Department of Labour Annual Report 2008/09

Meeting report

Department of Labour Annual Report 2008/09
The Chairperson welcomed officials from the Department of Labour (DOL), noting that the Department had apologised for the fact that the documentation sent earlier was in fact the presentation to the Portfolio Committee on 20 October. She noted an apology from the Director-General, who was at a conference in Geneva.

 Mr Boas Seruwe, Acting Director General, Department of Labour, noted that his delegation included top management officials and those from the provinces, who could deal with specific issues relating to the provinces. The Provincial officials were introduced as Mr T Thejane, Provincial Executive Manager, Western Cape, Ms T Nene-Shezi, Provincial Executive Manager for KwaZulu-Natal, and Mr Andile Makapela, Provincial Executive Manager, North West.

The branch Heads made presentations in their specific areas.

Adv N Phasha, Acting Deputy Director General: Corporate Services, DOL, presented Programme 1 – Administration. He focused on information technology (IT), noting that the DOL was providing IT services through 20 Mobile Labour Centres in remote areas.

There were 57 internal audits scheduled for DOL, National Skills Fund (NSF) and the Sheltered Employment Factories, of which 51 were complete, but 15 could not be performed due to lack of resources. 42 final audit reports were issued.

Ms Siyanda Zondeki, Deputy Director General: Service Delivery, DOL presented on Programme 2. She noted that there were 3 415 job seekers placed in learning opportunities. 8 531 registered job seekers were assessed and 7 343 were referred to identified critical scarce skills development programmes, of which 7 546 learners were assessed with the assessment instrument for learnerships, internships and other matters. These were mainly for strategic government job creation initiatives such as Coega, the Department of Health contribution to the Expanded Public Works Programme (EPWP), through data capturers, and other projects in transport and construction.

National Skills Development Strategy (NSDS) targets were implemented and aligned to Accelerated Shared Growth Initiative for  South Africa (ASGISA). The provincial skills plans were reviewed to ensure alignment to Provincial Growth and Development Strategies, Integrated Development Plans, and Local Economic Development. 1 673 projects were identified and listed in the Provincial Skills Plan. A total number of 10 390 unemployed were trained in support of EPWP; a total number of 3 782 unemployed were trained in support of other programmes.

The total number of workplaces inspected had decreased by 46 968 in 2008/09. The volume of workplaces inspected and the optimal utilisation of resources remained a challenge as the Department was still experiencing high staff turnover in the inspectorate division. However, 79% of the 226 297 labour complaints received were investigated and finalised within 90 days. 56% of the Occupational Health and Safety incidents reported were investigated and finalised within 90 days. An advocacy and blitz inspections programme was developed, targeting high-risk industries, and 10 285 inspections were conducted.

Mr Chokola Lengolo, Acting Executive Manager, DOL, presented on Programame 3, which gave a sense of progress against the NSDS,  and also attempted to summarise detailed information contained in the individual twenty-three Sector Education and Training Authority (SETA) Annual Reports, Umsobomvu Youth Fund, Productivity South Africa and the National Skills Fund Projects.

He noted that of the targeted 4 500 undergraduate bursaries, only 1 752 were awarded, because of the low intake at the National Skills Fund (NSF). This problem was corrected by bringing in a third organisation called Career Wise in order to increase the numbers because NSF and National Research Foundation (NRF) had a backlog with their funding from Department of Education (DOE). Out of the target of 1 500 postgraduate bursaries, only 997 were awarded. Although there was a target of 40 000 Adult Basic Education and Training (ABET) learners, only 21 413 learners were recruited and commenced their learning programmes. Part of the problem had to do with procurement processes that caused delays.

The low number of 15 169, out of 90 000 unemployed people, who were recruited into contracts was mainly due to suspension of training. For the entire year the provinces were not allowed to take on new contracts because the Auditor-General (AG) had queried the process that the DOL had used, since it was not in line with the new procurement regulations and therefore the expenditure was declared as irregular. To correct that, the whole process of registering providers had to be re-done. The expenditure incurred for the learners would still be disclosed, however, as irregular expenditure in the 2009 /10 audit report. Of that figure, only 8 885 had found employment.

The target of 56 506 workers to be assisted to enter scarce and critical skills in learnerships, apprenticeships, internships and bursaries, was one area where the Department saw remarkable achievement in doubling the target. More and more people in employment were reverting back to skills development because it assisted in mobility, provided some guarantee for employment, and enabled people to move up the grading levels within their employer companies to improve their income. Of 60 125 unemployed people assisted to enter scarce and critical skills in learnerships, 63 658 completed training.

The Department thanked the Select and Portfolio Committees on Labour for having assisted it to improve the quality of service delivered by skills development institutions, through the amendments to the Skills Development legislation, through the establishment of the Quality Council for Trades and Occupations (QCTO).

Mr Les Kettledas, Deputy Director General: Labour Policy and Labour Market Programmes, DOL, described Programme 4. He explained that the Employment Equity (EE) legislation provided for a review by the Director General, who could call upon the employer to submit a copy of the current analysis and EE plan, and could also request the employer to submit any document or information that could reasonably be relevant to the review of the employer's compliance. The Director General could also request a meeting with the employer to discuss its EE plan, the implementation of the plan and any matters related to its compliance with the Act, in terms of Section 43 of the Employment Equity Act. Subsequent to that review the Director General could either approve the employer's EE plan or make recommendations in writing as to the steps the employer must take in connection with his EE plan, the implementation of that plan, or its compliance, the period  within which those steps must be taken, and any other prescribed information. Having done this, there would then be a follow up to ensure that the recommendations had been implemented within the time frame stipulated.

The department had also built the capacity of twenty provincial staff members during the course of the Director General’s Review of Compliance Assessments, review compliance assessments so that when moving to the next phase some companies would be assessed at provincial level, whilst the review process would also start to be assessed at provincial level. In this financial year DOL would conduct follow-ups on 106 companies assessed in the previous three years. Although the top 100 Johannesburg Stock Exchange listed companies had been targeted, some had subsidiaries, which was the reason for the figure of 106.

Programme 5 was concerned with Social Security and it was noted that both the Compensation Fund and the Unemployment Insurance Fund published their own Annual Reports in terms of the Public Finance Management Act (PFMA).

Mr Bheki Maduna, Chief Financial Officer, Department of Labour, indicated that 94% of the allocation was spent. The Department had received a qualified audit, due to shortcomings in the management and control of assets, and the asset register.

The National Skills Fund received an unqualified report, with one matter of emphasis where procurement processes were not aligned and as a result had irregular expenditure of R648 million. The challenge was that it had failed to get condonation from the National Treasury on that amount, which was the reason for this still being mentioned in the Annual Report.

The Sheltered Employment Factories received a qualification on the valuation of inventory, and an emphasis of matter on two issues; the first being irregular expenditure on the non-adherence to the supply chain principles, and fruitless and wasteful expenditure on cell phone contracts and storage costs.

Discussion
Mr M Sibande (ANC, Mpumalanga) asked why no learning opportunities were registered in Mpumalanga and Gauteng North, and why, in terms of the enhanced skills development training in support of government programmes and EPWP; there was also nothing in Mpumalanga.

The Department responded that it was dependent upon requests put to it. Sometimes, SETAs or employers would request people to be assessed for learnerships or for internships. They would then be assessed within the Department and referred for placement and learnerships and internships. A zero recorded for Mpumalanga meant that no such requests had been received for placements in learnerships and internships, and the same applied to Gauteng.

Mr Sibande raised serious concerns about protecting vulnerable workers. He also mentioned that the ongoing discussions about labour brokers were contributing to their vulnerability. He asked how far the Department had achieved the professionalisation of the Inspectorate in the Department.

The Department responded that a skills audit of inspectors had been done, and this indicated that 59% of inspectors did not have the relevant qualifications. The Department had developed training to address that issue. It had also established a roving inspector task team that was currently undergoing training, which would equip that team with the skills to undertake incident investigation. The Department had received excess of five thousand reports on incidents happening and could only investigate about two thousand through its own lack of capacity. The Department was now ensuring that it had inspectors that could do the work, and that they would be able to focus on the different areas such as construction, mechanical and electrical related fields, or national health and hygiene. The Department would ensure that that capacity building was completed by the end of the financial year.

Inspectors had also been categorised into three levels: generalist inspector, principal inspector and specialist inspector. Job profiles for the different categories were developed and the Human Resources (HR) programme was working with the job evaluation of the principal inspector and the specialist inspector . It was hoped that this would address the numbers of inspectors who were leaving the Department.

Mr Sibande asked why the Sheltered Employment Factories had paid cell phone contracts for former employees.

The Department responded that that had been an oversight and plans were under way to correct that. It would also be monitored at the Audit Matters Forum.

Mr Sibande asked for clarification on the Department's contribution to the President's State of the Nation Address statements about jobs. He asked how many critical skills trainees were placed in employment opportunities during the 2008/09 financial year.

The Department responded that 7 343 had been placed, and the provinces would give examples of the critical and scarce skills. In addition, the critical skills list could be accessed on the DOL website. Small booklets were also distributed through the provincial offices and would be provided to the Committee.

In terms of general employment creation, the DOL contributed through the National Skills Fund Strategic Projects. In terms of the projects run through the various Premiers' offices alone, DOL had awarded almost  R1 billion to assist with the growth and development strategy. The Department also agreed a target for EPWP, and funding was given through the NSF for the creation of about 50 000 jobs. The Capital Works Project, which had been delayed over some years, was now under way. The Department would spend in the region of R46.4 million to repair the DOL Head Office, the provincial offices and the labour centres. DOL would shortly hear from the Department of Public Works (DPW) how many jobs the latter had created to contribute to the President's call.

It was noted that the training layoff started slowly, with R2.4 billion that DOL set aside under the NSF and UIF, which was used to target 120 000 people in terms of saving jobs. There was a thin line between saving jobs and creating new jobs, but if the Department had not intervened those jobs would have been lost. Therefore, this figure could also be seen as a response to the SONA call.

Mr Z Mlenzana (COPE, Eastern Cape), noted that he would base his questions on the Annual Report itself rather than the current presentation. He pointed out that it was confusing that some pages were numbered and others not.

He asked how the Department had decided on the targeted number of job seekers, particularly for the Eastern Cape and KwaZulu Natal, as the targets were set low, and asked if this had been deliberately done so that the Department would be able to say that it had delivered.

The Department responded that this was once again in the area of assessment of job seekers. The targets were set in terms of what performance had been achieved in the previous year, with what resources, and that national target was broken down per province. The targets per province differed because of their past years’ performance and resources available to each.

Mr Mlenzana noted the drop in the numbers of workplaces visited. He asked how the 5% increase in compliance and protection of workers could be guaranteed if the workplace visits were being cut.

The Department noted that it was experiencing the challenge of staff turnover in the Inspectorate, which was why it had not achieved the target set in terms of workplaces inspected. However, the focus on the smaller numbers of employees did allow it to ensure that compliance was achieved within the specified time period of ninety days, so the compliance ratios had actually increased.

Mr Mlenzana asked if the Department did an analysis report in terms of complaints, and whether it was sure that the statistics were valid, as he would like to get documentation for the Eastern Cape.

The Department responded that it did not have the information, but it was available in the provinces because inspectors in labour centres conducted inspections and had records of workplaces visited, which employers this pertained to, and in which sectors. If that information was required it could be provided.

Mr Mlenzana asked who the majority of complainants had been, and what type of complaints were raised. He asked which sectors were affected and what the Department had done to settle the complaints.

The Department responded that the provinces could provide that information, but most of the complaints related to wages, working hours or overtime.

Mr Mlenzana asked why KwaZulu Natal had the highest number of Occupational Health and Safety (OHS) related incidents, and in which sector these were found.

The Department noted that prior to the 2008/09 financial year, it had looked at the number of critical areas. Using the statistics from the Compensation Fund and Federated Employers Mutual Association (FEMA), it had realised that construction and agriculture were major issues in KwaZulu Natal, and one particular company’s problems had contributed to that high incident rate.

Mr Mlenzana asked what had been the budget implications of programmes. In particular, he wanted to hear about those  workers assisted for scarce skills, and learnerships, where the targets were far exceeded. He also enquired what measures were taken to address the issue of some departments not spending 1% on training. He further enquired what skills development programmes were in place to support small business and cooperatives.

The Department responded that this led into the broader question of how targets were set. The Department had a five-year National Skills Development Strategy. Before setting up the strategy it would undertake extensive consultation, would look at the income it would receive, and the figures for training costs, and thus would be able to come up with a national target, from which it could then assess what the specific targets would be for Small, Medium and Micro Enterprises (SMMEs) and Broad Based Black Economic Empowerment (BBBEE).

Mr Mlenzana asked about the lack of effective, efficient and transparent systems and internal controls regarding performance management, reported upon by the AG. He noted that the shifting of funds mostly affected the capital expenditure, which was in contravention of the PFMA’s Section 43. He asked how and why that had happened.

The Department responded that it had used a process approved by the Director General, and that was in line with legislation that was used in the Department without any problems, the problem came in when the new supply chain regulations were introduced. This did not stop the training processes that the Department was already involved in, but the new process resulted in this expenditure being classed as irregular expenditure.  The Department could not hold anyone to account, because the procurement was done in line with the initial approved processes. In order to align with the new regulations it would have had to stop the whole process, cancel the existing contracts and align the process. However, this would have resulted in it being sued for breach of contract and becoming involved in litigation. National Treasury insisted that this be disclosed in the annual financial statements. The Department did so, and requested condonation of the payments. However, because the amount involved was high and because it did not cease the contracts that had already been signed, so as not to disadvantage the learners already in the system, this would still appear in the 2009/10 financial statements as irregular expenditure.

Mr H Groenewald (DA, North West) thanked the Department for its very fruitful report with a lot of information. He was concerned that millions of rands were spent on training people, but once they were trained there were no jobs for them. He therefore asked what the Department was doing to create jobs to help those people, especially the youth, who were frustrated by the fact that although they were skilled, they were unemployed.

Mr Groenewald also referred to the SONA address that had promised that 500 000 jobs would be created before the end of the year. He did not think that was possible, as that number had actually been lost since that announcement. He was aware that there was a world crisis, but asked  what South Africa was doing to address the issues, especially in the rural areas.
The Department noted that training in itself did not lead to a job, but was a prerequisite that would enable people at some stage to get a decent job. A short while ago, people were complaining that South Africa would not be able to complete the large 2010 projects, the Gautrain, the Eskom Power Station, because they argued that there were no skills and therefore South Africa should allow in skilled workers from other countries. South Africa had opted to give training. The recession had brought its own implications. Once the economy peaked, South Africa, having done the training, would not be finding itself with a shortage of skills. That was the reason why the Minister made the call to companies to use the quiet time to train people instead of retrenching workers. In the past, many young people were unable to find employment because they lacked skills, and this lack of skills was the reason why people had argued that they were unemployable, and had instead taken in foreign workers with skills. The training now done would prepare the youth to take jobs, even if these were short-term jobs, or to embark into some self-income generating intervention. Foreigners had been able to survive in South Africa, even without getting full time employment, because they had been able to use their skills.

Mr Groenewald asked what was being done about the influx from neighbouring countries coming into South Africa and effectively taking jobs from South Africans.

The Department responded that the Department of Home Affairs administered the immigration legislation. When economic migrants entered the country, they must be properly documented, and must have work permits to be employed. DHA processed applications for work permits, but consulted with DOL offices in the various provinces as to whether or not such permits should be granted. The first criteria as to whether or not a work permit should be issued required an assessment of whether that skill was already available in South Africa. There was also a need determine that the conditions under which those people would be employed were not less favourable than would be offered to other workers in that sector. Some migrant workers were illegally employed, but this would be monitored through the inspection system. Highly skilled people coming from Australia or other countries also had to have work permits and proper documentation.

Mr Groenewald asked what the Department was doing to save labour brokers. He also enquired how many labour brokers were white and how many were black, pointing out that many people were going to lose jobs.

The Department responded that there was a process under way at the National Economic Development and Labour Council (NEDLAC), under which draft legislation would emerge. Once that was done, it would go to Cabinet and be brought to Parliament. He was not sure how many labour broking agencies were white and black-owned.

Mr Groenewald asked for clarification on the zero percentage registration of job seekers in Mpumalanga and other provinces. He also asked what was the estimated workforce of South Africa at this stage.

The Department responded that the economically active population was just on 17 million people, of whom  12.9 million people were employed. The recently released labour force survey indicated that 24.5% of them, or 4.2 million people, were unemployed.

Mr Groenewald asked why the assets register was not updated, and how the Department was going to address that problem. He also sought clarification on the irregular expenditure of R648 million.

The Department admitted that it had been found wanting on the financial management side, especially with regard to the assets register. The Director General had formed a forum for Audit Matters, where all the queries by the Auditor General were dealt with. Members would present to the Director General, who would then compile a progress report. Over and above that he had also tasked the internal audit unit of the Department to specifically focus on what the Auditor General had reported. An Internal Audit Steering Committee meeting reported on progress to the Auditor General.

Mr R Tau (ANC, Northern Cape) supported Mr Groenewald on the training issue, but not on the racial aspects and xenophobic reference to foreign nationals seeking employment in South Africa. He said people needed to be educated on being receptive to foreign nationals instead of expressing xenophobic tendencies. Questions to be asked included whether they were able to create jobs, to create skills and participate in the mainstream of the economy. He said that the Department should have given a breakdown of the training so that Members were aware of what training had taken place in their constituencies, and also a breakdown of categories such as women or youth. This would also enable Members of Parliament to make use of some of the programmes that the department was offering.

The Department noted that this information was available and could be provided if required.

The Chairperson said that the information was indeed required and requested that it be provided to the committee secretary soon.

Mr Tau noted that the AG’s report identified that the Department did not comply with Section 38(1)(a)(i) of the PFMA, and that the functional risk committee was not implemented as per the requirements of National Treasury. He asked if this breach of the legislation was not criminal, and asked what the Department was doing to prevent a recurrence. He noted that Parliament passed the budget, and it was not correct if the Department did not even follow the legislation.

The Department conceded that it had been incorrect, but noted that different kinds of reports were given by the AG. Sometimes he would find lack of control, without there being a total breakdown, or control that was not effective because of the period, and that process must be revised. However, fraud or something similar would amount to criminal issues, and would be far more serious.

Mr Tau referred to the figures for Programme 2 on Service Delivery, referring to the figures for the Eastern Cape, and asked how the Department arrived at those figures.

The Department noted that in the Eastern Cape, 33 301 people came to register for work. The Department also had the responsibility to register job opportunities and to find employers. Unfortunately there were only  135 opportunities, part of the global problem. However, there were 464 learning opportunities. He believed this was not adequate as the Eastern Cape was a large province. There were 1 035 opportunities altogether, of whom 1 009 were placed, which was 97% of the opportunities filled. There were 464 training opportunities, and all were filled, which accounted for the 100% figure there. However, about 33 000 people on the database could not get jobs. A system had been implemented, and it was hoped to improve it further as the process matured, to be able to place as many people as possible.  Although the system had been rolled out to all labour centres across the country there were challenges in terms of effectiveness and efficiency, and there were areas that were not working properly, such as matching skills to job opportunities.

In respect of employment services, the Department had not been offering counselling and career guidance services, especially in the period under review. In some labour centres there were no career counsellors, but the Department had begun to appoint them at the end of the year. The services that should be offered were not offered in areas where there were no career counsellors.

Mr D Feldman (ANC, Gauteng) appreciated that it took the Department a long time to compile the report, and felt that it was not correct that the Committee should have such a short time to interrogate it. He suggested a new strategy for the new term, whereby the Committee and Department should try to find solutions together. Instead of departments presenting rosy pictures, he would prefer that they should rather identify problems and then work through them with the Committee.

The Department noted that the major challenge had been the target to train 90 000 people, which could not be done because of the AG’s query. 75 000 people could not be trained. Mpumalanga’s issues could otherwise have been addressed by giving people placement opportunities. The economic melt down was affecting everybody, since people were being retrenched and a number of people were claiming from UIF. Inspection Enforcement Services was found to be weak, which was why professionalisation and training was now being implemented.

The Chairperson thanked the department for the presentation. She asked when the work would start on the HQ building, since it was noted that the bid process was completed.

The Chairperson asked for a breakdown on service delivery for remote areas, and the provision of IT service through twenty mobile labour centres, so that members could be informed of where the labour centres were and in which provinces.


The Chairperson noted that most internal audits were complete but the remaining 15 could not be completed due to lack of resources. She asked if there were plans to ensure that they would also receive services.

The Department said that this was a serious problem. There had been four vacant positions. It was difficult to say when there would be a full staff complement.

The Chairperson noted her agreement with Mr Tau’s comments on the breakdown of services rendered to the factories and asked what was to be done about the other provinces. She asked if the information could be provided before Parliament adjourned, so that Members could report back to their constituencies.

The Chairperson also added to Mr Sibande’s concerns about the lack of learning opportunities in Mpumalanga, and wondered if this was due to too little information being provided to the communities.

The Chairperson also asked for a breakdown of places visited, with their findings and challenges and asked what the Department did to ensure that vulnerable workers were assisted.

The Chairperson noted the gender breakdown. She asked if the Department had a gender focal point unit. If so, she would like to know the numbers, and suggested that it should look at whether gender mainstreaming was being implemented in the whole Department, and at what levels.

Mr Tau suggested that the Department should not respond to the issue of labour brokering, because it was a political process.

Mr Groenewald said his question was about percentages, and had nothing to do with politics.

Mr Tau continued that it should be understood that this Select Committee received an Annual Report for 2008/09 that was approved, although it did not have the benefit of having heard the Strategic Plan for that year. It because difficult to conduct a thorough engagement, without quantifying this against the objectives and priorities set out in the Strategic Plans for 2007 to 2009. He asked that comparisons be provided in future Annual Reports.

The Department noted that traditionally the Minister, before tabling his budget vote in Parliament, would present to the Portfolio Committee on Labour, although it was not always presented to the Select Committee. 

Mr Tau was not sure to what extent departments were informed of the Money Bills Amendment Procedure and Related Matters Act, which would empower even Parliament not to approve the amounts being requested by departments if they could not persuade Parliament of their ability to use their funds.

Mr Sibande said some of the Department's responses raised serious concern, particularly the excuses of lack of capacity, or responses having to be obtained from the provinces. There were three pages reflecting nothing for Mpumalanga, which meant there was no capacity. If the Department in Mpumalanga lacked capacity, then he would like to request the Chairperson’s support in asking the Director General to intervene and revamp that sector. He wondered if this was why some of the provinces were not at the meeting. The population of Mpumalanga was growing very fast, and a lot of people were unemployed, but it seemed the systems were not talking to each other to get proper statistics, and those supposed to be providing services were not doing so. He requested a full report on what was happening.

The Department said it had heard the concerns, would investigate and would send a report within one week to explain the disparities or lack of performance. Those were new initiatives of the Department and maybe it was a case of communicating to make the people aware of the services provided.

Mr Mlenzana asked for follow up on his question on the Table in Programme 3 in the Annual Report, showing a target of 1% of the personnel budget at least for training. Only 65 government departments spent at least that figure, and he enquired which were not spending as required.

The Department responded that the reason for variance was lack of cooperation, mainly around reporting, and the Department did have a list of those departments present. It might be that they had indeed used the money, but had failed to report it.

Mr Mlenzana asked, in respect of the total of 1 406 non-BEE firms and non-BEE cooperatives that were supported with skills development, which skills development programmes were offered.

Mr Mlenzana said that his question on the  lack of transparent systems and internal controls by the Department, as reported by the AG, had not been answered, nor why the Department had shifted funds from capital expenditure.

The Department noted that the initiatives to address the asset register for the period started very late, as the asset unit was not up to its full complement until January 2009, so there was not much time to get the assets ready for the audit at the end of March. There was now  full capacity in the Asset Management Unit, which was addressing the issue and progress was reported.

The Chairperson thanked the Department for the information shared and responses given. She expected the rest of the information to be sent before the adjournment of Parliament. She confirmed that the UIF and Compensation Fund would be called to report separately.
 
The meeting was adjourned.