DEL & UIF Q2 2021/22 Performance; with Deputy Minister

Meeting report

The Chairperson greeted and welcomed the Deputy Minister and all the officials in attendance. Apologies were made for the Minister who could not make it due to the Cabinet meeting that was running parallel to the Committee Meeting.

Deputy Minister’s Opening Remarks

The Deputy Minister of Employment and Labour, Ms Boitumelo Moloi, said the Department will be presenting on the Unemployment Insurance Fund (UIF) meeting strategic objectives for second quarterly performance report of 2021/22. The UIF has been at the forefront of creating jobs, especially preserving the ones that are already available through the investments made by the Public Investment Corporation (PIC) and the Labour Activation Programme (LAP). In March 2017, the UIF and the Industrial Development Corporation (IDC) signed the facility and subscription agreement to bring to effect a substantial investment of R5 billion. The IDC has approved 41 qualifying transactions totalling over R2 billion, of which R130 million was for companies in distress and relating to job preservation. So far, the investment has created and saved just over 8 000 jobs by 31 December 2021. Although this may seem like a drop in the ocean, considering the unemployment rate increase of 7.6 percent in the third quarter of 2021, what is important to note is that these jobs were created in the tough economic environment, where the COVID-19 pandemic wreaked havoc on the South African economy, which led to companies claiming from the COVID-19 Temporary Employer / Employee Relief Scheme (COVID-19 TERS) to afford worker’s salaries, while others resorted to outright retrenchments to survive. When Covid-19 hit South Africa, the country was seized with slow economic growth, and the national lockdown further placed the country in a dire situation, resulting in a devastating effect on business and workers. Therefore, it was important to introduce the TERS to balance curbing the spread of the virus and keep South Africa’s economic wheels going. Covid-19 TERS was also made legally valid because section 5(b) of the Unemployment Insurance Amendment Act (Act 10 of 2016), which allows the UIF to provide financial support to schemes that aim to retain employment for workers. Covid-19 TERS was made possible by the accumulated contributions of workers and the Public Investment Corporation’s (PIC) investment management, which had seen the UIF grow from R53 billion in 2011, to R151 billion before the introduction of Covid-19 TERS.

This healthy state of the UIF’s financial position enabled the Department to set aside an initial budget of R40 billion for Covid-19 TERS for three months. However, the National State of Disaster was extended and, subsequently, the Covid-19 TERS was also extended. To date, the UIF has disbursed R64 billion to 5.7 million workers, surpassing the initial budget by a colossal R24 billion. The Department is not ignorant of the corruption in the country, hence is using all the tools at its disposal to counter it. Corruption is anti-development, and it denies the poor services as it increases the cost of service delivery. The Department has previously warned companies and workers that submitting fraudulent claims is a criminal offence that leads to prosecution.  Following the ‘Follow the Money’ initiatives, there have been 22 arrests and the recovery of R111 million to the UIF coffers that was pursued by the Hawks and the Asserts Forfeiture Unit, and all other agencies dealing with this matter. The DM applauded the concerted efforts of law enforcement agencies for bringing suspects to justice, and for recovering the millions on behalf of the Department – even though the investigations are still ongoing.

UIF has, so far, received R2.5 billion in refunds, as of 31 March 2022, from the employers who made miscalculations or kept the money longer than what was agreed in the memorandums signed with the UIF. This has been motivated by the fact that they are aware that the entity is following the money.Covid-19 TERS is by far one of the most effective monetary government interventions, as it constituted 29% of the 41% stimulus package successfully disbursed by 31 March 2021.

Unemployment Insurance Fund: 2021/2022 Quarter Two Annual Performance Report

Mr Teboho Maruping, UIF Commissioner, gave the first part of the presentation with the main focus on the salient slides. [See the attached detailed presentation]

Key Issues

The UIF has started a process of risk management review every quarter to ask the risk management to test if any of the targets of the entity are at risk of being missed. This enables the Fund to come up with controllers and alternative ways of ensuring that those targets are not missed. The risk management team has categorised some of the areas, and where it is red is an indication that some of the targets as of Q2 were at risk of being missed for the rest of the year. The UIF came with some actions to mitigate the possible risks.

Quarter Two Performance Review by Internal Audit

The objective was to evaluate the following: adequacy and effectiveness of monitoring and evaluation reports, and the processes followed.

Audit Scope 

The audit scope covered the quarter two reporting period (01 July 2021 to 30 September 2021). It evaluated the adequacy and effectiveness of the control environment of the quarter two APP Performance report.

Quarter-Two Internal Audit Assurance

Internal audit audited the quarter two report and assured that:

• Eleven (11) targets were achieved and fourteen (14) were not achieved.
• This translates to 44% achievement.
• One indicator worth 4% could not be validated as evidence, not in line with the Technical Indicator Description
• A follow-up audit resolved the discrepancy between management and internal audit.
• Q2 achievement is now confirmed at 48%

Annual Performance Plan 2021/2022

-There are 25 performance indicators (and 25 targets).

Quarter Two Management Assurance

Management reported that:

• Twelve (12) targets were achieved and thirteen were not achieved.
• This translates to 48% achievement.

Performance Over Six Quarters: FY2020-21 to Quarter Two 2021-2022 FY

• The UIF is reflecting its performance trend in the last two years. The aim is to indicate the impact the Covid TERS payments had on the UIF performance.
• From Q1 2020/2021 the UIF performance dropped because all the energy was drawn towards paying out the TERS.
• The UIF performance this year, starting from Q4, was at 36% - which has improved to 44% and as the entity is reporting now at the end of Q2, the performance is at 46%.

Individual Performance indicators

Mr Theresho Mokgahla, Director: Policy Development Strategic Planning, Monitoring, and Evaluation, UIF, gave this presentation on the performance of the fund in Q2.

Key Issues

• There were 25 indicators, and the overall performance was 48%.
• The large fraction of the indicators are in the administration at 12, which performed at 50%.
• Business operations had the best performance at 63%.
• Labour Activation performed the worst at 20%.
• In total, the Fund has achieved 12 of its targets, which is a four percent increase from the previous quarter of 44%.

See presentation for detailed performance per programme

Finalisation of Temporary Employer-Employee Relief Scheme (TERS) applications approved/rejected by the delegated authority within 15 working days was not achieved. Zero percent of applications were adjudicated within 15 working days. Only two applications were finalised within 71 and 110 working days, respectively. This was because the recommended companies took more than 100 days to comply. Applications were recommended without compliance certificates by the single adjudication committee (SAC). Compliance certificates are a mandatory requirement.

The Fund also failed to provide the UIF contributors with learning opportunities. There were legal questions about the contents of the contracts of the 26 projects. This delayed recruitment of learners.

Quarter 2 Expenditure Report

Ms Fezeka Puzi, UIF CFO, gave this presentation.

Key Issues

Programme One: Administration

About 78% of the budget was utilised, with 22% underspending. Contributing factors for the overspending were as follows:

• Compensation of Employees: The variance is 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 is due to the low spending on projects and activities, delivery was affected by the lockdowns. The following are the major projects of the Fund. Follow the money auditors, ICT system and call centre revamp to improve service delivery.
• CAPEX: Procurement of the tools of the trade is currently ongoing through SITA and refurbishments of the investment properties are done through the PIC. The variance is due to the delays in invoicing from the PIC.

Programme Two: Business Operations

About 55% of the budget was spent, with 45% underspending. Contributing factors for the underspending included:

• Compensation of Employees: The DPSA has approved the Department's fit for a purpose structure to be implemented in the provincial offices and labour centres. The process is undergoing and the service provider has been appointed.
• Good and Services: This particular related to the operating lease for transport (buses). The project is currently underway the Fund has to acquire additional buses to finalise the project.
• Transfers and Subsidies – Benefit Payments: The variance is a result of amounts that were budgeted for re-assessments (UI Amendment Act Top-ups), but were not paid out due to prioritisation of the COVID-19 TERS and WABU benefits processing.

Programme Three: Labour Activation Programme

Only three percent of the budget was utilised, resulting in 97% underspending. Contributing factors for the underspending were:

For Transfers and Subsidies, particularly Unemployment Alleviations Schemes, the delays in implementation resulted from the new mandate on the Department. The Department‘s new focus is on projects that will result in employment or jobs. The Fund has convened a new Committee that will adjudicate all the new projects.

Mr Maruping said that there are concerns about the financial status of the UIF. Slide 36 shows a comparison between the amounts collected as contributions versus benefit payments, including COVID-19TERS and Workers Affected By Unrest (WABU) from 01 April 2020 to 30 April 2022. Collected contributions for the period in question were about R42 614 054 783.39, and payments made amounted to R98 227 419 458.80. The payments made were augmented by UIF’s investment income. There were no shortages. The differentiator is the R61 billion paid towards Covid; it was an intervention required, as the country was in the middle of a pandemic. The Fund’s financial position is still stable. The question should be on whether the Fund will be able to intervene again in the manner it has done with the Covid TERS; the answer is that it is unlikely.

Discussion

The Chairperson asked that the Department respond to the issues of the delay in the appointment of auditors, and the budget that has been overstated.

Mr M Bagraim (DA) said that he has been getting several queries about TERS, maternity, and UIF payments that have not been made to individuals. There seems to be a major backlog. Sometimes, when the entity is contacted, a response is given; other times, there is no response, and the complainants come back to him. He said when that, Ms Bronkhorst was still at the UIF, she used to give quick responses to the queries. He requested that the Department furnish the Committee with contact details for a relevant official who can fast-track the responses to queries, some of which are about a year old. Can we also have an update on the PIC money that was stolen from the UIF? There were hundreds and thousands of businesses that were not registered with UIF, but they claimed for TERS during the application period. How does the Department track down those businesses, even if they are small businesses? These businesses should be under the umbrella of the UIF. He said trade unions are often asking him about the calculations of the payouts. The Department must carry out workshops to educate the public on how the individual payouts are calculated. Sometimes, the people are very unhappy about what they receive from the UIF. Two years ago, there was a consideration that it should also include allowing those who resign to claim from the Fund. Has that consideration been taken up again?

Dr M Cardo (DA) said that he likes to know how much money the UIF has because before the lockdown UIF had around R120 billion. How much is the figure now? It has been over nine months since the July unrest, and about R20 million has been paid out to beneficiaries of the WABU. Has the UIF foreseen any possibilities of similar unrest occurring, given the high inflation as a result of the Russian- Ukrainian war, which has impacted the food and fuel prices? Has the UIF given any thought to the possibility of similar unrest, and will it be in a position to offer a similar sort of benefit to the affected, should such unrest occur?

Ms C Mkhonto (EFF) asked about the number of companies that defrauded the UIF TERS that have been identified so far. How much money has been recovered? In cases where the workers were defrauded by companies, has the UIF been able to intervene to ensure that the affected workers get paid their money by the employers who fraudulently withheld their money?

Mr S Mdabe (ANC) asked about the poor capacity to enforce UI legislation as the reason for a variance on slide 25. Is it due to a shortage of personnel or the skills that are required for the entity to be able to implement the UI legislation? On slide 29, the legal questions about the contents of the contracts of the 26 projects. Does the UI not have a standard contract document on contracting learners, that will choose individuals sector-specific to prevent delays in implementing the programmes? Does that UI communication unit monitor and have responses ready on social media comments daily on UIF claimants?

The Chairperson said that, on slide 22, the presenter mentioned that the Fund has to host a training workshop on irregular and wasteful and fruitless expenditure, which she thinks refers to feeling forms and all that. That cannot be the only reason for irregular and wasteful expenditure. Some of the things could be the pressure that the entity gets from the service providers. For example, one buys a six-pack of still water at Makro for R20, but then when contracted by the Department to provide services they charge R25 to R30 per bottle – does that need training? She proposed that the issue of irregular and wasteful be unpacked by the Department so that Members can understand what dealing with. She said she does not like to be forever chasing shadows. The treasurer will tell the Department and Committee if what she is asking about irregular and wasteful expenditure is allowed or not.

Mr M Nontsele (ANC) raised a question on the liquidity of the UIF – specifically, what could be the reason for the positive liquidity levels that Mr Maruping reported on in his presentation. Is it due to the up swell of the new employers, because there were fears that due to Covid-19 there might be a negative time, but instead of a few employers there are more who are contributing?

On the UIF Investment Portfolio, how often has UIF been able to interface with the Investment Portfolio holder, that is the PIC, so that it gets on board about questions asked on the manipulation of the portfolio, abuse of investments, and so forth?

Responses

Mr Maruping responded to the question on the delay in the appointment of auditors, saying that the CFO was referring to the follow the money auditors. Last year the entity appointed ‘Follow the Money’ auditors for twelve months, and went on a tender to appoint a new set of auditors. The delay was caused by Treasury's decision to pause the procurement processes, and some of the processes were limited to 30 000. As a result, some of the procurement processes were not happening across the county, thereby causing a delay. But, now, the entity is at the contracting stage of appointing the service providers to be able to start work speedily.

On overstating the budget, he said that the logic of the overstating was behind two main items, which were the Covid TERS and the WABU (Workers Affected by Unrest). There are still several outstanding cases and the UIF is not certain about how covid-19 will impact the economy. Where there is a need for an extension of the benefits for two months or so, there should be resources to enable the entity to do so. This also applies to WABU because the number of received cases was small. The activities that happened in the country were widespread in KZN and Gauteng, but the number of applications received was too small. There were too many cases that did not pass the test when UIF was determining if they were indeed applicants that were affected by the unrests at a certain point in time.

In response to Mr Bagraim’s question about the claims not being processed and the relevant person to email about queries, he advised that his email address be used because he is back now. He said the entity has picked up many fraudulent cases where people were not supposed to claim from the Covid-19 TERS. He announced that there was recently an Eastern Cape court judgement that was made in favour of the UIF. The institution concerned has to pay R200 million back to the UIF because companies have been claiming fraudulently for people who were not even working for them. This is because the UIF had relaxed the requirements for UIF to protect the employees regardless of whether the companies were registered with the UIF or not. Compliance with the UIF regulations is the responsibility of the employers, so the entity could not let the workers suffer. As such, the UIF wanted the employers to make the applications in such a way that they own the process, so that when it follows that money it pursues the employers to pay back the money they owe the entity. The UIF has a compliance mechanism now that has been put in place, which is integrated with debt collection compliance. This integrated compliance drive includes ‘Follow the Money’, the auditors, a debt collection team, and compliance unity. This team goes to companies to follow the money. The first thing they do is to confirm that the money the company was paid belongs to its employees, and compliance is also driven at the same time to ensure that the company is registered and that its declarations and the contributions are up to date, including interest and penalties. Once the company makes promises, the debt collection team sits with the company and signs an acknowledgment of debt on the spot. A payment arrangement is also made with the employer to facilitate payment over time. Thus, compliance gets done through this integrated approach.

On allowing resignations to apply for UIF, the process has not yet started. He said that on the money that has been alleged to be stolen, the UIF has engaged with the PIC to the extent of sitting with the board. What the PIC has given to the entity at this stage is that the investigations are ongoing and that there are companies that are claiming to be going into liquidation. These companies have asked the entity to do some internal processes and run the investigation process, and once that is done they will give UIF full details. Their concern is that if they give the UIF full information now that will compromise the investigation processes.

He said that he is taking Mr Bagraim’s advice that the UIF needs to come up with a communication mechanism to communicate with the public. He will get in touch with the communications officer to see how that communication could be done.

On the concern raised about the recurrence of the WABU or the KZN floods as has happened, he said there have been discussions on the matter, and the agreement is that scenario planning be made. The scenario planning must in a sense that it enables the entity to get to a point that it sets aside a separate benefit that covers similar situations like the Covid-19 TERS, WABU, or any other unrest that may materialise. This will be done with the actuaries to see what is possible and how the funding can be sourced; that process is already in motion. The UIF will give an update on the progress.

He responded to Ms Mkhonto’s question on fraud cases, saying that he does not have the numbers at hand but there is a full report on that that can be shared with the Members. It covers the cases that have been given to the SIU, Fusion Centre, the Hawks, or the Assets Forfeiture Unit. He said the EC case whose judgement favoured the UIF resulted from the collaboration between the Hawks, Asset Forfeiture Unit, UIF Audit Unit, and the SIU. In global terms, the auditors that the UIF has appointed have enabled the entity to bring back R900 million to the UIF coffers, which have been directly collected from companies.

Communicating these court case successes to the media has triggered some companies to voluntarily bring R2.5 billion back to UIF, and this figure is expected to rise as more companies are exposed. As the R200 million gets to UIF and some of the cases that are still awaiting judgement in court are finalised, more companies will be exposed and they will not be able to hide from the law. At some point, they will be caught and this money will come back to the UIF.  

Mr Maruping told the Committee that there is a communications monitor, both at the departmental level and UIF level. Although the entity monitors Twitter and Facebook, he admitted that the entity is lacking in proactively and appropriately responding on social media. The entity is not at that level yet, but he will take it up after the meeting.

On the matter of a standard contract template, he said the UIF has one, but what happens is that some of the service providers sometimes tend to think that they can almost run the show and attempt to dictate how the contract should be structured. One of the things the entity adds to these contracts is things like penalties that it can use against the service providers should they fail to meet their contractual obligations. One of the things that the Department is driving is that every project or funding put in place must produce jobs. People must be trained and placed into jobs. Failure to do that then there must be an alternative mechanism put in place. So, this is one of the greatest challenges that the entity faces when dealing with some of these companies.

On compliance shortage, he said that the number of staff that the UIF has on that team could be increased. The entity is looking at reviewing the relevance of the UIF structure. This is the process that has been taken by the Minister to ensure that there is capacity in all areas to enable them to do what they are supposed to do. The targeted completion date of that project is 18 months, which is around September 2023. Where the entity is expecting to have a company review on the whole structure is in the compensation fund and the UIF, and it will ensure that they are fit for purpose and will fix compliance issues. In the meantime, the UIF is bringing in interns to add to the staff to close the shortage gap.

In response to Mr Nontsele’s question on liquidity level, he said that he was referring to slide 36. On this slide, the UIF is reflecting the contribution level of the fund, which has not dropped over time in terms of what the fund normally receives on annual basis. The UIF intervention through Covid-19 TERS was meant to ensure that the employer and employee relations remain intact. During that same period, the UIF anticipated more jobs will be lost, hence the CFO mentioned that in some areas the entity overstated funds or was over-budgeted. On the contrary, more companies have seen the value of the UIF, and those companies that were partially complying are being seen in the way there is a sudden increase in the contributions to the Fund. Covid-19 TERS has somehow educated South Africans about the value of the UIF, and that it can help them in times of need. Covid-19 TERS contributed to getting more employers to comply, and those that were partially complying to fully comply, thereby increasing the contributions received by the fund. If TERS is stripped off from the R90 billion, it gives R36.43 billion. Compared to the R42 billion that has been received so far, it can be seen that there is a surplus of R6 billion. This means that despite the difficult economic conditions, UIF continued to receive contributions and even better contributions. Thus, the Fund's contribution during the pandemic somehow imparted public awareness about Fund and what it can do for the institutions.

On the engagements with PIC, he said UIF has already had an engagement with the board because these issues are important to the entity, as it is in a bad light in the media. These issues are handed to the PIC to handle. These engagements have been board to board or investment committee to the investment committee. On 14 June, UIF will be having a meeting with the DM of finance who is currently the chairperson of the board. One of the objectives of the meeting is to raise issues that are been in the media on the fraud that is happening in the investment portfolio. UIF would also like to raise concerns about the overall confidence in the PIC, which the media indicates is dropping, particularly on the PIC management of the UIF investments. This issue will be raised with the DM of Finance who is the chairperson of the PIC board next week. These are the continuous and rigorous engagements that the UIF is driving so that it addresses issues that it is picking up in the media.

Ms Puzi, UIF CFO, said one of the key things that the UIF is trying to tighten is the service level agreement (SLA) between the Fund and the PIC to be able to hold that PIC accountable. The UIF Act stipulates that all surplus money needs to be invested with the PIC, and it is legislated that the UIF cannot use any other assert manager except the PIC. The only instrument to hold the PIC accountable is the SLA, so UIF is in the process of tightening it, and the board is driving that process.

On the financial position of the fund, she said as of the end of September, that is quarter two that the entity is reporting on, the total assets of the funds were sitting on R121 billion, but that amount consists of assets of the fund as well as the investments. Thus, the UIF often needs to reserve money for technical reserves that is for the claims and liabilities. Roughly, the total assets, including property, plant, and equipment for the fund, amount to the aforementioned R121 billion. About R110 billion of that was invested with the PIC.

On the irregular expenditure and wasteful that was not achieved, she said the indicator showed that the UIF needs to reduce the irregular expenditure. The irregular expenditure is due to one big contract that was on the SAP licences. The entity sits with that irregular expenditure, while the investigations are being held to hold people responsible for it accountable. That investigation is followed by recommendations. There is consequent management that has to be taken and then you need to write to the National Treasury to request a condonement. What is holding the UIF is the investigation report to be finalised so that further actions can be taken.

Mr Thobile Lamati, Director-General, DEL, responded to the question on resignations being accommodated in the UIF process, saying that part of the basket of issues that will be discussed at the National Economic Development and Labour Council (NEDLAC) include this issue because the Department of Labour raises it very sharply. When the current UIF Act was amended, the UIF made a promise to implement this first and see how it goes. It made provisions in this existing legislation that was not there before, and that included extending the period for claimants from six months to twelve months. The UIF wanted to look at the impact of that on the funds of the UIF, so this will be part of the discussions at NEDLAC. Whether it will happen or not, will be informed by these discussions.

Ms Aggy Moiloa, DEL Inspector-General, responded to the question of the entity’s capacity to carry out inspections. She said the extra resources at the disposal of the UI are about 110, including vacancies of specialist inspectors whose duty is to look into compliance with the UI Act and the Unemployment Contribution Act. They check compliance on whether or not employers are contributing towards the Fund, registered employees, or declaring as required by the law. During the period under review, these inspectors were able to conduct over 8 000 inspections, which was a 93% achievement on the set target. Compliance levels were a bit of a mixed bag with 50% compliance and 50% non-compliance. The entity was able to issue 100% notices and the areas of non-compliance were mostly administrative in nature, where, although there are contributions, declarations are not taking place monthly as required – even though people would have been registered as well. In cases where there were contraventions of contributions, the UIF was able to recover R2.96 million, which is an addition to the figures that the commissioner has already mentioned.

The Chairperson asked about the training that was mentioned in the presentation on irregular and wasteful expenditure. The response given does not talk to her concern. She also asked if the proposal she made is a proposal that is possible or if there will be some constraints. When government departments, including municipalities are found to have done something wrong, it gets published all over the country by both print and social media. Can the Committee be informed about those companies where money was followed and they paid, as well as their sectors? The private sector cannot have its flaws handled privately while the public sector is being exposed to the entire country. The private sector must be equally exposed.

Mr Lamati responded to the irregular and wasteful expenditure question, saying that the Chairperson's observations are correct and that it cannot only be training that is a contributing factor. There are several factors that the commissioner and the CFO also touched on. In the instances where people have not done what they are supposed to do, consequence management has to take place. The only issue that entity has is the time that it takes to carry out its investigations to be able to hold those responsible accountable for that irregular and wasteful expenditure. Training is just part of the interventions that the UIF has to implement in an event that training is the only aspect that is lacking, and in ensuring that people are sensitised not to commit any misconduct in as far as the irregular and wasteful expenditure conduct is concerned. He said that the Chairperson’s suggestion to unpack the irregular and wasteful expenditure can be done, and the information is readily available and can be furnished to the Committee. The information of the companies that have been audited under the ‘Follow the Money’ process can be shared with the Committee and can also be uploaded on the Department website, where anyone can easily see who these companies are.

Mr Bagraim said that when the UIF was outlining the R121 billion that it still has, it mentioned that R110 billion is invested with the PIC. He presumes that it is not part of the money that has gone missing. The entity is carefully monitoring the money that is in the PIC to prevent the disaster that happened last time when that money went missing.  Can the UIF give a response on that R110 billion, which is the majority of the money of the R121 billion? Can the Commissioner also send us a copy of that court finding?

Mr Maruping said that he is looking at the UIF portfolio just to give Members comfort. The exact amount is R122.7 billion, and all this money is attached to different portfolios. The majority of these are sitting with the entity's bonds, and more than 50% of these portfolios are locked in bonds. The money that is alleged to be stolen is still under investigation and makes up 11% of the portfolio. The rest of the portfolio is completely safe, and it is only in the Social Responsibility Investment (SRI), where this issue has been raised. The entity will report back to the Committee after meeting with the Deputy Minister and engaging on the issues in question.

Mr Lamati added that one of the things that did not come out clearly in the presentation is the decision taken by the fund to stop the SRI, given the challenges facing the UIF on accounting, among other things. He just wanted the committee to be aware of that. A copy of the court findings will be sent to the Committee.

Briefing by the Department of Employment and Labour: Q2 performance

Ms Marsha Bronkhorst, Chief Operations Officer (COO), DEL, gave the first part of the presentation, with a focus on the salient slides.

Key Issues

Overview of performance per quarter:

In Quarter One, the number of targets planned was 22, and 16 (73%) were achieved and six (27%) were unachieved. There was an improvement in the performance in Quarter Two, where the number of targets planned was 20. A total of 15 (75%) were achieved, and five (25%) were unachieved.

Quarter Two performance per branch 2021/22: An overall 75% achievement was recorded for that quarter. Comparative analysis per programme for Q1 to Q2 for 2021/22: There was an improvement in overall performance from 73% to 75%.

Performance trends from 2020/21 to date: From 2020/2021, when the country experienced a hard lockdown, when the Department achieved 25%, the performance of the DEL from quarter to quarter has steadily increased. At the end of this Q2, the DEL performance is at 75%.

Areas of non-achievement

There is a recurring non-filling of vacancies. Vacant funded posts are maintained at three percent or less for every quarter. At the end of Q2, the vacancy level was at 10.41%. This was due to the unavailability of panel members to deal with the high volume of applications. There was a delay in capturing applications as a result of the new HRM circular advertising all vacant posts of the DPSA Public Service Vacancy Circular.

On the percentage resolution of reported incidents of corruption in the Department, 329 cases were received and 220 finalised (220/329= 67%); four cases were referred to ER, and ten cases referred to SAPS. The challenge here is that complicated cases are referred to external parties with their completion deadlines. The timeframe for completing the investigation into anti-fraud and corruption is 90 days, and it is not integrated into the timeframe with Employment Relations in terms of reaching the 90-day deadline.

On the number of employers/workplaces/users inspected per year to determine compliance with employment law, 116 328 employers were inspected to determine compliance with employment law against a target of 148 452. The variance is –32 124. The total number of compliant employers was 88 765. The reason for this is that some workplaces were still inaccessible 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 also took longer than anticipated to fill vacancies, and this affected the achievement of targets.

On the percentage of non-compliant employers/workplaces/users received by statutory services referred for prosecution within 30 calendar days, the target was 65%. However, 55% (1 806 of 3 297) of non-compliant employers/workplaces/users received by statutory services referred for prosecution within 30 calendar days. There was about 20% improvement in the achievement of targets, as compared to the first quarter, due to some of the interventions that were implemented in quarter one. The branch has explored and put in place measures to strengthen relations with the courts, but some areas are more effective than others. As a result, this initiative has not been fully effective. The target for the number of partnership agreements concluded with various stakeholders was ten; eight of them were concluded, but the verification process is still in progress. 

Money Recovered

The Department gave a reflection on the money that was recovered by the inspectors during the quarter per legislation. On the underpayment of the wages of employees in terms of the BCEA, R641 769.02 was recovered. For NMWA (National Minimum Wage Act), R7 653 617.06 was recovered. For COIDA (Compensation for Occupationally-Acquired Injuries and Diseases Act), R51 201 022.46 was recovered. For UICA (Unemployment Insurance Contributions Act), R2 960 486.92 was recovered. At the Head Office, there was a fine for Employment Equity (EE) non-compliance, of R20 000.

Placements by Opportunity Type

A total of 37 193 work and learning opportunities were filled by registered work seekers, of which:

- 57% (21 096) were formal jobs;

- 26% (9 659) Projects;

- 9% (3 340) UIF-LAP;

- 7% (2 669) learnership

Placement by Age Group

- 71% (26 486) of work seekers placed are young people aged 15-35 years.

- 29% (10 707) aged 36 years and above.

- The placement was predominantly young people.

SEE Quarter Two Performance

The target for the percentage annual increase of goods and services by end of December was 2.5%. There was a 703% increase in sales from R1 049 560.79 in Q1 to R8 249 663.93 in Q2, which was due to the drastic increase in sales orders and the expansion of SEE’s delivery footprint.

The matter that was not finalised was the number of customer agreements entered into annually, of the two targeted, and one is still outstanding. There was delayed finalisation of three customer additional sales contracts due to administrative processes.

DEL Financial Report

Mr Bheki Maduna, CFO, DEL, gave the presentation.

Key issues

Budget information

This is the voted funds for Quarter Two:

- The budget was at R855.450 million;

- The expenditure was at R783.263 million;

- The available budget was at R72.187 million;

Transfers

CCMA received the bulk of the transfers.

Mr Sibusiso Phakathi, SEE CEO, commented on the employment of people with disabilities. He said that the SEE reports on that at the end of the financial year because it is informed by the resources that the entity would have accumulated to build financial liquidity. This is to justify why the presentation indicated that the employment of people with disabilities was not applicable. This is reported at the end of the financial year.

Discussion

Mr Bagraim asked the Department if it is considering redefining the employment of people with disabilities, especially in the private sector, with the workshops of non-governmental organisations such as Epilepsy SA having workshops while they cannot afford to pay the minimum wage. They also cannot afford the workshop not because they make a profit or losses every month, but because they perform more than just employment. He asked if the Department can look at this in a good light.

Ms Mkhonto said that the issue of vacancies in the inspection unit is worrisome. On the inspections not being fully carried out because companies were not accessible due to the pandemic, she said that Members visit sites and hear about challenges facing inspectors, specifically the right of admission.  Why is it not reflected in the presentation, because some inspectors are not allowed entry in some places? The other factor is that it is alleged that some employers refuse to meet with the inspectors to give them the required reports. Can that be confirmed as true or false? If it is true, what is the prevalence of those incidents in percentages? The future of covid-19 is unclear; it may last longer or disappear, but either way, there will be underperformances. Can the reasons for underperformances be explained?

The Chairperson commented on the oversight of the SEE since the report has not been presented to the Committee. She asked the entity to present the information being raised on what is done by the SEEs, because the Members were physically there. She does not want to be tempted to ask questions, because the situation in the two provinces that Members visited leaves much to be desired. The Chairperson said that the Committee needs that information, including all the issues that have been raised today on the SEE in the entity's next presentation.

On the vacancy rate, she asked the Department to unpack the levels so that the Committee can understand where the challenges are in the Department concerning that vacancy rate. She said her next point overlapped with the visit. There has been a serious IT challenge in the two labour centres that the Committee visited. What is the IT situation in the entire DEL areas where IT is needed the most? What is being done to address the situation?

DEL Responses

Mr Lamati said on IT, there are two critical issues. Because DEL is a highly transactional entity, it is very critical that the IT system is always available, which means that the system downtime is reduced. This is clear from the target of 98% that the DEL has, that it wants that system to be up 98% of the time. However, the situation is not always what is desired. For instance, the entity depends heavily on the State Information Agency (SITA) because DEL uses the agency’s network. If the SITA network is down, there is absolutely nothing the Department can do about it. Both the Ministers of Home Affairs and DEL have sharply requested to detach their entities from SITA because the two departments are highly transactional. The Department is in a process of requesting that it be allowed to operate outside of the SITA environment so that it can take care of its own environment, and will be able to be responsible for its networks. The old IT infrastructure is another issue. As new systems are developed, the Department has to ensure that the old hardware of infrastructure is compatible with the upgrades. Thus, it will have to embark on a refresher programme to refresh the hardware it has so that its laptops are compatible with the system being developed now. Those are the two critical areas and, of course, the refreshing of the hardware requires a lot of money. This will require the DEL to reprioritise in some instances so that this programme is rolled out in all the provinces and their labour centres. This is the concern that the Committee will receive when it gets to the labour centres, but the Department is busy trying to solve the problem.

Responding to the question on vacancies, he said that the Department will send the report to the Committee, and it will be unpacked according to levels as requested, the branches where the vacancies are and the age of the vacancies. The information is readily available and will be provided. On the SEE, he said he will wait for the time of the presentation on that report in the next briefing.

He responded to the question of redefining the employment of people with disabilities, as it affects the private sector: part of what the CFO presented today is what is called transfers. This is money that is transferred to entities and public employment services. This is to enable these institutions to employ and also pay the existing employee. The Department advertises regularly to allow these instructions to apply, and it is working with National Treasury to extend the scheme, but for now, the scheme is still in existence. If the matter has to be discussed at NEDLAC, the Department will not have a problem with that – if it will help that this group of people is not left out. The scheme he is talking about caters to those in the private sector.

Ms Moiloa said that she shares the sentiment about the vacancies. At the time of reporting, the entity was sitting at the vacancy rate of about 9.8 %, and that has now gone down to 8%. The Department is trying hard to close those vacancies, because each vacancy represents potentially the number of inspections that could be conducted and are not conducted because of the absence of warm bodies.

On the right of admission since there is Covid -19, the Department can confirm that a workplace will indeed be inaccessible due to that. However, generally, the inspectors are empowered by the law. From a legal point of view, the basic conditions of employment, particularly section 65, talks about the power of entry that allow the inspectors to enter any workplace. Section 66 talks about the power to question, which gives the inspectors the right to ask any question about the inspection upon entering any workplace. Section 67 gives the inspectors a right to enjoy full cooperation in the workplaces they enter into. Section 39 of the Occupational Health and Safety goes on to give the inspectors powers to serve a contravention in instances where there is an obstruction to the inspectors' ability to do their work. Thus, from a legal point of view, inspectors are empowered to do their work. From the process point of view, before inspectors go out to any workplace, there is profiling that is done, so they know what to expect before getting to the targeted workplace. If the workplace is deemed problematic and with the potential to pose challenges to the inspectors, a few SAPS officials are taken along to assist the inspectors to gain access to such places. Inspectors also have a right to subpoena places that deny them access for any reason whatsoever. Generally, the Department has no problem with gaining access to workplaces, and the prevalence of instances where access is denied, and the entity has to use its powers. The prevalence is very low – less than 1%. It is unusual for inspectors to be unable to access a workplace.

Mr Sam Morotoba, DDG: Public Employment Services, DEL, said that people living with disabilities should be integrated into mainstream employment, and employers should try to provide workplaces that accommodate them. It is currently not the case, and most workplaces cannot accommodate them. It is only in instances when people get injured on duty that the compensation will provide assisting devices. There are currently 540 such establishments, but they are funded by the Department of Social Development and the SA Lotteries. In the Department, for the last four years, because of Covid-19, ten organisations were funded per three-year cycle; this number had to increase the one year because of the pandemic, and there was approval from National Treasury to that effect. Thus, the scheme is in line with what the Department does at SEE. While SEE is permanent employment, the Department gives subsidies to organisations that deal with people with disabilities. For the next three years, as at April 2022, that Department has nine organisations, and Members are welcome to visit. The Department subsidises each worker in those factories with R1 800, and they are also given 10% administration cost in line with each worker. The understanding is that companies also draw on the subsidies or the social grant, and they also top up the social grant and the Department’s R1800 subsidy with the proceeds from the profits they make from the goods they sell. Unfortunately, whilst the Department has several disabled individuals' workshops in the Western Cape, the one on epilepsy is not part of the nine. The restriction is due to the amount to the amount of money the DEL receives from National Treasury. The entity started with about three organisations. With the cash injection from the National Treasury, it was able to increase the numbers. This is one area that got more potential, and the Department of Social Development is now considering shifting some of its 540 organisations to the DEL because of the way it runs its factories and subsidies.

Mr Thembinkosi Mkalipi, Chief Director: Labour Relations, DEL, added on the grounds for exemption. He said any employer that is unable to meet the minimum wage can apply for an exemption. For private NGOs that play in this part, and are registered with the Department of Social Development as an NPO, and apply for an exemption, they can get an exemption up to the level of the expanded EPWP programme, which is packed at 88% of the national minimum wage – which is now at R12.75, compared to the national minimum wage which is R23. Therefore, if a company that is registered with the DSD cannot afford a minimum wage apply for an exemption it can get up to that. They pay as the EPWP programme rate.

The Deputy Minister thanked the Committee for allowing her Department to present before it. She expressed her satisfaction with the presentation, and committed to submit more information and reports if the Committee requests.

The Chairperson thanked the DM and the DEL delegation for the presentation. She indicated that the reason why this information is requested to be unpacked based on vacancy levels and all the other things that have been requested is to empower Members to be able to respond. At times, the media would want to ask some questions on certain issues, and Members do not have that information. As public representatives, Members have a responsibility to protect the Parliament and themselves. By saying “protect” she means that Members should respond according to facts to be able to demystify some of the myths about the Committee and this Department. When conducting oversight, if the Committee feels that the Department is doing what is expected, it will never be apologetic about that. So the sooner the Committee gets the information it needs, particularly on the UIF, the better. UIF is forever, and people will forever want to understand and punch walls. So, when they punch walls Members must be ready to respond with facts.

She asked the Department to take the request on UIF and things needed from the Department very seriously. The companies that defrauded the UIF must be exposed because if, there was no ‘follow the money’ they could have kept that money. All corruption must be exposed similarly, regardless of who commits it – including individual members of the public and the private sector.

She reminded the DG to ensure that the Committee receives the information on the SEEs, and indicated that fireworks will explode on the day of the presentation on the SEEs because of the two provinces the Members visited.

She thanked Members for attending the meeting.

The meeting was adjourned.