South African Post Office flexible labour strategy: progress report

Meeting report

The Committee noted the apologies of Ms Stella Ndabeni, Deputy Minister of Communications and Ms S Tsebe (ANC).

The Chairperson welcomed the delegates from the South African Post Office (SAPO) and the Department of Communications (DOC).  The matter had arisen when employees of labour brokers utilised by SAPO had petitioned Parliament during 2012.  The Committee had to ensure that the issues raised by the employees were addressed.  SAPO had developed a flexible labour strategy and was required to provide the Committee with updates on the implementation of the strategy.

Briefing by the South African Post Office (SAPO) on the progress made in the implementation of the flexible labour strategy
Mr George Mothema, Chairperson of the SAPO Board apologised for providing the Committee with more than one version of the briefing documents.  He explained that the Board had taken a resolution to approve the briefing documents prior to presentation to Parliament.  Board approval could not be obtained before the deadline for submitting the documents to the Committee.  There were slight differences between the original version provided to the Committee and the final version presented during the proceedings.

Ms J Killian (COPE) suggested that SAPO allocated version numbers to the documents to avoid confusion.

Mr Mothema agreed to the suggestion.  He introduced Ms Khumo Mzozoyana (the recently appointed Chief Financial Officer), members of the SAPO Board and the delegates from SAPO to the Committee.  Ms Mzozoyana gave a brief overview of her background and experience.

Mr Mothema summarised the background to the introduction of the flexible labour strategy by SAPO.  The Post Office had suffered a strike by temporary workers that had resulted in significant financial loss to the organisation.  The SAPO Board had embraced the concept of creating decent employment opportunities and took a balanced approach to implementing Government’s employment objectives.  A consultant was appointed to develop a new model for a flexible labour strategy.  The Board had adopted the report issued by the consultant and approved the proposed model.  The Board had noted that stakeholder engagement was essential for the successful implementation of the strategy.  The progress that was being made in the implementation of the strategy was being tracked by the Board and mitigation action was being taken to address the risk factors that had been identified.

Mr Christopher Hlekane, Chief Executive Officer, SAPO presented the briefing to the Committee (see attached document).

The flexible labour strategy was presented to the Committee during August 2012.  The Committee had raised issues concerning the cost implications, the risks to SAPO, the model to be implemented and the benefit to employees that needed to be addressed.

The briefing summarised the process followed by SAPO in implementing the agreed framework and the progress made regarding the commitments to terminate labour broking contracts by the second quarter of 2012, to employ flexible staff directly for a fixed period and to commence the implementation for the flexible employment model by the second quarter of 2013. 

Contracts with all labour broking firms were terminated by 23 September 2012.  A total of 7911 previous labour broking employees were appointed on 12 month fixed term contracts from September 2012.  Biographical and demographical data of the employees had been captured on the SAPO system.  Ten additional human resource support personnel were required.  The part-time employees were subjected to the same vetting process as permanent employees.  SAPO used an external service provider for the vetting process.  Part-time employees received preferential treatment for appointment to full-time vacant positions.

Ms Mzozoyana presented the financial implications of the implementation of the strategy.  Previously, 32% of the remuneration of a labour broker employee was paid to the labour broker.  Under the new dispensation, employees received 100% of the salary earned, less statutory deductions.  Total SAPO staff costs had decreased from R283.1 million in August 2012 to R281.5 million in January 2013.  Additional costs incurred for part-time employees were for uniforms (R9.5 million) and training (R4.2 million).  Successfully vetted employees who were granted a part-time contract (also referred to as ‘permanent part-time contract employees’) qualified for additional contractual benefits.  The total cost of the contractual employee benefits was estimated to be R84 million, in addition to the cost of uniforms and training.

Mr Hlekane concluded the briefing with a summary of the potential risk and mitigation measures in place.  The major potential risk factors were ongoing labour unrest and increased staff costs.

Mr Mothema advised that the Board was in the process of concluding a turnaround strategy for SAPO that would allow the organisation to absorb the additional staff without compromising its financial viability.  The additional costs could only be accommodated on the basis of future growth.  The Committee would be briefed on the strategic plans of SAPO in due course.

Discussion
Ms R Morutoa (ANC) observed that SAPO had attempted to respond to the issues that had been raised by the Committee during the previous briefing.  She asked how many of the 7911 employees concerned had been employed on a permanent basis.  She asked what was meant by the term ‘permanent temporary employee’, what the total cost was for absorbing all the temporary employees and if the model chosen was the most appropriate solution.

Ms Killian noted that progress had been made with regard to the commitments that were given.  The Committee had highlighted concerns over the business model as SAPO needed to be a financially viable operation.  The total employee cost (including flexible labour cost) had decreased from R283 million to R281 million between August 2012 and January 2013.  However, the projected additional employee costs of R97.7 million, an increase in operational expenditure and further capital expenditure on equipment could put the financial viability of the Post Office at risk.  She asked what future developments were anticipated and what the budgetary implications were.  The Committee could not allow a situation to develop where the SAPO business model collapsed and the Committee was blamed for imposing a financially unsustainable employment strategy on the organisation.  She urged SAPO to be frank and open with the Committee and to be clear on any medium term adjustments to the business plan that needed to be made.

Mr C Kekana (ANC) remarked that the business environment in which SAPO operated had changed drastically with the development of modern telecommunications systems.  He understood that the presence of the Postbank, particularly in the rural areas, would offer more employment opportunities.

Ms R Lesoma (ANC) recalled that the estimated additional cost to SAPO for implementing the new employment strategy was R48 million.  She assumed that the additional cost quoted in the briefing of R97.7 million was an estimated amount.  She wanted to know what the actual cost would be.  She said that the costs involved should be of secondary consideration to the need for providing decent jobs.  She questioned the need for the services offered by employment agencies, at a cost to the employer.  She asked if the implementation of the flexible employment strategy had impacted on the operations of SAPO and if the cost of mail would be increased.  SAPO needed to be financially sustainable.  She asked why the employees concerned were subjected to a vetting process as SAPO was happy to use the personnel previously employed by the labour brokers.  She asked for confirmation that a fixed term contract of 12 months had been offered to all the employees concerned.

Mr G Schneemann (ANC) observed that certain employees would fail the vetting process or might not be suitable for permanent employment.  He wanted to know what action was taken by SAPO to provide the employees with the necessary skills.  The Committee was informed during the briefing in August 2012 that training would be provided but this was not referred to during the current briefing.  He asked if there was any link between the skills of the employee and the vetting process.  He noted that changes had been made to the targets that had been set during the previous year.  He wanted to know what progress had been made to develop the additional internal human resource capacity that was required to deal with the additional 7911 employees.  He asked if the vacant posts in SAPO were being filled by the pool of temporary employees.  He asked what progress was being made with assisting temporary employees to progress to permanent employment.  SAPO needed to become more innovative in attracting business to the Post Office.  The strategy for increasing its customer base needed to be considered during the budgeting process.

Mr B Steyn (DA) suggested that more use was made of electronic media to distribute briefing documents.  He understood that SAPO had changed to a different model during 2012 and wanted to know what the reasons were for the change.  The new strategy was implemented before the necessary internal capacity was in place.  He asked what minimum and maximum hours worked by permanent part-time contract employees were used to calculate the cost of the additional benefits.  The amount concerned varied substantially from the amount estimated previously.  There were no savings in flexible labour costs if the portion paid to the labour broker was paid to the employee instead.  He noted that SAPO continued to make use of external service providers and queried the benefit derived from such practice.  He pointed out that the Government subsidy paid to SAPO was being phased out.  SAPO was already struggling to remain profitable and should not risk the jobs of the other 112000 Post Office employees for the sake of 7911 temporary workers.  The long term sustainability of the plan needed to be considered as SAPO could not rely on the Committee to approve additional funding.  He wanted to know what would happen to the employees when their twelve month contracts expired.  He asked for an explanation of the differences between the fixed term and permanent employment contracts.  Previously, the number of temporary employees was given as 7500 but the number had increased to 7911.  He recalled that the twelve month contracts given to certain employees during 2012 were withdrawn the following day.  He understood that certain cases were being challenged in the Commission for Conciliation, Mediation and Arbitration (CCMA).  He wanted to know what the reasons were for the termination of the contracts, how many cases were involved and what the financial implications were if the CCMA ruled against SAPO.

Ms M Shinn (DA) was concerned that SAPO was being forced into something that the organisation could not afford to do.  She hoped that the new strategic plan would indicate the financial sustainability of the flexible employment strategy.  She asked for more information on the additional costs incurred for uniforms, training and ten additional HR personnel to manage the temporary workers.  The concern was that SAPO had a substantial wage bill without generating additional revenue.  Any new initiatives to generate income would take a long time before sufficient revenue was earned to avoid debt.

Ms F Muthambi (ANC) noted that SAPO had identified labour unrest as a major risk factor.  She understood that SAPO had a collective agreement with the labour unions in place.  She asked for details of the strategic partner for ‘co-sourcing’ referred to on page 4 of the briefing document.  The Committee required assurance that the flexible labour strategy was sustainable despite the phasing out of the Government subsidy to SAPO.  She wanted to know if SAPO’s performance management system applied to employees below the level of senior executive.

Ms L Van der Merwe (IFP) shared the concerns over the long term financial sustainability of the plan.  She wanted more information on the HR capacity to deal with the additional personnel.  She asked what the possibility was of outsourcing the employees to strategic partners such as Telkom.  She asked what the current relationship was between SAPO and the labour unions.  Reports in the media suggested that SAPO and the unions were at loggerheads and that the unions had called for the removal of the head of the human resources division.  The support of organised labour was essential for the successful implementation of the plan.

Ms W Newhoudt-Druchen (ANC) noted that twelve-month contracts were concluded with the employees during September 2012.  The briefing referred to contracts being in place in January 2013.  She wanted to know when the twelve month contracts would expire and what would happen afterwards to the employees concerned.  She asked for confirmation that SAPO had no dealings with labour brokers.  She also wanted clarity on the ten additional HR support staff.  She asked for the briefing documents to be e-mailed to her.

Mr Mothema explained that the purpose of the Postbank was to provide citizens living in remote rural areas access to the capital markets.  The Postbank would also offer SAPO products.  The Postbank was currently in the corporatisation phase and had a limited offering in terms of the Banking Act.  The granting of a banking license to the Postbank was critical and ensuring that the bank was adequately funded was a major concern.  Employees previously employed by labour brokers were given preference to fill vacant permanent positions.  These employees needed to be vetted in accordance with the SAPO and Postbank requirements.  SAPO was reluctant to ask the Committee for a bail-out.  The flexible labour cost had been sustained in prior years and the only additional cost was the cost of the employee benefits applicable to permanent contract workers.  SAPO regretted losing the South African Social Security Agency (SASSA) business and planned an aggressive marketing campaign to expand its client base.  A more detailed briefing on SAPO’s strategic plans would be presented to Parliament in the near future.

The Chairperson clarified that the Committee understood that the previous labour broker employees were granted a one-year contract at no extra cost to SAPO during phase 1 of the flexible labour strategy.  During phase 2, the employees concerned would be employed by SAPO on a permanent basis, with additional benefits and at additional cost to SAPO.  The employees would be vetted before being appointed on a permanent basis and SAPO would provide the necessary training.  The questions from Members were mostly about the second phase of the strategy.

Mr Hlekane could not confirm how many employees would ultimately be given permanent positions.  To date, 355 employees had been transferred to fill vacant positions.  He explained that a ‘part-time permanent employee’ was an employee that worked less hours per day than a full-time employee.  The Board was currently considering the business viability of having a part-time staff complement.  A decision would be made during 2013.  The changes in the business environment needed to be taken into account.  Although mail volumes had declined, bulk mail was more profitable.  The relationship with organised labour was managed closely but the strikes called by the unions had strained the relationship.  Prior learning and experience needed to be taken into account when devising training programmes.  It was necessary to assess the training needs of individual employees as well as the changing operational needs of the organisation.  The progress made in providing training would be monitored.  The existing SAPO HR systems were used to accommodate the temporary employees.  The internal HR capacity had to be managed to ensure that there was sufficient capacity to deal with the transition without ending up with superfluous capacity one the transitionary phase was completed.  The ten additional HR positions were for administrative support and management staff.  SAPO would continue to monitor the filling of vacant posts.  The business need for the position would be assessed and the skills of candidates would be matched to the job.  The exact number of previous labour broker employees was only determined once the records of the labour brokers were captured on the SAPO database.

Mr Hlekane said that SAPO was being realistic in the development of strategic plans to address the business challenges.  The original strategic framework proposed migrating from outsourcing to insourcing via a process of co-sourcing.  The revised framework migrated directly from outsourcing to insourcing.  The calculations to determine the cost of additional employee benefits were based on working an average of six hours per day.  SAPO continued to monitor the process and the financial implications.  The major financial risk was the cost of equalising the benefits of full-time and part-time employees.  The risk was mitigated but the utilisation of contract workers, prudent management and cognisance of seasonal business demands.  The labour unrest risk was based on the assumption that not all employees were satisfied with the changes and would go on strike.  SAPO’s turn-around strategy took the phasing out of the Government subsidy into account.

Mr Hlekane advised that SAPO had implemented an employee performance management system with effect from 2013.  The performance targets for individual employees at all levels in the organisation were based on the corporate strategic plans and targets.  A communication strategy and formal lines of communication with organised labour were in place.  A process of continuous engagement with the labour unions was followed and the unions had been involved in the changes affecting the labour force.  The twelve-month contracts with the employees would expire at the end of August 2013.  External service providers were only used for the vetting of the 7911 employees concerned, which was a temporary arrangement.  All contracts with labour brokers had been terminated in September 2012.

Ms Mzozoyana explained that the previous estimate for the additional cost of employee benefits had excluded certain benefits and was not correct.  The estimate amounting to R84 million was correct.  She confirmed that there were no savings to SAPO from dispensing with the services of labour brokers.

Ms Morutoa observed that the Auditor-General might investigate the actual cost of implanting the strategy.

Ms Killian understood that employees who had passed the vetting process would qualify for part-time permanent employment.  She asked what the minimum number of hours that had to be worked per day was before an employee qualified for the benefits normally granted to full-time employees.  She asked if the abrupt termination of the contracts with the labour brokers had resulted in a staffing vacuum.

The Chairperson wondered what the legal provisions concerning ‘part-time permanent’ workers were.  The phrase ‘permanent part-time’ was confusing.

Mr Hlekane advised that the intention was not to grant full benefits to employees working fewer hours than full-time employees.  SAPO had appointed an external service provider to assist with establishing what benefits should apply to part-time employees.

Mr Maputha Diaz, Group Executive: Human Resources, SAPO explained that the labour legislation defined an ‘employee’.  The details of the relationship between the employer and the employee were included in the employment contract, e.g. the nature of the duties and the number of hours worked.  A total of 26 cases were lodged with the CCMA, all in the Western Cape.  21 cases concerned SAPO employees who were previously retrenched.  SAPO policy had been not to re-employ retrenched workers but the policy had been revoked and the workers concerned were subsequently offered employment contracts.  Two cases concerned foreign workers without valid work permits.  The workers were invited to re-apply once the permits had been obtained.  The remaining two cases concerned workers who were previously dismissed by SAPO for gross misconduct.  These two workers would not be re-employed by SAPO.

Mr Mothema explained that the service provider appointed by SAPO to develop the flexible employment model had based the original strategy on a number of assumptions.  Subsequently, the input from management on the plan was obtained and the financial implications of the strategy were determined more accurately.  The discrepancies between the original and revised frameworks arose from earlier erroneous assumptions that were made.

Mr Kekana observed that the retail sector also made extensive use of labour broker services and part-time employees.  He asked why the system appeared to be working in the retail sector but not at SAPO.

Mr Mothema explained that the approach taken by the SAPO Board was that the Post Office was a state-owned entity (SOE).  As such, SAPO had an obligation to contribute to Government’s employment policies, the New Growth Path and job creation.  SAPO could not be compared to the retail sector.  He pointed out that the workers had appreciated the benefits of the strategy once they received the portion of the earnings previously paid to the labour broker and became aware of the other benefits available to them.

The Chairperson asked when the following progress report would be submitted to the Committee.

Mr Mothema advised that the following progress report would be made at the end of the first phase, i.e. when the current twelve month contracts expired at the end of August 2013.

The Chairperson thanked SAPO for the input provided.  The Committee saw that progress had been made and he expected that the subsequent progress report would include more information on the future employment strategy of the Post Office.

Other Committee Matters
Vacant position on the Board of the South African Broadcasting Corporation (SABC)
The advertisement calling for nominations of candidates to fill the vacant position on the SABC Board needed to be placed.  The Committee’s input into the draft advertisement had been requested.  Suitable candidates needed to have strong auditing and accounting skills.  However, the applicable legislation only referred to business and financial skills, which was a broader concept.  After some discussion, Members agreed that the legally prescribed requirement was adequate to attract candidates with suitable qualifications.

A letter from concerned SABC employees had been received by the Committee, requesting that the reasons for the recent resignations from the SABC Board were investigated.  The Committee was responsible for the process to appoint members of the SABC Board but its involvement in the exit process was less clearly defined.  It might be necessary to review the applicable legislative provisions as there was a tendency for resignations to be tabled with the Office of the President.  As the Committee was responsible for oversight over the SABC, it was necessary to ensure that circumstances impacting negatively on the functioning of the Board and leading to the resignation of Board members were dealt with.  Not all Board members were willing to have their reasons for resigning to be discussed in a public forum.  The Committee was aware that the Auditor-General was conducting an investigation into resignations at the SABC and awaited the relevant report.

Safety of Independent Communications Authority of South Africa (ICASA) Councilors
Ms Shinn had informed the Committee of an attack on an ICASA Councilor, allegedly related to his involvement with an investigation into the non-payment of license fees by certain operators.  She had requested the Committee to request the ICASA Board to report on what measures were in place to ensure that the safety and security of Councilors were safeguarded.  The Committee was aware that the incident might be under investigation and that any action taken should not jeopardise any law enforcement activity under way.

The Committee would request ICASA to report on two separate issues, i.e. the safety of Councilors and the status of compliance to license fee regulations.  Another suggestion was that the Committee research staff investigated international good practice on the safety and security of appointed officials.

Committee Programme for the first term of 2013
The Committee considered its programme for the first Parliamentary term of 2013.  The programme would be amended to include the briefing from ICASA, as discussed earlier.  Ms Van der Merwe proposed that the programme was adopted.  The motion was seconded by Ms Newhoudt-Druchen.

The meeting was adjourned.