Report of the Portfolio Committee on Labour on hearings on Budget Vote 17 - Labour, dated 24 June 2003:

Table of Contents
Page Topic
A: Terms of Reference
B: Background
C: Procedure D: Submissions
E: General recommendations F: Conclusion
The Portfolio Committee on Labour, having considered Budget Vote 17 - Labour, referred to it, reports as follows:

A. Terms of reference
The Committee resolved to conduct the hearings on 11 March 2003. The objectives of the hearings were to:

1. Investigate the appropriateness and efficacy of the budget allocation to the Department of Labour (DOL) for 2003/04.
Monitor whether funds allocated to the various programmes are in accordance with policy priorities and objectives of the DOL.
Determine whether there are measurable objectives for each programme within the departmental vote in terms of the PFMA.
Determine whether policy developments take place in accordance with the key objectives and aims as stated in the 15-point plan programme of the DOL.
The Committee agreed that a report would be compiled and tabled in Parliament after all the information had been collated and analysed.

B. Background
The process began with an extensive briefing by the Director-General and senior officials on 4 March 2003. The Committee also invited NEDLAC stakeholders to make submissions on the Budget Vote. Only Fedusa and the community constituency made submissions. Presentations made by Fedusa and the community constituencies did not cover all the programmes. The mentioned stakeholders concentrated on specific areas which affected their constituencies. The Committee expressed a concern that labour and business did not participate in the hearing.

Procedure
Budget allocation for 2003/04

The Committee noted that the R 1 291 089 000 allocated to the DOL for 2003/04, indicates a 6% decrease compared to the R 1 296 173 000 allocated for 2002/03. Over the whole MTEF period expenditure decreases by 20% in real terms. This is due to the lower transfers to the Unemployment
Insurance Fund (UIF).

The Programme: Service Delivery spends the largest share of the budget over the MTEF period with its share increasing every fiscal year. This is indicative of the DOL’s increasing focus on service delivery. Personnel is the second largest item that increases steadily in real terms over the MTEF period. The estimated expenditure, however, for personnel for 2003/04 is R 271 928 000. This represents a 10% decrease on the R 320 039 000 estimated for 2002/03.

The expenditure on transfer payments is declining over the MTEF period. The amount budgeted for 2003/04 was R 519 932 000. This reflected a decrease in transfer payments to the UIF. The expenditure on the Programme: Social Insurance also declined as a result of the UIF becoming financially sustainable.

The Committee wanted clarity on whether the current budget covered the impact of legislation. It was indicated that the DOL would try to maximise the available resources. The Committee also emphasised the importance of recognising the challenges with which the DOL is faced in relation to enforcing and monitoring compliance.

The increased allocations on the budget baseline are to support the decentralisation of administrative support, regulatory enforcement, and advisory services to provinces in order to improve service delivery.

Programme 1: Administration
The medium-term expenditure estimate for Administration for 2003/04 is R 210 840 000. This will grow by 20% over the MTEF period, particularly in relation to corporate services. The allocation for Administration over the MTEF period is on average 17,9% of the DOL’s total allocation, excluding the statutory amounts.

The bulk allocation for Administration is consumed by personnel expenditure.

The Committee raised a concern at the number of vacant posts that exist within the DOL. It was mentioned that such posts are partly due to the moratorium that was placed on filling vacancies below director level as a result of the number of staff additional to the establishment, as well as attrition and movements of people during each financial year.

The Committee also raised a concern on the process of transformation and location of sheltered employment. The concern that was expressed is the finalisation of this outstanding matter.

The 8% increase on professional and special services is to accommodate the expansion of the IT function in the DOL. This will increase by 9% over the MTEF period.

The Committee sought clarity on the disagregation of the roll-overs from 2002/03.

Programme 2 : Occupational Health and Safety of Persons
The medium-term expenditure estimate for this programme for 2003/04 is R 26 481 000. This reflects a 3% real expenditure increase compared to R 24 174 000 estimated in 2002/03. A 9% increase is estimated over the MTEF period. The biggest expenditure is on auditing and technical support to provinces. The 6 % increase on the Subprogramme: Training of Staff is due to the training of inspectors.

The spending on this programme is prioritised in an effort to reduce workplace accidents through appointing additional inspectors and enhancing capacity to address specialised investigations. The service delivery component of this programme, namely the workplace and blitz inspections, are located in the Programme: Service Delivery.

The Committee noted that there was no budgeted expenditure on research. Clarity was sought on the number of inspectors targeted to be trained during the current financial year. The Committee was concerned about whether the DOL had any mechanism to monitor the use of government cellphones and cars. The DOL informed the Committee that it had policies which governed the use of cellphones and cars.

Programme 3: Social Insurance
The medium-term expenditure estimate for this programme for 2003/04 is R 269 639 000. This reflects a 25% decrease compared to the R 337 601 000 estimated in 2002/03. The expenditure on the Compensation Fund increases in both nominal and real terms over the short and medium terms. This programme provides administrative and other support to the Fund.

Out of the total estimated for the current financial year, R 257 000 000 is budgeted under the Subprogramme: Unemployment Insurance. The nominal and real spending on the UIF decreases massively over the MTEF due to the winding down of the turnaround strategy implemented to make the UIF financially sustainable.

The Committee wanted clarity on the relationship between Occupational Health and Safety of Persons and the Compensation Fund. The view expressed by the Committee was that the effectiveness of health and safety at the workplace would impact on the Compensation Fund. The DOL noted that claim processing enquiries will be decentralised to provinces as a way of improving the system. A report on how the DOL intends to improve the functioning of the Compensation Fund at a strategic level will be due some time during the current financial year.

Clarity was sought on whether there was a specific project upon which the DOL intends to embark in order to use the surplus on the UIF. It was mentioned that the surplus would be invested to ensure its sustainability.

The Committee further raised the issue of irregularities that were noted in the Auditor-General’s report on the state of the UIF. The Committee sought clarity on whether such concerns were attended to by the DOL.

Programme 4: Employment and Skills Development Services
The medium-term expenditure estimate for this programme for 2003/04 is R 175 055 000. The real expenditure on the programme grew by 4% from 2002/03, and by 7% over the MTEF period. Personnel and administrative expenditure is projected to grow strongly as oversight over the skills development machinery is strengthened with transfer payments declining in real terms. A 24% decrease in expenditure on skills development policy advice and planning is envisaged over the MTEF period.

The Committee raised a concern over the type of courses and syllabus at technical colleges. The issue of unemployed matriculants, centralisation and accessibility of SETAs was noted as a major problem. The DOL mentioned that the employment strategy framework and learnership programmes are intended to address some of these concerns. The Committee suggested that for the purposes of accessibility, SETAs could be located closer to the labour centres.

Regarding funds allocated for training, it was mentioned that out of the R 2 billion allocated for the current financial year, 20% goes to the national skills levy and 80% to SETAs.

In order to address the problem of scarce skills, the DOL indicated that funds would be made available through the strategic project fund for students who want to pursue studies in mathematics, science, accounting and technology. Some people will receive training in primary and secondary agriculture as part of providing them with an opportunity for sustainable livelihood and access to markets. The Committee suggested that information on these projects be disseminated through labour centres, municipalities and constituency offices.

On the issue of job creation, the DOL noted that there were proposed interventions such as the promotion of public works programmes, stimulation of business development, and skills development. These proposals will be tabled at the Growth and Development Summit.

Programme 5: Labour Relations
The medium-term expenditure estimate for this programme for 2003/04 is R 185 544 000. Spending on this programme remains relatively constant with a 1% real decrease from 2003/04 and a 1% increase over the MTEF period. Out of the total estimated expenditure for 2003/04, R 160 471 000 is made up of transfer payments to the Commission for Conciliation, Mediation and Arbitration (CCMA) and Ditsela. The transfer to the CCMA makes up 82% of the expenditure of this programme.

The DOL indicated that its focus during the current financial year included ensuring that the amendments, new regulations and adjustments to the CCMA processes were successfully implemented. It also sought to finalise the policy on child labour and the codes of good practice on HIV/Aids and disability.

The Committee suggested that the Minister be advised of the urgency of releasing the codes of conduct. Furthermore, the policy on child labour should be finalised. The DOL should look into the possibility of designing a brochure/flyer on workers’ rights. The latter could be attached to all CCMA correspondence.

Furthermore, the Committee raised a concern about the backlog of cases at the CCMA.

Programme 6: Labour Policy
The medium-term expenditure estimate for this programme for 2003/04 is R 27 821 000 as against the R 26 474 000 that was allocated in 2002/03. Out of the total amount, R 2 million is budgeted for the Subprogramme: Research, Policy and Planning, and R 21 834 000 for the Subprogramme: Promotion of Productivity.

The DOL indicated that it intends to conduct research on co-operatives and employment creation in order to ascertain the relationship between the two. Research will also be conducted on atypical forms of employment in order to determine whether there are any policy implications.

Programme 7: Service Delivery
The medium-term expenditure estimate for this programme for 2003/04 is R 373 787 000. Out of this amount, R 153 094 000 is budgeted for inspection and enforcement services.

D. Submissions received form FEDUSA and the Community Constituency
FEDUSA
(a) Employment and Skill Development Services
The DOL has no tangible programme to allow for new entrants under 30 years of age to enter the labour market.
Provision of support skills in small business is the area that is not being paid attention to by the Departments of Labour, of Trade and Industry and of Finance.
Recommendations by Fedusa
The Departments of Labour and of Education should work together to bridge the gap between learning and the work environment.
The new tax incentives should be amended to a grant form that will be paid to employers in advance. This must be monitored and controlled by SETAs.
A more visual campaign must be introduced to make role players and beneficiaries a ware of learnership opportunities.
The Portfolio Committees of Labour and of Education, the National Skills Authority and the National Board of Further Education should convene an Indaba in order to evaluate the lack of progress of the National Skills Development Strategy and the Human Resource Strategy.
Business centres should be established in provinces in order to support the development and growth of small business.
Mechanisms should be devised that will assist in co-ordinating support activities for new companies and close corporations.

(b) Labour Relations
The allocation of funds for the above programme does not allow for the strengthening of civil society.
Funding allocated to Ditsela tends to be a one-sided programme that does not benefit entire communities.
Recommendation by Fedusa
The DOL should set up a structure that will allow for civil society to approach it directly for funding.

(c) Auxilliary and Associated Services
Funding allocated to NEDLAC is inadequate.

(2) Community Constituency
Inadequate funding has been budgeted for enforcement.
There is insufficient follow-up to verify information provided by employers on employment equity targets.
The Committee wanted clarity on the role of the community constituency at NEDLAC. It was me ntioned that the community constituency only participates in the development chamber. The Committee also raised a concern on the amount pertaining to the deaf and the blind. It was suggested that funds for this purpose be budgeted for by the Department of Social Development.

E. General Recommendations
Inter-sectoral collaboration between the Departments of Labour and of Education should be enhanced.
The DOL should monitor employers who do not contribute to the Skills Development Fund.
The participation of NEDLAC stakeholders at local level should be monitored.
Whether the allocation of funds for the deaf and the blind should be re-channeled to the Department of Social Development.
In future, presentations made by the DOL to the Committee on the Budget Vote must reflect clear performance targets with measurable outputs.
The DOL should consider utilising municipalities, labour centres, and constituency offices as a vehicle for the dissemination of information.

F. Conclusion
The manner in which the budget was presented did not place the Committee in a position to check performance against quantifiable targets. It has been difficult to determine whether funds allocated to various programmes were applied effectively.