Department of Employment and Labour (DEL) responses to 2021 BRRR; DEL 2021/22 Annual Report; with Deputy Minister

Meeting report

Opening Remarks by Deputy Minister of Employment and Labour
Ms Boitumelo Moloi, Deputy Minister of Employment and Labour, said the Director-General would provide an outline for the presentation, and that she would make comments at a later stage.

She was then unable to make an address later in the meeting as she had to leave proceedings midway.

Department of Employment and Labour (DEL) Annual Report 2021/22

Ms Marsha Bronkhorst, Chief Operations Officer, Department of Employment and Labour, comparing the four quarters of the year, which informed the Department’s performance and achievement of its targets, said in quarter one, the performance of the Department was sitting at 73 percent. That improved in quarter two to 75 percent. The was followed by a dive in quarter three which placed performance at 68 percent, followed by 81 percent of performance achievements met in quarter four.

The annual performance of the Department was 64 percent of targets achieved. The performance was divided into four programmes namely:
(i) Administration;
(ii) Inspection and enforcement services
(iii) Public employment services
 (iv) Labour policy and industrial relations.

Administration had an overall achievement of 63 percent. Inspection and performance achieved at 25 percent. Public employment services were at an achievement rate of 83 percent, whilst labour policy and industrial relations achieved 70 percent.

Only 85 percent of the budget was spent.

Comparing the performance per programme between 2020/21 and 2021/22, it was noted that Administration drastically improved from an overall performance of 25 percent to 63 percent in 2021/22. Inspection and enforcement services declined from 50 percent overall achievement to 25 percent. Public employment services’ performance remained unchanged, at an achievement rate of 85 percent. Labour policy and industrial relations declined from 90 percent overall performance in 2020/21 to 70 percent in 2021/22.

On the provincial performance for inspection and enforcement services:
-Eastern Cape had a 67 percent achievement rate, wherein inspections were not achievable.
-Two provinces remained a concern, namely Limpopo and Mpumalanga, which only achieved 33 percent of their indicators for the 2021/22 financial year.

For public employment services respectively:
-There had been a consistent 100 percent achievement in all the provinces, except for Gauteng and KwaZulu Natal which both had a 75 percent performance rate.

See presentation attached for areas of non-achievement in the different programmes

Corruption Cases
The main challenges were found in the Gauteng province as it had recorded a high number of corruption cases. The Unemployment Insurance Fund (UIF) head office had the second highest, followed by KwaZulu Natal, with Mpumalanga and Limpopo on a similar scale. Eastern Cape had lower numbers of corruption cases – although not acceptable.

Misconduct Cases
The bulk of misconduct cases had been found in the Compensation Fund, followed by the head office of the DEL, the Mpumalanga province, the Eastern Cape, and the Gauteng province. The biggest number of types of misconduct cases in the Department was about the damage and misuse of state property.

Inspection and Enforcement
The underachieved targets in this programme included an undercount in the inspections against the targets that had been set, and that had been due to the branches that had unverifiable performance information. Whilst only 64 percent of cases received by the Statutory Services were referred, the target was not achieved as a result of the adjustments made due to discrepancies and errors emanating from the late audit verification process undertaken after the signing of the quarterly performance report. Due to delays in the new procurement measures by National Treasury, the branch could not do the two required seminars.

Public Employment Services
Public Employment Service was not able to maintain the full achievement as it had done in previous years; that was due to the draft labour migration policy which had not been approved by Cabinet, at the time of reporting. The placements made were constituted as follows: 78 percent was for contract-type placements, 16 percent was for temporary opportunities, 4 percent was for permanent opportunities, and the remaining 2 percent was classified as other income-generating opportunities.

Labour Policy and Industrial Relations
The Employment Equity Amendment Bill was still to be assented to by the President. The mid-term report was produced and submitted; however, it missed the deadline and was thus deemed to be underperforming. Similarly, the annual Job Opportunity and Unemployment in the South African labour market was late, as such was recorded as underperforming.

Audit outcome
Mr Bheki Maduna, Chief Financial Officer, DEL, said the audit outcomes for the year under review had been classified as an unqualified opinion with some matters of emphasis. The first matter of emphasis under review was the restatement of financials, followed by the major underspending by the Public Employment Services in the Department. All the programmes had an underspent amount. The highest under expenditure was from the Public Employment Services which was sitting at R279 million. The Department was at 15 percent for underspending.

Expenditure information
The administration programme had an underspending of R156 million due to the compensation of employees resulting from vacant posts. Goods and services were mainly attributed to reduced travelling, accommodation, foreign travel by the departmental officials, and workshop attendance. Capital expenditure also had underspending due to delays in the delivery of laptops and desktops due to the global shortage from a supplier.

Inspection and Enforcement Services had an underspending that amounted to R104 million. Similarly to administration, the programme had underspending due to vacant posts, reduced goods and services, and reduced capital expenditure.

Public Employment Services had over R279 million for under-expenditure, with the major underspent being from the amount of money (R238 million) that was meant to be transferred to the Government Technical Advisory Centre (GTAC) as per the Presidential Employment Stimulus funding. The pathway management with GTAC had investigated that, and the matter was corrected. The balance of the underspending relied on the economic classification of the compensation of employees, goods and services, and capital expenditure.

Labour Policy and Industrial Relations had an under-expenditure of R45 million due to the amount that was earmarked for the job summit. Due to Covid-19, the job summit had been postponed to May, which fell outside of the current financial year.

Irregular expenditure amounted to R17.994 million recorded in the year under review. That was mainly dominated by a R16.865 million ICT-related contract for Enterprise Support Services that was not approved by the DBAC.

Fruitless and wasteful expenditure to the value of R265 000 was recorded in the year under review. In the main, that was in respect of the damages caused to departmental vehicles during use.

Supported Employment Enterprises
Mr Sibusiso Phakathi, Head of Department: Supported Employment Enterprises, DEL, presenting the Supported Employment Enterprises (SEE) Annual Performance Report, said SEE was an entity that promoted supported employment for persons with long-term physical, mental or sensory impairment disabilities. SEE was reported to have met the target for persons living with disabilities as the enterprise had employed 25 persons living with disabilities by the end of the 2021/22 financial year. The enterprise had a five percent growth target, that it was not able to meet. Efforts were being made to rectify the decline.

The customer agreements annual target was met, and the enterprise entered six memorandums of understanding, from a targeted five. The enterprise’s key imperatives were:
(i)  New Customer acquisitions which were at 90 percent. The enterprise had a strong focus on furniture for higher margins. 
(ii)  Market penetration of the private sector, as more private sector clients drove the economies of scale. That resulted in the creation of employment for people who were living with disabilities.

The financial performance of the entity had experienced challenges; there had been a 12 percent decline in the current asset, which translated to a R20 million deficit. On a positive note, the numbers had experienced an improvement, which would allow the entity to augment the deficits experienced in the previous financial years.

The operating cost was high – with the entity managing 12 manufacturing plants across the country- and the sales of goods were not covering the costs. Almost 90 percent of the budget went to salaries, which was one of the main challenges.

Audit outcomes for the year in question were qualified with an opinion. Services in kind were eliminated and classified as repeat findings. The challenges had been in Inventory, cost of sale, receivables, and payables. That had been largely due to exchange receptions. Efforts were being made to rectify those challenges, and automated systems that would rectify the challenges were being implemented.
 
In addressing the audit findings, the enterprise was doing the following:
Generating monthly financial reports for closer monitoring.
Increasing debt collection rates.
Integrating value chains across systems; and
Implementing audit recommendations

Department of Employment and Labour response to 2021 Budget Review and Recommendations Report

Mr Thobile Lamati, Director-General, DEL, said the Department had made efforts towards the recommendations provided for the various initiatives that had to be undertaken.

Focus on Employment

There had been improved coordination to maximise impact, working with the project management office and other stakeholders to ensure improvement in coordination, whilst expanding the programmes designed to preserve jobs such as:  the Labour Activation Programme, the workplace challenges programme, and the Temporary Employer Relief Scheme.

The role of the National Economic Development and Labour Council (NEDLAC) was being strengthened by having job summits, integrating them with Economic Rapid Recovery Plans, and moving towards establishing a social compact that would address employment issues, economic recovery, and poverty eradication. Currently, the Department is looking at ways of re-aligning itself to ensure its objectives were met.

Compensation Fund Interventions had the following progress

New students at post-school training – sat at 526. The Department was finding it difficult to attract students, thus it resolved to training the children of the Compensation Fund beneficiaries.

People living with disabilities were funded for vocational rehabilitation, of which 53 were continuing students and 41 were new students.

Commission for Conciliation for Mediation and Arbitration (CCMA)

The budget issue for the CCMA resulted in an allocation for the 2022/23 financial year - increase of R1 046 293 000 (from R991 984 000). The financial needs of the CCMA were being continually considered.

National Economic Development and Labour Council (NEDLAC)

NEDLAC needed to increase capacity, which had been done through the training and development of the staff. Alongside the restructuring of the entity, the was a need to employ more senior staff with facilitation and leadership skills.

Unemployment Insurance Fund (UIF)

The following recommendations and initiatives have been affected:

As of 15 March 2022, 131 fraud and corruption cases had been received and 54 had been resolved.
As of 31 December 2021, 21 073 learning opportunities were supported
During 2022/23, UIF was going to deploy a new ICT system to improve application and payment systems
The reconfiguration of the UIF to have a fit-for-purpose entity would be pursued.

Discussion

Mr M Bagraim (DA) said both the Compensation Fund and the Unemployment Insurance Fund had to be suspended and handed over to the receiver of revenue, pending the review of the funds.

It seemed that the Department was glossing over the misconduct issues in the Compensation Fund. How much had been spent on external chairpersons and salaries for suspended officials? 

Ms C Mkhonto (EFF) said the Department's underperformance and under-expenditure were a grave concern. She expressed concern for the officials heading underperforming units and stated that it would be ideal in the coming years if serious consequence management was done in that regard. Limpopo and Mpumalanga provinces performed under 50 percent. As the custodian of employment and labour, it was not acceptable that the Department had such a high unfilled vacancy rate; the Department was meant to be the leader in both the public and private sectors.

A serious intervention was needed towards the commissioners of the Compensation Fund and the Unemployment Insurance Fund. Of the money that the Department recovered from external partners, where had the funds gone to? Who was responsible for accounting for such funds? On capacity building, was there any upskilling for the inspectors to enable them to perform better?

Dr M Cardo (DA) concentrated on the dysfunction at the Compensation and Unemployment Insurance Funds and asked if there had been any engagement between the Minister (and/or Director-General of Labour) with the South African Revenue Services regarding taking over some of the functions of processing the claiming of funds at the CF and the UIF? Had there been any conversation about placing the UIF and CF under administration, or outsourcing some of the functions of the funds to the private sector?

Mr S Mdabe (ANC) asked how many of the reported fraud cases had been committed by employees of the Department. He said the fruitless and wasteful expenditure had been reported to be about R26 million, of which R23 million related to unused license costs, maintenance support, etc. What control measures were being put in place to avoid future occurrences? Were there capacity-related challenges in the Department and could those plans be shared with the Portfolio Committee?

The Chairperson expressed grave concern about the Department’s inability to fulfil its employment mandate. She said it was not okay for a department not to fill a post. The Department had been the one department that had been given the mandate to fulfil employment-related matters by the country, yet it seems that it could not satisfy the employment processes. What was happening with the Human Resources of the DEL?   
Were the posts funded or unfunded? Human Resources in both the national and provincial structures needed to account for that. It was unacceptable that there were unfilled vacant posts in the Department; those vacancies were not for scarce skills. Could the Committee be taken into confidence on what the story was regarding the Department’s Information and Communication Technology situation because that was where the bulk of the irregular expenditure emanated from. There was a circulated picture of people in Limpopo covered in blankets, sleeping overnight at labour centres; it could not be that people were subjected to those conditions in this day and age.

Responses from the Department

Mr Lamati, on ICT issues, said the Department had decided to automate operations. As a result, a part of the contract was between Siemens and National Treasury to facilitate that automating move. The Department had experienced challenges with the contract and had engaged another service provider (SAP) that sold licenses to the Department. When buying a licensing packing, there were parts of it that were not currently needed but would be used at a later stage. That was how the Auditor-General had queried the Department on why it had licenses that were not currently being used.

That matter was being resolved with SAP and the products that were not currently being used would be shelved; plans were to refund the Department on those.

On irregular expenditure, steps were being taken to address the issues of the departmental official that engaged SAP (unauthorised). The Department ended up being liable to pay the service provider. There was consequence management to take officials to task.

On financial disclosures, the Department took those seriously and took to task the officials that had failed to disclose their financials. As part of the Department’s initiatives, ethics were a key feature, including financial disclosures by officials. 

Unfilled vacant posts were all fully funded; hence the CFO had reported that the unused funds were being returned to National Treasury. It was true and concerning - it was unacceptable for the Department to have such a high number of unfilled posts. The Department was to blame, and something was being done to address the issue.

On UIF and CF, the Minister, the Deputy Minister, the Head of the Department, and the Commissioners came to the Portfolio Committee advising on plans to improve the audit outcomes of the two entities. The Committee approved those actions, which were now being implemented.

It was then confusing that the Committee approved those plans, yet now there were questions and suggestions to place the said entities under administration; especially considering that the times proposed to the Committee were yet to expire.

There was capacity building to upskill the inspectors, and the Department did that regularly. Although it did not mean the officials did not go astray - a case in point was in Mpumalanga, where the Minister was part of an inspection and an employer had indicated that the inspector was not going to visit their premises. The inspector was no longer part of the departmental setup, as rogue officials were not desirable relative to the values of the Department.

An appeal had been made to all the employees of the Department to ensure that all misconducts were reported to the Department so that there could be consequences.

Recovered funds did not go back to the fiscus as those were funds due to complainants and had not belonged to the state.

The figures for how much was spent on officials on suspension were not readily available, but one official was recorded as being on suspension.

On departmental employees that committed fraud, there were officials of the Department who were colluding with the outside to defraud the UIF. Recently there was a case in KwaZulu Natal and other areas, and the exact figures could be provided to the Committee. Outsiders were unable to defraud the entities without collusion with internal officials. In that light, the Department and its entities had undertaken several forensic investigations in the UIF and CF.

Ms Margaret Mazibuko, Chief Director: Provincial Operations, DEL, said the Mpumalanga province had struggled in 2021/22, leading to 33 percent of underperformance. With the support of the head office, the province had put in place a recovery plan to enhance and support inspections and enforcement measures. In 2022/23, the province moved and yielded a recovery plan that had yielded good results, with achievement in plans for the first semester of the year.

That had been done by increasing control measures and implementing a skills audit with the managers in the inspection and enforcement programme. Meetings were also being held with the established verification committees in the provinces.

In instances where the managers responsible for inspections and enforcement failed to perform, consequence management was affected.

Mr Phaswane Tladi, Provincial Chief Inspector, said the underperformance of Limpopo in referrals had issues with the Police Services and the National Prosecuting Authority, the entities used to report that their systems had not had a programme to capture the reported issues. The Department had since met with the executives of those entities and strides had been made with referrals to the police and the prosecuting authorities. Strides had been made in educating those offices on inspection laws. Currently (2021/22 financial year), the Inspection and Enforcement was, as a result, sitting at an achievement level of 83 percent.

A Department official said the UIF was currently using disintegrated legacy systems. The organisation had evolved with new functions that were not previously catered for. The benefits of using the new system would ensure enhanced and cost-effective fraud prevention measures. Currently, older systems had not had a resource for managing the investment of the fund.

The Chairperson enquired about what was not being done by the Gauteng, Mpumalanga, and KwaZulu-Natal provinces that the other provinces were doing to curb corruption and fraud. Were there any collusions between staff, business, and the public in all those corruption allegations? The level of corruption in Gauteng was alarming.

Mr Lamati responded that the Department would prepare a report to shed light on those corruption issues in Gauteng.

Closing Comments

The Chairperson acknowledged and encouraged the Department's efforts in having the provincial officials at the Portfolio Committee meeting, which ensured that effective measures of oversite from the Committee meetings were achievable.

Meeting was adjourned