National Productivity Institute Annual Report: briefing

Meeting report

LABOUR PORTFOLIO COMMITTEE
4 November 2005
NATIONAL PRODUCTIVITY INSTITUTE ANNUAL REPORT: BRIEFING

Chairperson:

www.npi.co.za]
National Productivity Institute 2005 Annual Report presentation
Productivity SA (NPI’s bi-monthly publication) [available www.thedti.gov.za]

SUMMARY

The National Productivity Institute briefed the Committee on its Annual Report.

Members asked questions about general increases in SA productivity; whether rural areas were being accessed via learnerships; if labour legislation was too rigid; how the Institute justified its requests for more funding and why it had only two regional offices.

MINUTES

National Productivity Institute (NPI) Presentation
The CEO, Dr Yvonne Dladla, explained who the NPI is and what they did. Their focus is on productivity in the public and private sector. She explained the NPI’s interventions in the public sector, which is their key objective. They have led programmes in local government and partnerships with municipalities that focus on productivity improvement. They are also working with Sector Education and Training Authorities (SETAs) and the Department of Education.

The NPI plans to fast-track development around local municipalities, as productivity is essential.
Examples of interventions in local government and municipalities are their involvement with a regional branding project for wine in the Northern Cape. It is a project that aids small business development in that area.

In Ekhuruleni (Gauteng) a feasibility study is being conducted to employ mine workers in brick making. In the North West, a partnership with the Greater Taung municipality has been formed for fish farming and brick-making projects. In the Free State, they have led a project that deals with emerging farmers. They are encouraging those farmers to not only farm maize but to look into other options that can give then a competitive edge. An essential oils farm has been established. It farms lavender, thyme, rosemary and geranium and has created about 800 jobs.

The NPI is part of the VUNA Awards, and they do this in partnership with the Department of Provincial and Local Government (DPLG), the Development Bank of Southern Africa (DBSA) and the SA Local Government Association (SALGA). The NPI provides technical support to the partnership. It is also a member of the Project Consolidate provincial team in Gauteng.

The projects undertaken with public entities to enhance efficiency have been with parastatals like the SA Broadcasting Corporation (SABC), Spoornet, Eskom, Transwerk and SAPREF (SA Petroleum Refinery). Development depends on efficient transport, which is why the Load Accreditation Programme was established. It deals with infrastructure development, promoted driver wellness, road safety and improved transport productivity. Transport is a critical area in productivity because it also impacted on daily lives.

The NPI is also involved in education and training as it facilitates productivity. They made sure people attained specific qualifications and had a programme that ensured that school going children had a productivity mindset from a young age. This is conducted in all provinces but Limpopo. The achievements are that they have trained workers on productivity, trained emerging entrepreneurs and learners and introduced two productivity qualifications that have been submitted for approval. The one is a certificate in productivity and the other is a National Diploma in Productivity.

Their intervention in the private sector has aimed to increase productivity levels with a focus on growing sectors in the economy. Their projects include the Sector Initiative Programme which aims to increase productivity and competitiveness through collaboration between large and small enterprises. There is also the Workplace Challenge Programme, which assists businesses to improve productivity and the Social Plan which helps to prevent job losses in companies facing decline through the development and implementation of turnaround strategies.

The key successes of the Sector Initiative Programme have been in the Internet clearing desk, the furniture industry and forestry. The key success of the Workplace Challenge Programme is that 113 companies in 14 clusters have been assisted. The key success of the Social Plan Programme is that 62 company forums were established to implement turnaround strategies and 6400 jobs were protected.

A case study of the Workplace Challenge comprises Expertool, an SMME in the Western Cape and productivity award winner. The impact of the project on this company is that it reduced its reject rate by 65%, absenteeism went down from 10% to 3% and on-time delivery is now 100%. The company was in the red in 2002 but by 2004, they were in the black. A case study of the Social Plan Programme comprises a company called Serco Industry in KwaZulu-Natal. It was facing closure due to their productivity problems. The NPI saved 64 jobs, created 34 new jobs and achieved 75% full order on-time delivery. The turnover went up from R5 million to R30. 5 million.

The NPI also has a programme called the Sustainable SMME Initiative that assists micro and small enterprises. The key objective of this programme is to make small businesses viable through productivity improvement processes. Every province has a SMME directorate. Partners include labour centres, the Eastern Cape Development Corporation and the provincial government of the Western Cape. Achievements have been raising productivity awareness through workshops, and then training. The focus has been on tourism, emerging farmers, women, the disabled, and young entrepreneurs. Three memorandums of understanding (MOUs) have been signed with the KZN, Free State and Mpumalanga provinces. 37 productivity coaches have been trained and a handholding programme for 336 SMMEs by productivity coaches is in place. 108 SMME enterprises in the Western Cape are also being given support through the 100 incubation programmes. The impact of this project was demonstrated through a video played of a successful businesswoman who got training through the programme. With the help of the NPI, she has become a contractor who rehabilitates wetlands.

Research is another of the NPI’s focus areas. In the last financial year, they completed 4 research and development reports. These were a performance, productivity and service delivery in the public sector report for 2004, a productivity statistics report for 2004, and a world competitiveness report. This report is used by companies globally when choosing which countries to invest in.

Their productivity awareness message is spread through marketing. October has been deemed Productivity Month and the NPI tries to get South Africans to think about and talk about productivity. This is done through billboards, workshops, television and radio shows. They also have a bi-monthly publication called PRODUCTIVITY SA that is distributed nationwide.

Their support services such as human resources, information technology and the financial department ensure that they function effectively. They use a balanced scorecard to make sure that their own staff is productive. Their HR practice of making sure staff members are trained got them an award and they have a relationship with trade unions in their organisation. They have a risk management and fraud management plan, and have consistently produced audited financial reports.

Mr Bongani Coka, the Chief Financial Officer, presented the financial report. Last year, a significant portion of their R50 million income came from the parliamentary grant and also from government. The Department of Labour funds the Social Plan and the Workplace Challenge. The NPI charges market-related fees to cover their expenses when administering advisory services and for interventions in companies like Spoornet and the SABC.

The projects they are working on this year include a partnership with the Department of Labour and the Commission for Conciliation, Mediation and Arbitration (CCMA) to determine the impact of labour registration on the labour market. There is also a partnership with DBSA, DPLG and SALGA to support municipal performance. The NPI is working to improve productivity in micro and small enterprises. It is promoting collaboration between workers and managers through proactive productivity forums. It is incorporating productivity in General Education and Training (GET) and further education and training (FET).

Their current focus is on the development of unemployed graduates to facilitate productivity improvement in organisations. They are also developing DIY productivity and competitiveness tool kits to reach more companies. They are building the capacity of NPI employees through a partnership with the Asian Productivity Organisation. This is to train them in cutting-edge methods in productivity. The NPI is also strengthening relationships with the Southern Africa Development Community (SADC) and African Productivity Organisations of which the NPI is the secretary.

Their biggest challenge is a lack of capacity. They have limited financial and HR capacity given their mandate. The grant of R23 million is not sufficient in relation to the size of South Africa and hence the limited impact. The social partners support the National Productivity Accord, but they need them to make a public commitment to fast-track productivity increases.

The Chairperson thanked the delegation and noted the NPI’s financial challenges.

Discussion
Mr Lowe (DA) thanked the delegation for the presentation and congratulated them on their unqualified audit. He noted that they had doubled their income from R4 million to R9 million. Most of the advisory service income comes from parastatals. What about approaching private companies to strengthen their case when requesting more funding? The NPI’s accounts receivables had increased by a third but their provision for bad debts had shown no increase. Was this possible? How did the NPI measure overall success? Did it deliver value for the R23 million that it receives from the government? For example, has there been an increase in SA productivity?

There is a lot of unhappiness with the service delivery of municipalities in South Africa. How successful has the NPI been in helping and how do they plan to help? He also wanted to know about the collaboration with SETA as there has been a problem with the Services SETA. Will the NPI assist people with learnerships?

Mr Mkhongi (ANC) wanted to know if the NPI has the finances to do things like infrastructure development and so forth. He wanted to know if they were dealing with other issues besides overloading, like the construction of roads. He also wanted to know about the social plan programme and their success stories because the country faced serious job losses in the mining and textile industries. He also wanted to know about their involvement with SMMEs. He cited an example of a water project that ended and the workers were again unemployed. He mentioned the broader goal of government to halve poverty by 2014. He wanted to know if the projects that the NPI was involved with could help achieving this goal.

Mr G Anthony (ANC) said that he welcomed the report and was now aware of the challenges. He said that the priority was to now push harder on this aspect. He felt that the entity is doing its best to contribute to the objectives of poverty alleviation and income redistribution. There is also the question of trying to increase economic growth to 6% and improving the quality of the product. The productivity of the workers must be improved and the stakeholders are government, labour and business. He expanded on the impact of labour legislation on the labour market. He felt that labour laws were not flexible enough. What was the NPI’s opinion on this?

He mentioned that they were doing well in terms of spreading themselves around the country but it is vital to target municipalities that deliver to rural areas. In Kgalagadi, the service delivery is clearly not up to standard. What is being done? In terms of service provision for rural areas, there was not enough Adult Basic Education and Training (ABET) for the population. The question of capacity became relevant. Steering committees are not empowered to come up with something that the community could benefit from. Can something be done?

Mr Maduna (ANC) wanted to know how productivity in municipalities would be increased. He also wanted to know about the partnership with DBSA. In what form are they engaging with municipalities? The Committee was informed by the DBSA that they were assisting municipalities but that they were using consultants. Capacity should be developed because in most cases, the consultants take the money and leave the municipality drained. The main reason for Project Consolidate is the lack of capacity. Did they have a role in increasing productivity at the Department of Public Works? He also wanted to know about the tripartite alliance system that they used for turnaround strategies. What happens if there is no union? How did they develop the productivity mindset among learners in the rural areas?

Mr Mzondeki (ANC) wanted to know if municipalities accepted the NPI. Were they invited to assist? The NPI should play a role rather than consultants. Employers took a long time to respond to Social Plan turnaround strategies. Has there been any improvement in that regard? He was excited by the plan for unemployed graduates, and wanted to know what the NPI’s relationship with the Umsobomvu Youth Fund was like as that relationship would be very important. To whom were learnerships given by the Services SETA? Where was the essential oils farm in the Free State situated?

Mr Mtshali (ANC) wanted to know how the NPI would minimise job losses.

The CFO agreed that accounts receivables had increased by a third, and there had been no corresponding provision. This was based on the fact that there were subsequent provisions. It indicated that besides the government grant, there were other amounts received from the Department of Labour and the Department of Trade and Industry. They received an allocation for project management and once they have done project management for one month, they transferred the funds. For example, they would recognise the revenue in March and payment a month later as this gives the auditors comfort. There has been no under-provision in the past.

It was easier to target one big company instead of 20 small ones. For instance, instead of targeting small companies they would target Spoornet. The lessons learnt from such an exercise would be shared with other companies.

Mr Mosai, Research and Advocacy Director, answered the questions relating to research. He said that in terms of quantifying value, he could not say how much had been spent. However, there has been a significant increase in productivity since 1994, approximately 3,2% per annum. Prior to then, there had been challenges and productivity levels were dropping.

The impact of the labour legislation project is an exciting one. They needed hard data to inform the debate. He felt that data that addresses challenges was needed. The project is taking off. It is going to address the issues of flexibility, concerns over whether the labour market is addressing job losses and the problem of accounting not being done in the informal sector.

With regards to 6% growth and helping government to reach its goals, they were assisting companies such as DEFY to increase productivity and invest more in productivity. They were also dealing with issues of measuring Black Economic Empowerment (BEE) procurement. For instance, were employees capacitated and could they contribute positively?

Mr Neville Goba, Productive Behaviour and Competencies Director, addressed questions regarding education and training. He explained the relationship with SETAs. SETAs were doing pre-learnership interventions in schools so that school leavers could gain entry into learnerships. The unit standards were injected into subjects in schools so that learners already had credits. The majority of people getting these learnerships were unemployed young people recruited and selected by SETAs. The NIP was not project-managing this themselves. However, they were trying to create a situation where the learners were productive. There has been a lot of positive feedback from employers.
As for the relationship between service providers (SETAs) and vulnerable municipalities, they have developed service providers so that they can go and work in outside areas. They have been focusing on those areas but have not done enough. There is room to improve.

Mr Anthony (ANC) wanted to know whether the NPI went to rural areas on their own initiative or had to be requested to go there. Dr Dladla responded that they did both. They worked with organisations that invited them, but also went out proactively.

Mr Dudley (NPI) spoke on the topic of municipalities. They had a lot of success with the Workplace Challenge in terms of quality, cost and speed of service. These principles could be applied to municipalities. They wanted to start with three municipalities. It was a great challenge.

Dr Dladla answered the question about the DBSA. In terms of Project Consolidate in Gauteng, a distinction has been drawn between consulting and facilitating. With the DBSA, they were trying to put in place principles whereby the municipalities could build their own capacity. They were finalising a MOU with the DBSA. The DBSA will also provide funding to pilot this project.

Mr Iggy Sathekge, Promoting and Positioning Productivity Director, dealt with the issue of municipalities in more detail. He explained the efficiency and effectiveness of SALGA, the Department of Public Service and Administration (DPSA), and DBSA and said it was hard to highlight pockets of success. The first phase of the programme is appraisal. This is where they determined which municipalities are successful and why. The second phase is the dissemination of information. The third phase is capacity building. This is where they identified struggling municipalities and assessed what could be done to help. They are working with Project Consolidate. The issue of consultants will be dealt with in this forum, and they can then jointly put a programme in place. The NPI acts as the technical advisor. They have the capabilities and competency to deal with these issues. These issues will also be addressed in this forum.

Mr Mzondeki (ANC) felt that the Committee had a political role to play here. If Members wanted to see fewer consultants, it was up to them to advise municipalities to use the NPI instead of consultants.

Mr Goba then answered questions relating to SMMEs and taking productivity to rural areas and schools. He explained that the NPI is working with the Department of Education and have trained all learning co-ordinators in all provinces. They are currently busy developing learner-teacher support material to be taught in schools from next year. This will have a spin-off effect on the education system. The teacher, in teaching this material, will also adopt a productivity mindset. When the teacher begins to do things productively, then factors such as time and efficiency are improved.

With regards to SMMEs in rural areas, the NPI has already started dealing with emerging farmers in rural areas. These farmers do not have technical but they can help. Those are the interventions that have been put in place and they have dealt with quite a few. They get facilitators to help them improve their businesses through projects. Some of these have moved from backyard operations to large-scale factories. They work closely with service providers but have not done enough in the rural areas.

The Chairperson asked about strategies to monitor service providers.

Mr Goba explained that the NPI entered into a service-level agreement with service providers. This then determined what output is expected from them.

Mr Maduna (ANC) commented that some service providers were not accredited, especially in rural areas.

Mr Goba explained that the NPI did not rely on existing service providers. They developed their own through training because productive ones were scarce. The service level agreement is an intense programme that is developed, refined and monitored. They have certain forms that they use to monitor progress. When they assisted SMMEs, they recorded the time, date, type of assistance and the recipient must confirm that the service was rendered. Their records are kept for at least five years. They provided information and followed up because they are not paid for failure.

Dr Dladla asked Mr Goba to explain what happens with dying projects e.g. the water one. How are they revived? Mr Goba responded that if they are informed of failing projects, they tried to revive them.

Mr Coka said they focused on job creation and redeployment which is a more costly exercise. They have embarked on a number of strategies to prevent this. They worked closely with banks as they had a direct interest in floundering businesses. They also approached things from a macro level and sector studies were done to approach companies in declining sectors. The future forums are proactive forums where they approached companies not necessarily in decline, but where jobs were threatened. They focused on joint solutions.

Mr Lekgetho (ANC) wanted to know how to approach regional offices.

Dr Dladla replied that there are only two regional offices in the Western Cape and Durban. If anybody would like to contact the NPI, they are based in Midrand. They worked throughout South Africa.

Mr Dudley (NPI) addressed the question about trade unions. He explained that it was a principle that labour and management had to collaborate. Most companies are unionised and if they are not unionised, they still had labour representation. They had the Social Plan and Workplace Challenge and felt it was absolutely fundamental to work with both parties.

Dr Dladla added that they had a relationship with the Umsombovu Youth Fund but it is not a formalised one. There is no memorandum of understanding. They had a joint project looking at new venture creation for young people.

Mr Mkhongi (ANC) wanted to know about the NPI’s involvement in the National Youth Service programme.

Mr Goba said that they had initiated collaboration with the Gauteng Department of Labour to develop entrepreneurs using unemployed graduates. They would be trained through the Gauteng SETAs.

The Chairperson asked whether they were looking at the scarce skills needed when dealing with unemployed graduates.

Mr Goba replied that they were purely operating on mandates through SETAs and identification.

Dr Dladla spoke about HR and the issues of women and the disabled. She stated that they had made a conscious effort to ensure that women, the disabled and youth were all part of their programmes. They are still failing in the area of appointments. They have not as yet appointed a disabled person. They had a demographically-representative staff profile.
They are looking into heritage cultural tourism for job creation. She was unsure of the exact location of the essential oils farm. They worked with the Durban Metro council; in fact they have just launched an SMME development programme where approximately 300 SMMEs would benefit.

On minimising job losses, Mr Dudley (NPI) explained that the NPI plays the role of the facilitator. The principle of the Social Plan is the future forum. With good timing, they tried to engage with companies as early as possible. They developed collective strategies on how the turnaround would take place.

Mr Mtshali (ANC) cited the example of Telkom retrenching people. When Telkom announced their financial results that particular year, they announced that they were giving the CEO, Sizwe Nxledlana an R11 million bonus for good performance. They had made profit of about R4 billion that year. Then a few months down the line, they announced that they had to lay off workers because they could not compete globally, did not make enough profit, had to introduce new technology and those workers were not qualified. He felt that Telkom should have thought of technology upgrade earlier and prepared the workers for the change through training. He felt that if the NPI bought labour and management together, then nothing meaningful should be discussed unless there was an agreement that workers would not lose their jobs.

Mr Dudley said that Telkom and the Communications Workers’ Union (CWU) had approached the NPI. The reality is that in this case, management refused phase 1 of the programme. They went straight into phase 2. With the Post Office, the NPI worked with them to put future forums in place. They were able to save 3000 to 4000 jobs.

Dr Dladla mentioned that the NPI needed to sharpen its municipality programme. She requested that MPs inform them of struggling municipalities. The Chairperson informed her that in Taung, one municipality failed to submit its annual report.

Mr Goba said that the quality of work done by the Department of Public Works was a major challenge because decision makers in the Department had to be receptive to NPI’s involvement. They have spoken to the Department of Public Works but certain appointments have not been kept.

Mr Lekgetho (ANC) said that the NPI had an enormous task of championing socio-economic development. He wanted to know about their staff complement. He also expressed concern about their office situation. He felt that as a National institute, they should be more visible around the country. He also said that the question of consultants was inevitable. He added that when the NPI was interacting with learners to maximise productivity, they should try to find children from particularly destitute rural areas.

Mr Mzondeki (ANC) wanted to know about their retention of staff. He asked whether they had the problem of their good people being poached. He added that the Committee was faced with the challenges of increasing the NPI’s regional offices and their funding.

The Chairperson wanted to know about the vacant post of the chairperson of the board.

Dr Dladla replied that their staff compliment could go up to 100. Productivity is maximised through education to the children in the rural areas and at school. In the rural areas, the NPI also focused on the informal sector. Their thinking is that if the parents of the children can come up with viable business ideas then hopefully they can create the means to send the children to university. There are income generation activities to make sure that projects became sustainable.
Staff retention has been a problem as people were offered better remuneration and they found it difficult to compete. They could not compete with the higher salaries offered. The Minister has yet to appoint a chairperson of the board. He has not given an indication of when this would be done.

The Chairperson thanked the NPI team and congratulated them on their seminars as she had attended one that impressed her.

The meeting was adjourned.