Consider applications for accreditation and subsidies of bargaining councils and private agencies.

 

4.1.3     Discretionary Functions

The discretionary functions of CCMA are to:

• Supervise ballots for unions and employer organisations.
• Provide training and information relating to primary objective of the LRA.
• Advise a party to a dispute about the procedures to follow.
• Offer to resolve a dispute that has not been referred to the CCMA.
• Publish guidelines on any aspect of the LRA and to make rules.
• Provide training and advice on establishment of collective bargaining structures, workplace restructuring, consultation processes, termination of employment, employment equity programmes and dispute prevention.
• Conduct and publish research.
• Provide assistance of an administrative nature to an employee earning less than the BCEA threshold.
• Determine fees that CCMA can charge and regulate practice and procedure for conciliation and arbitration hearings.

 

4.1.4.    Strategic Pillars

The strategic pillars of the CCMA are to:

• Optimise the organization.
• Enhance labour market stability
• Support strategy implementation and good governance.

 

4.1.5.    Programmes of the CCMA

 

 

Programmes of the CCMA are:

1. Administration
2. Proactive and relevant labour market intervention
3. Special interventions and support
4. Efficient and quality dispute resolution and enforcement services
5. Effective strategy management and governance

 

 

4.1.6.    CCMA 2021/22 Q3 Non-Financial Performance

 

CCMA reported that it had four planned indicators reporting in Q3 and all were achieved translating to an overall achievement of 100 per cent. The table below provide the details on non-financial performance in Q3.

 

Table 4: CCMA 2021/22 Q3 Non-Financial Performance Results

OUTPUT INDICATOR	Annual Target	Quarterly Target	Q3 Actual Output
Number of interventions conducted to promote effective dispute resolution in essential services	9	2	2
Number of stakeholders engaged to ensure that there are minimums to be maintained during industrial action in essential services.	84	12	30
Number of essential services designations, minimum services agreements, minimum services determinations and/or maintenance services determinations monitored for compliance and observance.	6	1	2
Number of awareness sessions on essential services designation conducted	10	2	3

Source: Presentation to the Portfolio Committee on Employment and Labour dated 7 September 2022

 

The above table reflects that CCMA had an annual target of conducting nine interventions to promote effective dispute resolution in essential services and two interventions in Q3. The entity conducted two interventions as per target.

 

CCMA had an annual target of engaging 84 entities to ensure that there are minimums to be maintained during industrial action in essential services and a quarterly target of engaging 12 entities. It engaged 30 entities in Q3 against the target of 12. Over-achievement on this target was attributed to the high interest for MSA facilitations shown by the Department of Social Development (DSD), which were initially organised per province. It is also in the interest of the ESC to have as many public centres as possible concluding MSAs.

 

The Commission had an annual target of monitoring 6 essential services designations, minimum services agreements, minimum services determinations and/or maintenanance services determinations for compliance and observance and a quarterly target of monitoring one. The entity monitored two in Q3 against the target of one. Over-achievement was attributed to a request received by the ESC from NEHAWU in Parliament to review the Minimum Service Determination (MSD) which was concluded on the 6th August 2020, which was then conducted to avert any possible industrial action.

 

The entity had an annual target of conducting 10 awareness sessions on essential services designations and a quarterly target of conducting two. The entity conducted three against a target of two in Q3. Over-achievement on this target is attributed to the increased requests by the private hospitals for the ESC’s assistance in designating private health, as the six months given to the sector to conclude MSAs was lapsing.

 

4.1.7           High Impact Labour Market Contributions in 2021/22, Q3

During the period under review, a total of 3880 referrals were received by the CCMA. This is an increase of 2 per cent (93) referrals compared to 37877 referrals in the second quarter of the same financial year. Majority of referrals were from Business/professional services, Safety/security (private) and Retail at 20 per cent 15 per cent and 13 per cent respectively. On average, CCMA took 23 days (legislated days is 30) to deal with conciliation cases and 76 days (legislated days is 60) to deal with arbitration cases. The settlement rate was 74 per cent in Q3. CCMA received 11 TERS applications of which four were recommended and seven not recommended amounting to R14.6 million.

 

Other achievements

CCMA conducted the following activities in Q3 of 2021/22:

• 5475 outreach services conducted (inclusive of awareness raising activities, capacity building activities and social justice blockages activities);
• 847616 people were capacitated to better understand the law and their rights through outreach activities (inclusive of Radio Talk Shows);
• 104 complains were received, 80 were investigated and responded to while 24 were pending investigations;
• 95 per cent (35 of 37) of public interest matters (section 150) were settled;
• 48 per cent of jobs (4283 out of 9015 jobs at stake) were saved compared to employees facing retrenchments (cases referred to the CCMA);

4.1.8.    CCMA Financial Performance in Q3 of 2021/22

 

Table 5: CCMA Expenditure per Programme in Q3 of 2021/22

PROGRAMME	Budget	Actual Spending	Variance	Variance
	R’000	R’000	R’000	%
Administration	160 444	130 764	29 680	18%
Labour Market Intervention	8 883	9 008	(125)	(1%)
Special Interventions and Support	11 303	10 243	1 060	9%
Dispute Resolution and Enforcement Services	535 716	530 602	5 115	1%
Strategy Management and Governance	24 666	22 329	2 337	9%
TOTAL	741 012	702 946	38 066	5%

Source: Presentation to the Portfolio Committee on Employment and Labour dated 7 September 2022

 

The CCMA budget for Q3 2021/22 amounted to R741.0 million. Of this amount, R702.9 million or 95 per cent was spent by the end of Q3, resulting to a variance of R38.1million or 5 per cent of the budget.

 

The Dispute Resolution and Enforcement Services programme received R535.7 million, which is the largest share of the budget. Of this amount, it spent R530.6 million or 99 per cent by the end of Q3 resulting to a variance of R5.1 million or 1 per cent of the budget. The variance was reported to result from a reduction in projected referrals, which is influenced by slow economic recovery and the continuous impact of COVID-19. The other contributing factor is resulting from dispute management outreach activities, including travelling costs, venue hire and promotional materials that were budgeted for but not utilized as anticipated due to impact of COVID-19 regulations. Finally, the other factor is reduced expenditure in travelling costs to conduct cases in the remote areas by the commissioners. Therefore, it is expected that the variance will be utilized in last quarter of the financial year.

 

The Administration programme received R160.4 million, which is the second largest programme budget of the entity. It spent R130.8 million or 82 per cent of the budget by the end of Q3, resulting to a variance of R29.7 million or 18 per cent. The variance was reported to result from timing differences in staff recruitment. Other contributing factor is the timing difference in software expenditure maintenance and funding of assessment of the doubtful debts, which was budgeted for but not incurred as anticipated. In addition, COVID-19 related expenditure, and insurance premiums which are amortised monthly, also contributed to the favourable variance. Furthermore, the favourable variance results from timing differences in travel costs and training interventions that are still expected to be held during the financial year and court litigation costs, including the printing for pocket statute manual practices procedure and case law manuals which will be incurred when a need arises. Lastly, the variance also results from recruitment services and projects such as organizational design, which will be executed in subsequent months.

 

Strategy Management and Governance programme received a budget of R24.7 million and spent R22.3 million or 91 per cent of the allocation by the end of Q3. This resulted to a variance of R2.3 million or 9 per cent of the allocation. The variance was reported to be due to timing differences in staff recruitment and the amortization of insurance premium, which will be absorbed in the last quarter of the financial year. Other factor is the renewal of data analysis software, and qualitative analysis tool at the requisition stage of the SCM processes and the timing differences in travel costs and delays in payment related to the website revamp project.

 

Labour Market Intervention programme received a budget of R8.9 million and spent R9.0 million, which is an over-expenditure by 1 per cent in Q3. The variance was reported to result from more claims received from the Councils on the awards made. Other contributing factor is resulting from the re-submission of claims that were non-compliant which were rejected for payment processes in previous months.

 

Special Interventions and Support was allocated a budget of R11.3 million in the Q3 and spent R10.2million or 91 per cent by the end of Q3, resulting to a variance of R1.1 million or 9 per cent. The variance was reported to result from timing differences in staff recruitment and less utilization of part-time commissioners for the ESU and Mediation interventions. The other contributing factor is saving related to travel costs for the ESC members to conduct its mandate; the saving will be absorbed when the activities occur in the last quarter of the financial year.

 

1. Productivity South Africa

Productivity SA s established in terms of section 31 of the Employment Services Act, No. 4 of 2014, as a schedule 3A Public Entity of the Department of Employment and Labour with the responsibility to fulfill an economic or social mandate of government, which is to promote employment growth and productivity thereby contributing to South Africa’s socio-economic development and competitiveness.

 

Productivity SA has three regional offices in Johannesburg/ Midrand, which is the Head Office and also servicing Gauteng, North West and Limpopo; eThekwini/ Durban servicing KZN, Eastern Cape and Mpumalanga; and Cape Town servicing Western Cape, Northern Cape and Free State.

 

Vision

The vision of Productivity SA is to lead and inspire a productive and competitive South Africa.

 

Mission

The mission is to improve productivity by diagnosing, advising, implementing, monitoring and evaluating solutions aimed at improving South Africa’s sustainable growth, development and employment through increased competitiveness.

 

Legislative Mandate

Productivity SA contributes to the following mandate of the Department:

• Improved economic efficiency and productivity.
• Creation of decent employment.
• Promoting social dialogue and workplace democratization.

 

Functions of Productivity SA

In terms of section 32 of the Employment Services Act, the functions of Productivity SA are to:

• Promote a culture of productivity in the workplace;
• Facilitate and evaluate productivity improvement and competencies in the workplace;
• Support initiatives aimed at preventing job losses;
• Measure and evaluate productivity and competitiveness in the workplace and overall economy; and
• Maintain a database of productivity and competitiveness systems and publicize same; and to undertake productivity-related research

 

1. Productivity SA Performance per Strategic Objective in Q3 of 2021/22

 

Productivity SA reported its performance per Strategic Objective as follows:

 

Table 6: Productivity SA Performance per Strategic Objectives in Q3 of 2021/22

STRATEGIC OBJECTIVES		Annual Planned Indicators	Q3 Planned Indicators	Achieved	Overall Achievement %
1.	Strengthen the institutional capacity of Productivity SA to deliver on its mandate and be financially sustainable	3	1	1	100%
2.	To support government programmes aimed at sustainable employment and income growth	2	2	2	100%
3.	To support enterprises facing economic distress and initiatives aimed at preventing job losses.	3	3	1	33%
4.	Generation and dissemination of productivity related research and statistics	2	n/a	n/a	n/a
5.	To promote a culture of productivity and competitiveness in the workplace and community life	2	2	2	100%
Overall Performance		12	8	6	75%

Source: Presentation to the Portfolio Committee on Employment and Labour dated 7 September 2022

 

Table 6 above reflects that Productivity SA had 12 annual planned indicators for 2021/22 financial year. Of these indicators, 8 report in Q3. The entity achieved 6 of the 8 indicators reporting in Q3, translating to an overall performance of 75 per cent. Strategic objective 3 achieved one of the three indicators reporting in Q3, translating to an overall achievement of 33 per cent. The entity achieved 100 per cent in other strategic objectives.

 

1. Productivity SA Performance per Programme in Q3 of 2021/22

 

Productivity SA reported on its performance per programme as follows:

Table 7: Productivity SA Performance per Programme in Q3 of 2021/22

PROGRAMME		Annual Planned Indicators	Q3 Planned Indicators	Achieved	Overall Achievement %
1.	Corporate Services (CS)	2	1	1	100%
2.	Human Resource Management (HRM)	1	n/a	n/a	n/a
3.	Corporate Relations (CR)	1	1	1	100%
4.	Competitiveness Improvement Services (CIS)	3	3	3	100%
5.	Business Turnaround and Recovery (BT&R)	3	3	1	33%
6.	Research, Innovation and Statistics (RIS)	2	n/a	n/a	n/a
Overall Performance		12	8	6	75%

Source: Presentation to the Portfolio Committee on Employment and Labour dated 7 September 2022

 

Table 7 above reflects that there were 12 annual planned indicators. Of these, 8 indicators have targets reporting in Q3. The entity achieved six of the eight targets reporting in Q3, translating to an overall performance per programme of 75 per cent. Business Turnaround and Recovery (BT&R) programme had three indicators reporting in Q3 and one was achieved, translating to an overall achievement of 33 per cent. BT&R saved 7473 jobs in companies facing economic distress against a target of 7900, missing the target by 427 jobs. Under-achievement was attributed to that many companies that sought help did not meet the compliance requirements. They were either not in good standing with SARS and/or UIF. In addition, under capacity across all regions contributed to this under-achievement.

 

As a remedial measure, the relaxation of the compliance requirements during the current pandemic have been raised with the leadership of DEL as well as the importance of establishing the Technical Steering Committee to resolve any service delivery constraints. In addition, there is an on-going recruitment drive for vacant positions and additional service providers. BT&R supported 82 companies facing economic distress through turn-around strategies to retain jobs against a target of 158, missing the target by 76 companies. Under-achievement was attributed to that many companies that sought help did not meet compliance requirements. They were either not in good standing with SARS and/or UIF. In addition, under capacity across all regions contributed to this under-achievement.  The remedial action proposed above is also applicable in this instance.

1. Productivity SA Financial Performance in Q3 of 2021/22

 

Productivity SA reported its financial performance as follows:

 

Table 8: Productivity SA Expenditure per Programme in Q3 of 2021/22 Financial Year

PROGRAMMES	Budget	Actual	Variance	Expenditure Q1 2021/22
	R’000	R’000	R’000	%
Administration	44 282	45 497	(1 215)	103%
Competitiveness Improvement Services	14 906 053	16 999	(2 0930	114%
Business Turnaround and Recovery	55 423	17 560	37 863	37%
Research, Innovation and Statistics	7 327	5 565	1 762	76%
TOTAL EXPENDITURE	121 938	85 621	36 317	70%

Source: Presentation to the Portfolio Committee on Employment and Labour dated 7 September 2022

 

 

 

Table 8 above reflects that Productivity SA had a total budget of R121.9 million in Q3 of 2021/22. It spent R85.6 million or 70 per cent by the end of Q3. This resulted to a variance of R36.3 million. The Business Turnaround and Recovery programme received the largest budget allocation of R55.4 million. However, it spent only R17.6 million or 37 per cent of the programme allocation. This resulted to a variance of R37.9 million.

 

Administration programme received the second largest programme allocation of R43.3 million. It spent R45.5 million or 10 per cent of the allocation resulting to over-expenditure of R1.2 million. Competitiveness Improvement Services programme received R14.9 million and spent R16.9 million or 114 per cent of the allocation resulting to over-expenditure of R2.1 million. Research, Innovation and Statistics programme received R7.3 million programme allocation and spent R5.6 million or 76 per cent of the allocation. This resulted to a variance of R1.8 million.

 

1. National Economic Development and Labour Council (NEDLAC)

 

The NEDLAC was established through the NEDLAC Act no 35 of 1994. It operates under the terms of the NEDLAC Constitution. NEDLAC mandate is derived from the following: NEDLAC Act; Labour Relations Act, NEDLAC Constitution; and NEDLAC protocols.

 

NEDLAC objectives in terms of the NEDLAC Act are as follows:

• 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 they are introduced in Parliament;
• Consider all significant changes to social and economic policy before it is implemented or introduced in Parliament; and
• Encourage and promote the formulation of coordinated policy on social and economic matters.

 

1. NEDLAC Performance per programme in Q3 of 2021/22

 

NEDLAC reported its performance per programme as follows:

 

 

 

 

Table 9: NEDLAC Performance per Programme in Q3 of 2021/22

PROGRAMME		Planned Indicators	Indicators reporting in Q3	Indicators achieved in Q3	Indicators not achieved	Overall Achievement %
1.	Administration	6	4	0	2	0%
2.	Core-Operations	4	2	2	0	100%
3.	Constituency Capacity Building	3	2	2	0	100%
Overall Performance		13	6	4	2	75%

Source: Presentation to the Portfolio Committee on Employment and Labour dated 7 September 2022

 

Table 9 above reflects that NEDLAC had 13 annual planned indicators. Of these indicators, 6 report in Q3 of 2021/22 and 4 were achieved translating to an overall performance of 75 per cent. Core-operations programme had two indicators reporting in Q3 and they were both achieved resulting in overall achievement of 100 per cent.

 

The Administration programme had four indicators reporting in Q3 of 2021/22. Of these indicators none was achieved. This translates to an overall achievement of 0 per cent. Constituency Capacity Building programme had two planned indicators reporting in Q3 of 2021/22. Both these indicators were achieved, translating to an overall achievement of 100 per cent.

The entity commented on indicators that were not achieved as follows:

• Only 23 per cent of the 30 per cent of planned training targets were achieved. This was reported to be due to delays in procurement processes due to non-responsive tenders.

Improved procurement processes were put in place and a report was provided to MANCO.

• Only 42 per cent of the 100 per cent of complaints resolved. Most of the complaints/incidents were not addressed due to time constraints and availability of a user or support team as well as hardware failures.

This poor achievement was reported to be mostly related to the cyber-attack which happened in the second week of December where staff and service providers were not readily available.

 

1. NEDLAC Financial Report as at Q3 of 2021/22

 

NEDLAC reported on its finances as follows:

 

 

 

 

Table 10: NEDLAC Financial Report

Financial Performance Data	Q3 2021/22 Actual Budget R’000	Q3 2021/22 YTD Budget   R’000	Variance     R’000
Grants	44 320	44 320	-
Interests & other income received	976	658	318
Total Revenue	45 296	44 978	318
Compensation of Employees	20 202	21 345	1 143
Goods & Services	9 833	22 200	12 367
Depreciation & amortisation	1 166	1 433	267
Total expenses	31 201	44 978	13 777
Surplus/ Deficit	14 095		14 095

Source: Presentation to the PC on Employment & Labour date 7 September 2022

 

Table 10 above reflects that NEDLAC Year to Date budget for Q3 2021/22 financial year amounted to R44.978 million. Of this amount R31 201 million was spent by the end of Q3, resulting to a variance of R13.777 million. The key reason for underspending was reported to be:

• Saving on compensation of employees due to vacancies.
• A significant increase in goods and services budget (from R5.7 million in Q2 to R9.8 million in Q3), but still underspend compares to year to date. However, there were plans to spend in place.
• No new transactions of irregular expenditure or fruitless and wasteful expenditure.

 

NEDLAC reported on its expenditure per programme as follows:

 

 

 

 

 

 

 

 

 

 

 

Table 11: Expenditure per programme in Q3

Programme	Q3 YTD budget R’000	Q3 YTD actual R’000	Variance R’000
Administration	26 206	20 580	5 625
Core-Operations	13 147	7 757	5 390
Capacity Building	5 625	2 864	2 761
Total	44 978	31 201	13 777

Source: Presentation to the PC: Employment and Labour dated 7 September 2022

 

Administration programme spent R20.6 million of the R26.2 million budget allocation, translating to a variance of R5.6 million.

Core-Operations programme spent R7.8 million of its R13.1 million budget allocation, translating to a variance of R5.4 million.

Capacity Building programme spent R2.9 million of the allocated R5.6 million, translating to a variance of R2.8 million.

1. The Unemployment Insurance Fund

 

UIF responded to AGSA and SCOPA as outlined in the following paragraphs:

 

1. UIF AGSA AND SCOPA RESPONSE

 

The entity responded to the following matters arising from Q2:

• Audit Outcomes
• Comprehensive Action Plans
  • Investment findings
  • Irregular Expenditure
  • Covid 19 TERS expenditure
  • Financial discipline
  • Follow the money

 

1. Audit Outcomes 2016/17 – 2020/21

UIF reflected an improvement from disclaimer opinion in 2016/17 to an unqualified opinion in 2017/18.

The reasons for disclaimer in 2016/17 were:

• Investments
• Investments Revenue
• Fair value adjustment
• Cash flow statement

However, the entity regressed to qualified opinions in 2018/19; 2019/20; and 2020/21. In the three financial years, the reason that is common is:

• Investments in associated interest in joint venture and other financial asset payments.

 

UIF outlined measures taken to address qualification areas and outstanding matters.

Outstanding matters are:

• Audit firms to implement follow the money project will be appointed; COVID 19 TERS reconciliation between financial and operational systems.
• To identify and recognize all COVID 19 TERS over-payments; To automate all system identified over-payment; To conduct debt collection process on all the outstanding debts.
• Refreshed data to be analysed by the appointed actuaries; COVID 19 TERS reconciliation between financial and operational systems.
• To identify and recognize all COVID 19 TERS additional benefit payment transactions; To appoint a reviewer for the disclosure purpose; The trail balance to be reviewed on a weekly basis.
• Consultation meeting with National Treasury; Responses from the PIC on the valuation reports.
• Principal agent analysis exercise to be finalized and disclosed; The accounting policy and disclosure notes to be updated; Prepayment checklist to be prepared and implemented.

 

B. Comprehensive Action Plans

Investment Findings

Investment findings led to qualification. As a result, UIF took the following action:

• UIF consulted various stakeholders and changed the accounting treatment of unlisted investments;
• UIF developed detailed review procedures to deal with accounting treatment of management accounts;
• Improved governance by instituting the Investment Committee joint meetings with the PIC;
• Reviewed the unlisted investment mandate; and
• Improved oversight on investment by instituting the Board to Board meetings with PIC.

 

Irregular expenditure

• The Loss Control Committee has been formed and is in the process of concluding the draft reports for management inputs and handover to the relevant Departments.
• Updated the Irregular, Fruitless and Wasteful Expenditure register.
• Assessment and determination test has been concluded for nine (9) irregular and five (5) fruitless and wasteful expenditure cases.

 

COVID 19 TERS expenditure

Over and above the investigations, UIF responded to the following issues:

• Overpayments
• Acknowledgement of debts
• Refunds
• ICT interventions

 

 

Financial discipline

Financial Review Checklist ensures that:

• Balances are supported by appropriate supporting schedules, thus accounting for all movements; Balances are properly reconciled; Reconciliations ae reviewed and signed off at the appropriate levels; and All reconciling items are investigated, long outstanding reconciliations are escalated and appropriately cleared.
• Going forward, interventions in Expenditure and Supply Chain process will ensure that all expenditure transactions observe and complies to Expenditure Financial Discipline in that all expenditure is within budget to avoid Unauthorised Expenditure and unnecessary budget excesses.
• Using GRAP checklist to ensure that all transactions are accounted for in line with Accounting Prescripts.

 

Follow the Money

Follow the Money project is sponsored by the UIF Commissioner and managed by Mr. Nkosi and has eight (8) service providers.

The objective of the project is to ensure that COVID 19 TERS relief funds reached the intended recipients and where not spent appropriately, recover the funds with interest.

The start date of the project is 1 April 2022 and the end date is 31 March 2023.

The highlights of the project include:

• Phase of Follow the Money concluded with six (6) auditors.
• R14 billion confirmed to have been paid correctly to deserving employees by employers.
• A further R3.2 billion paid back by employers as a result of audit.

Other achievements include:

• Follow the money tender was finalized. Seven (7) audit firms have been appointed and were planned to start on 1 September 2022 but due to court cases the process was moved to until the court challenge was resolved. The legal teams of both the firms and Department are finalizing agreements.

Activities in progress include:

• Risk based criteria for selecting priority companies to be audited in the coming 12 months.
• Automated solution for Follow the Money: Change request approved.
• The Task Team established has developed the activities to deal with the COVID TERS Accounting treatment.

Critical issue:

• One service provider took UIF to court for not being appointed for the project, resulting in the project being halted. However, the service provider withdrew one part of the court matter but retain another one.

 

1. Matters arising from Q2 Portfolio Committee appearance

The following are matters arising from Q2 appearance of the UIF before the Portfolio Committee on Employment and Labour:

• Court Rulings;
• Follow the Money;
• Resolution of service delivery challenges and complaints;
• Calculation of benefits;
• Interventions on KZN flood disasters;
• Financial sustainability;
• Distribution of COVID 19 TERS payments;
• WABU payments progress;

 

Court rulings

• Acknowledgement of debt amounting to R42 million and R33 million recovered by SIU.
• As at 23 August 2022, exposed UIF payments linked to cases amounted to R230 million, amount preserved by AFU was R133 million and amount already received/recovered was R123 million.
• As at 23 August 2022, there were five (5) convictions, five (5) prior year convictions and two (2) acquittals.

 

Follow the money

Total verified amounted to R810 million. Of this amount 77.4 per cent was verified as accurate, 17.8 per cent was refunded, 3.4 per cent is still to be refunded and 1.5 per cent was referred to SIU. Employers are given till 30 September 2022 to submit requested information. If the deadline is not met, the following actions will be taken:

• Employers will be referred to the SIU;
• Employers will refund the whole COVID TERS funds;
• Employers will be blocked from any UIF service offerings; and
• Employers will be blacklisted from doing business with UIF.

 

Resolution of service delivery challenges and complaints

• The Fund embarked on the fit-for-purpose project. The project objectives are to review the systems, processes and structure focusing on the client in order to improve service delivery.
• Appointed a Complaints Officer with a complaint team.
• Deployed integrated Virtual Office (VO) and Siyaya for seamless claim processing.
• Decentralised claims processing to the Provinces.
• Increased Call Centre capacity from 50 agents to 350 agents.

 

Calculation of Benefits

Formulae for calculation of benefits were provided.

 

Interventions on KZN flood disasters

UIF reported that the Department does not have an established, documented, and predictable mechanism for deciding on requests for interventions. A process to develop a guiding framework/approach for responding to such requests is at conceptualization stage. The framework will seek to balance responsiveness versus financial sustainability.

 

Financial sustainability of the Fund

The Fund was reported to be financially sustainable, with the growth in total assets.

 

Distribution of COVID 19 TERS payments

A total of 14.7 million employees were paid and the payments amounted to R64 billion.

 

WABU payments progress

A total amount of R19 million was paid to 6071 beneficiaries.

 

1. UIF Performance per Programme in Q3 of 2021/22

 

Management of the UIF reported that 13 of the 25 targets were achieved and 12 were not achieved. The achievement was initially reported at 52 per cent. Following the internal audit, performance was confirmed at 48 per cent.

Summary of Internal Audit findings is as follows:

• Evidence provided on the indicator percentage of internal and external audit findings did not include Internal Audit findings as required by the TID.
• Documentary proof of the decision could not be produced and therefore, the reported performance was only based on AGSA audit findings and for that reason the target cannot be said to have been achieved.

Management accepted these findings and has already included Internal Audit findings in its quarter 4 APP report.

 

Conclusions made by Internal Audit were that:

• The evidence gathered meets the Standards for the Professional Practice of Internal Auditing.
• The evidence is sufficient to provide senior management with proof on the conclusion derived from the Internal Audit.
• The control environment within the Policy and Planning Directorate needs improvement.

 

UIF reported on its performance per Programme as follows:

 

Table 12: UIF Performance per Programme in Q3 of 2021/22

PROGRAMME		Planned Targets	Achieved	Overall Achievement %
1.	Administration	12	6	50%
2.	Business Operations	8	5	63%
3.	Labour Activation Programmes	5	1	20%
Overall Performance		25	12	48%

Source: Presentation to the Portfolio Committee on Employment and Labour dated 28 September 2022

 

The entity achieved 12 of its 25 planned indicators, translating to an overall performance of 48 per cent in Q3 of 2021/22. The entity also achieved 48 per cent in Q2 of 2021/22.

 

1. Administration

Table above reflects that the Administration programme achieved six of the 12 planned indicators, which translates to an overall achievement of 50 per cent. The targets that were not achieved are:

• Wasteful and Fruitless Expenditure was 39 per cent, which is above the 22.5 per cent target. The reason for the variance was non-compliance with procurement prescripts.
• The entity paid 99 per cent (544/546) of valid invoices within 30 calendar days after receipt against a target of 100%. The reason for the variance was reported to be fragmentation across the various stages of invoice handling.
• Vacancy rate at the end of December 2021 was 9.5 per cent against a target of 9 per cent. The reason for the variance was the high number of service terminations; high number of applications received on post advertised; and delay in advertising SR9-12 posts in media due to non-compliance with UI legislation by media service providers.
• The Claims Management System was not tested due to delay in the development of test plans.

 

1. Business Operations

Business Operations programme had 8 planned indicators reporting in Q3. Of those indicators, five were achieved translating to an overall achievement of 63 per cent. This programme recorded the highest achievement in Q3. This programme did not achieve the following targets:

• The entity finalized 2.3 per cent of fraud cases within specified time frames against a target of 90 per cent. The reason for the variance was reported to be that complex cases required adequate time as well as inadequate capacity;
• The target of producing and approving quarterly report on the functioning of the Committee within 30 working days after end of quarter was not achieved. The reason for the variance was reported to be limited capacity that led to the prioritization of investigations work;
• A total of 39 983 new employers were registered against a target of 60 000. The reasons for the variance were reported to be economic impact of COVID 19 resulting in less number of new employers registered; generous targeting; and poor capacity to enforce UI legislation;
• The target of issuing 90% of applications with complete, accurate and verified information with compliance certificates, non-compliance letters or, tender letters within 10 working days was not achieved due to evidence that was not in line with TIDs;

 

The entity reported that all backlogs have since been cleared.

 

1. Labour Activation Programmes

The Labour Activation Programme had five planned indicators and only one was achieved. This translates to an overall achievement of 20 per cent. The following targets were not achieved:

• The target of having 90 per cent of TERS applications approved/rejected by the delegated authority within 15 working days was not achieved. The reason for the variance was reported to be that all six applications received for the quarter did not have compliance certificates. The compliance certificates are required for preparation of approval submission to the delegated authority.
• The target of supporting 10 cooperatives was not achieved. The reason for the variance was reported to be that LAP is not in total control of this deliverable. This is dependent on partners training and assisting participants in forming cooperatives. Some of the LNAC adjudicated proposals are still in the training phase.
• The target of supporting four SMMEs was not achieved. The reason for the variance was that annual targets were already achieved by Q2. Sixty-seven (67) SMMEs were supported against an annual target of 15.

 

1. UIF Expenditure per Programme in Q3 of 2021/22

 

The Fund reported on its expenditure per Programme as follows:

 

Table 13: UIF Q3 Expenditure per Programme in 2021/22

PROGRAMME		Budget	Actual spend as at Q3 2021/22	Variance	Expenditure Q3 2021/22
		R’000	R’000	R’000	%
1.	Administration	2 469 515	772 945	1 696 570	31%
2.	Business Operation	33 094 658	19 410 773	13 683 885	59%
3.	LAP	1 890 867	357 109	1 533 758	19%
	TOTAL	37 455 040	20 540 827	16 914 213	55%
ECONOMIC CLASSIFICATION
Compensation of Employees		1 450 136	1 108 143	341 993	76%
Goods and Services		2 167 355	988 967	1 178 388	46%
CAPEX		758 487	37 562	720 925	5%
Transfers		33 079 062	18 406 155	14 672 907	56%
TOTAL		37 455 040	20 540 827	16 914 213	55%

Source: Presentation to the Portfolio Committee on Employment and Labour dated 28September 2022

 

Table 13 above reflects that the entity had a budget of R37.5 billion in Q3 of 2021/22. Of this amount, R20.5 billion or 55 per cent was spent by the end of Q3 of 2021/22. This resulted to a variance of R16.9 billion.

 

Programme 1 received R2.5 billion and spent R772.9 million or 31 per cent. Contributing factors to under-expenditure were reported as follows:

• Compensation of Employees – The variance was due to the current vacancy rate, payment of the merit awards lesser than the amount budgeted for and the lower spending on overtime caused by the lockdowns.
• Goods and Services – The variance was due to low spending in projects and activities, delivery was affected by lockdowns. The following are the major projects of the Fund: Follow the money auditors, and Call Centre revamp improve service delivery
• CAPEX – Procurement of the tools of trade was underway through SITA and refurbishment of the investment properties was done through the PIC. The variance was due to delays in invoicing from the PIC.

 

Programme 2 received R33.1 billion, which is the largest share of the budget. It spent R19.4 billion or 59 per cent of the budget by the end of Q3. This resulted to a variance of R13.7 billion. The Fund reported that the contributing factors to underspending were:

• Operating Lease Transport Buses: Due to COVID 19 Regulations and lockdowns, the production companies had to close down and could not deliver the required number of buses.
• Compensation of Employees: The DPSA has approved the Department’s fit-for-purpose structure to be implemented in the provincial offices and labour centres. The process is underway and the service provider has been appointed.
• Benefit Payments: The variance is as a result of amounts that were budgeted for re-assessment (UI Amendment Act Top-ups) but were not paid out due to prioritization of the COVID 19 TERS benefits processing.

 

Programme 3 received R1.9 billion, which is the third largest programme allocation. It spent R357.1 million or 19 per cent of the allocation resulting to a variance of R1.5 billion. Contributing factors to 81 per cent underspending were reported as follows:

• Unemployment Alleviation Schemes: Delays in implementation resulted from the new mandate of the Department. The Department’s new mandate focus is on projects that will result in employment creation or jobs. The Fund has convened a new Committee to LNAC that will adjudicate all the new projects.

 

4.5.      The Compensation Fund (CF)

 

4.5.1.    Constitutional Mandate

The mandate of the CF is derived from section 27(1)(c) of the Constitution. In terms of this section, all South Africans have a right to social security. The CF is mandated to provide social security to all injured and diseased employees.

 

4.5.2.    Legislative Mandate

The CF is a scheduled 3A public entity of the DEL. The Fund administers the COIDA No130/1993. The main objective of the Act is to provide compensation for disablement caused by occupational injuries or diseases sustained or contracted by employees or for death resulting from such injuries or diseases and provide for matters connected therewith.

 

 

 

4.5.3.    Strategic Focus

The CF shall focus on the following strategies which will further inform institutional policies over the five-year cycle:

            Financial Management

1. Improve the system of internal control and maintain financial soundness.

Customer

1. Ensure appropriate benefits are delivered to intended beneficiaries, efficiently and at a reasonable cost.
2. Contribute to employment and economic growth through rehabilitation and re-integration.

Organisational Capacity

1. Develop the capacity of the Fund to deliver according to its mandate.

Internal Business Process

1. Improve operational efficiency through process reengineering and technological innovation.

 

4.5.4.    Progress regarding implementation of corrective measures emanating from previous engagements regarding audit outcomes

The presentation of the CF focused on the following issues:

1. Commitments made in June 2021
2. Progress report on commitments

• Bringing in skills in the office of the Chief Financial officer
• Clean Audit Action plan
• Review of the organizational architecture of the CF and UIF
• Forensic investigation progress report

 

1. Commitments from the last appearance

• Secondment of skilled personnel to add capacity within the Office of the CFO to assist with the improvement of audit outcomes.
• Develop and implement an Action Plan to address the audit disclaimers.
• Review of the organizational architecture of the CF in order to address the systemic root causes of the challenges facing the Fund.
• Institute a forensic investigation in the CF.

 

1. Secondment of resources for the office of the CFO

• The Minister approved the secondment of skilled resources from the private sector within the accounting and auditing industry.
• A team comprising 20 skilled personnel (list provided) were seconded into the Fund from the FTMG Africa (Pty) Ltd with a combined 222 years of experience in auditing and financial management environment.
• The team’s focus has been in the implementation of Clean Audit Action Plan (particularly prior period errors and improvements in records keeping), preparing the Fund for audit and assisting with the implementation and monitoring of key controls.

 

1. Develop and implement Action plan

• The DG approved a Clean Audit Action Plan on the 11th August 2022, which is aimed at addressing specific root causes of the various audit findings in the Fund through implementation of specific controls.
• Management of the Fund over the last 12 months has been implementing this Action Plan with a dedicated team providing coordination and monitoring support.
• Areas along which the Clean Audit Action Plan has been designed are amongst others as follows:
  • Revenue
  • Benefits
  • Provision for outstanding claims
  • Payables from non-exchange transactions
  • Investments
  • Prior period errors
• While management is seized with the design and implementation of the controls required in the Clean Audit Action Plan, additional resources brought in to the office of the CFO has been focused on the key activities within Revenue, Benefits, Investments and material prior period errors.
• In order to adequately address the key weaknesses contributing to material misstatements in the Annual Financial Statements as a result weaknesses identified in controls, record keeping and adequately correcting prior period issues.
• The report below will provide the Committee with an update on the Clean Audit Action Plan broadly and detailed progress with addressing specific disclaimers issues in revenue, benefits, investments and prior period errors.

 

1.  Organisational architecture review

• PwC was appointed on the 9th March 2022 for a period of 18 months to conduct a diagnosis of the organizational architecture for the CF and UIF, including COID and the UI Provincial Offices and Labour Centres, mainly in as far as the work of the two entities is concerned.

 

1. Forensic investigation progress report

 

 

 

Overview of the Project

• The objective of the project is to conduct forensic investigation to prove or refute allegations of fraud and corruption, maladministration, conflict of interest resulting in disclaimer audit outcomes and unethical culture in the CF.
• The investigation scope is to be based on a 5-year period (2016/17 until 2020/21).
• The volume of transactions to be tested and verified, includes claims records of about 1 498 196, medical invoices records above 716 648.
• The following service providers have been appointed to carry out the investigations:
  • Bowman
  • Abucus
  • SNG & TSF AFRICA
  • NEXUS
  • STONETURN
• Contracting with the service providers was conducted during February 2022 after the completion of the procurement processes and contract negotiations.

 

4.5.6.    CF Performance per Programme in Q3 of 2021/22

 

CF reported on its programme as follows:

 

Table 14: CF Performance per Programme in Q3 of 2021/22

PROGRAMME		Annual Planned Indicators	Indicators with targets reporting in Q2	Achieved	Overall achievement %
1.	Administration	11	3	2	67%
2.	Compensation for Occupational Injuries and Diseases Services	3	2	1	50%
3.	Medical Services	2	2	2	100%
4.	Orthotic and Rehabilitation	3	1	1	100%
Overall Performance		19	8	6	75%

Source: Presentation to the Portfolio Committee on Employment and Labour dated 28 September 2022

 

Table 14 above reflects that CF had 19 annual planned indicators and eight indicators with targets reporting in Q3. Of the eight indicators with targets reporting in Q3, six were achieved translating to an overall performance of 75 per cent.

 

The Administration programme had 11 annual planned indicators and three indicators reporting in Q3. Of the three indicators reporting in Q3, two were achieved translating to an overall achievement of 67 per cent. The CF had an annual target of reducing the vacancy rate to 9.9 per cent and the quarterly target of reducing the rate to 11.6 per cent. However, the vacancy rate was at 13.63 per cent by the end of Q3.

 

COID services had three annual planned indicators and two indicators with targets reporting in Q3. Of the two indicators reporting in Q2, one was achieved translating to an overall achievement of 50 per cent. The Fund did not achieve the target of adjudicating 85 per cent of claims within 30 working days of receipt. It adjudicated 71 380 of 90 392 claims within 30 working days of receipt, translating to 79 per cent achievement of the target. However, KwaZulu-Natal, Mpumalanga and Western Cape achieved 88 per cent, 90 per cent and 87 per cent respectively.

 

Medical Services programme had two annual planned indicators and two indicators with targets reporting in Q3. The Fund had an overall achievement of 100 per cent under this programme. This programme finalized 7 545 of 7 778 or 97 per cent of requests for pre-authorisation of specialized medical interventions within 10 working days against a target of 85 per cent. It finalized 464 532 of 533 211 or 87 per cent of accepted medical invoices within 40 working days of receipt against a target of 80 per cent.  

 

Orthotic and Rehabilitation programme had three annual planned indicators and one indicator with target reporting in Q3. This target was achieved translating to an overall achievement of 100 per cent. This programme finalized 1 006 of 1 079 or 93 per cent of compliant requests for assistive devices within 15 working days of receipt against a target of 85 per cent.

 

1. CF Financial Performance in Q3 of 2021/22

 

4.5.7.1. Expenditure per programme

 

CF reported its financial performance as per programme follows:

 

 

 

 

 

 

 

Table 15: Expenditure per Programme in Q3 of 2021/22

PROGRAMME		2021/22 Approved Budget	2021/22 Expected Expenditure	31 December Actual Expenditure	Variance Under/ (Over)	Variances Under/Over
		R’000	R’000	R’000	R’000	%
1.	Administration	7 125 054	5 343 790	2 304 456	3 039 335	57%
2.	COID Services	1 702 751	1 277 063	1 141 113	135 951	11%
3.	Medical Services	4 573 865	3 430 399	3 135 894	294 505	9%
4.	Orthotic and Medical Rehabilitation	229 747	172 310	129 790	42 520	25%
TOTAL BUDGET		13 631 416	10 223 562	6 711 252	3 512 310	34%

Source: Presentation to the Portfolio Committee on Employment and Labour dated 28 September 2022

 

Table 15 above reflects that the approved budget for 2021/22 financial year amounted to R13.6 billion. The expected expenditure for Q3 of 2021/22 amounted to R10.2 billion. The actual expenditure was R6.7 billion or 66 per cent of the expected expenditure. This resulted to a variance of R3.5 billion or 34 per cent.

 

The Administration programme received R7.1 billion in 2021/22 financial year, which is the largest share of the budget. The expected expenditure for Q3 of 2021/22 financial year was R5.3 billion. However, the actual expenditure was R2.3 billion or 43 per cent of expected expenditure. This resulted to a variance of R3.0 billion or 57 per cent of expected expenditure.

 

The approved budget for COID Services for 2021/22 financial year amounted to R1.7 billion. The expected expenses for Q3 was R1.3 billion. However, R1.1 million or 99 per cent was spent by the end of Q3 of 2021/22 financial year resulting to a variance of R135.9 million or 11 per cent of expected expenditure.

 

The approved budget for Medical Services programme amounted to R4.6 billion in 2021/22 financial year. The expected expenses for Q3 of 2021/22 financial year was R3.4 billion. However, R3.1 billion or 91 per cent was spent by the end of Q3 resulting to a variance of R294.5 million or 9 per cent of the expected budget.

 

The approved budget for Orthotic and Medical Rehabilitation programme amounted to R229.9 million in 2021/22 financial year. The expected expenses for Q3 of 2021/22 was R172.3 million. However, R129.8 million or 75 per cent was spent by the end of Q3 resulting to a variance of R42.5 million or 25 per cent of expected expenditure.

 

4.5.7.2. Expenditure by Economic classification

 

CF reported in expenditure per programme as follows:

 

 

Table 16: Budget per Economic Classification in Q3 of 2021/22

2021/22 Expenditure/ Revenue Per Economic Classification	2021/22 Approved Budget	2021/22 Expected Spent	31 December 2021 Actual Expenditure	Variances Under/ (Over)	Variances Under/(Over)
	R’000	R’000	R’000	R’000	R’000
Revenue	19 372 796	16 047 485	15 532 584	514 901	3%
Compensation of Employees	958 780	719 085	926 316	-207 231	-29%
Good and Services	6 594 789	4 946 092	1 511 504	3 434 588	69%
Total Administration Budget	7 553 569	5 665 176	2 437 820	3 227 356	57%
Rehabilitation Programme	220 000	165 000	124 011	40 989	25%
Compensation Claims	1 529 600	1 147 200	1 013 624	133 576	12%
Medical Claims	4 328 247	3 246 185	3 135 797	110 388	3%
Total Benefits	6 077 847	4 558 385	4 273 432	284 953	6%
Total Expenditure Budget	13 631 416	10 223 562	6 711 252	3 512 310	34%

Source: Presentation to the PC on Employment and Labour dated 28 September 2022

 

The above table reflects that the approved budget for Compensation of Employees was R958.8 million and

The expected expenditure for Q3 was R719.1 million. The actual expenditure as at 31 December 2021 was R926.3 million or 129 per cent resulting to a variance of R207.2 million or 29 per cent. This means that CRF overspent the budget by R207 million or 29 per cent on Compensation of Employees.

 

The approved budget for Goods and Services was R6.6 billion and the expected spent was R4.9 million. The actual expenditure was R1.5 billion or 31 per cent of the expected expenditure. This resulted to a variance of R3.4 billion or 69 per cent.

 

1. COMMITTEE OBSERVATIONS

 

After receiving the presentations from the Department and its entities, the Committee made the following observations:

 

5.1.      The Department of Employment and Labour

1. The Department spent 92 per cent of Q3 budget and achieved 67 per cent of the targets. It was explained that some employees take study leave during October to December and the Department cannot deny them that privilege.
2. There is no evidence of consequence management to address under-performance.
3. The Department had a vacancy rate of 9.62 per cent against a target of 3 per cent in Q3. As a remedial action the Department plans to appoint data capturers. The Department also proposes taking away the post if not filled after a certain period and give the posts to a branch that needs personnel, such as the inspectorate.
4. DEL did not achieve the target of resolving 93 per cent of reported incidents of corruption in the Department, instead 76 per cent of cases were resolved. Failure to achieve the set target was attributed to limited resources to do investigations. The Department is considering outsourcing investigation of some fraud cases.
5. Inspection and Enforcement Services branches of both the Eastern Cape and Free State provinces overall performance was 33% in Q3.

 

5.2.      Commission for Conciliation, Mediation and Arbitration

1. The CCMA achieved an overall performance of 100 per cent in Q3 of 2021/22.
2. The entity received 38 807 case referrals in Q3 of 2021/22. This is an increase of 930 or 2 per cent from the previous quarter.
3. CCMA spent R702.9 million or 95 per cent of R741.0 allocation in Q3, resulting to a variance of R38.1 million or 5 per cent of the budget.
4. Income received from services rendered as of 31 December 2021 amounted to R3.2 million, with 42 per cent collected from Training and Advisory services and 58 per cent from other revenue-generating services.
5. There were no new irregular as well as fruitless and wasteful expenditure identified during Q3.
6. CCMA concluded agreements with DEL and SALGA to access their facilities for purposes of conducting hearings.

 

5.3.      Productivity SA

1. Productivity SA achieved the overall performance of 75 per cent in Q3 of 2021/22. The entity achieved 33 per cent in Business Turnaround and Recovery programme and achieved 100 per cent in all other programmes. The entity achieved the same overall performance of 75 per cent in the previous quarter.
2. The entity reported that there were no irregular expenditure as well as fruitless and wasteful expenditure identified in the period under review.
3. The total revenue of the entity was reported to have increased by 3.7 per cent.
4. There were four (4) external audit findings still outstanding as at the end of Q3, which are: policies are not reviewed on regular intervals; internal audit charter not reviewed; disciplinary policy not updated to include disciplinary in line with irregular expenditure framework; and leave management.

 

1.    NEDLAC
   1. NEDLAC achieved an overall performance of 75 per cent. Administration programme recorded an achievement of 0 per cent in Q3. It achieved 23 per cent in training against the target of 30 per cent. This non-achievement was attributed to delays in procurement processes due to non-responsive tenders. The programme resolved 42 per cent of complaints against a target of 100 per cent. The poor achievement was reportedly related to the cyber-attack which happened in the second week of December when staff and service providers were not readily available. The other two programmes registered overall achievement of 100 per cent.

 

1. Unemployment Insurance Fund
   1. UIF achieved 12 of the 25 planned indicators, translating to an overall performance of 48 per dent.
   2. The entity spent 55 per cent of its Q3 budget with Labour Activation programme spending the least at 19 per cent. The 81 per cent underspending was attributed to delays in implementation unemployment alleviation schemes, which resulted from the new mandate on the Department. The Department’s new focus is on projects that will result in employment or jobs.

 

1. Compensation Fund
   1. Compensation Fund spent 66 per cent of its budget and achieved 75 per cent of its planned indicators with targets reporting in Q3. COID Services programme had the lowest achievement of 50 per cent.
   2. The entity achieved a vacancy rate of 13.63 per cent against a target of 11.6 per cent in Q3.
   3. It adjudicated 79 per cent of claims within 30 working days of receipt against a target of 85 per cent.

 

The Committee noted with concern the issue of non-filling of vacancies in the entire DEL portfolio and its entities.

 

6.         COMMITTEE RECOMMENDATIONS

 

In view of the above-mentioned observations, the Committee recommends that the Minister ensures that:

 

6.1.      The Department of Employment and Labour

6.1.1.    The vacant funded posts that cannot be filled by other branches of DEL be transferred to the IES branch.

6.1.2.    Personnel with requisite skills are appointed to ensure that the vacancy rate is reduced to target level.

6.1.3.    Other avenues are explored, including outsourcing, to ensure that fraud cases are investigated and finalised timeously.

6.1.4     DEL presents a progress report to the Committee, in its next QPR4, regarding the failure to address consequence management with regards to non-filling of vacant funded posts.

 

6.2.      Commission for Conciliation Mediation and Arbitration

6.2.1.    CCMA is appropriately capacitated in terms of financial, ICT and human resources in order to be able to execute its dispute resolution mandate.

6.2.2.    CCMA considers other revenue generating streams in order to move towards self-sustainability.

6.3       Productivity SA

6.3.1.    The four external audit findings that are still outstanding are resolved without further delay.

6.3.2.    The single source funding matter is expedited to ensure that the entity is appropriately resourced.

 

6.4.      NEDLAC

6.4.1     Cyber security is strengthened at NEDLAC to avoid a repeat of a cyber-attack that happened in December 2021.

6.4.2.    Improved procurement processes that were put in place are implemented so as to facilitate acquisition of required services.

 

6.5.      Unemployment Insurance Fund

6.5.1.    Outstanding matters in addressing qualification areas are resolved e.g. appointment of audit firms to implement follow-the-money project and to conduct debt collection process on all the outstanding debts.

6.5.2.    Procurement prescripts are complied with so as to avoid wasteful and fruitless expenditure.

 

6.6.      Compensation Fund

6.6.1.    Clean Audit Action Plan is implemented and the entity report to the Committee quarterly on progress made.

 

The Executive Authority and Accounting Officer of DEL must present before the end of the fourth term 2022, a report on HR issues relating to non-filling of funded vacancies.

 

Report to be considered.