Department of Labour Quarter 3 performance

Meeting report

Department of Labour: Third quarter performance

Mr Sam Morotoba, Deputy Director-General: Public Employment Services, Department of Labour, gave a breakdown of the third quarterly performance per programme. The performance of the four branches had been: Administration 75%; Inspections and Enforcement Services 75%; Public Employment Services 100%; and Labour Policy and Industrial Relations 40%. This gave the Department an overall performance of 71%. All interim financial statements had complied with the guidelines issued by National Treasury. There had been R83 125 in fruitless and wasteful expenditure, but no unauthorised expenditure, although R116 639 in irregular expenditure was detected and reported. The Departmental audit and risk committees were fully functional.

Mr Morotoba explained the frustrations the Department was now dealing with in terms of non-compliant companies, and said they had embarked on inspections in all provinces in a quest to clean up non-compliance. As at quarter three, it had it had inspected 5 301 companies in the Eastern Cape, where 4 611 had complied and 690 had not. In the Free State only 3 683 complied out of 4 254 inspected. In Gauteng, the figure was 7 895 out of 9 540, in KwaZulu-Natal it was 7 865 out of 9 931, and 3740 complied in Limpopo out of 4 601 inspected. Of the total of 48 191 companies inspected, only 38 934 complied and 9 257 were found to be non-compliant. In 376 cases where the Director General had made recommendations for a review of performance, only six had complied. The Inspector General would give feedback on the action taken against non-compliant firms, as some had been taken to court and cases were still pending.

The Department had targeted certain industries -- wholesale and retail; agriculture; hospitality; construction; community; mining; manufacturing and transport -- and had identified areas of non-compliance in that consultative forums were not properly constituted as required by Section 26, read with Section 17. The analysis reports were not compliant with the provisions of Section 19. Employers were disregarding the use of the Employment Equity Act (EEA) 12 template in the 2014 EE regulations. They had found that the EE plans did not meet all the requirements of Section 20(2), and were disregarding the EEA 13 template in the EE regulations. Other concerns were that they had found that the employers were failing to prepare and implement their EE plans; that the designated senior EE managers were still junior staff with no authority and means to transform the workforce; and that the employers failed to inform employees on EE matters.

Mr Morotoba reminded the Committee that the last they met they had been requested to give a detailed plan on their interventions on analysis and inspection, a point they had seriously considered for this presentation. He proceeded to illustrate their interventions to improve EE enforcement and mentioned a few enforcements that had been put in place as being the enforcement of EEA 12 and EEA 13 templates for compliance. Companies had been provided with templates, and advocacy sessions were conducted with EE forums to provide technical guidance for understanding their roles and responsibilities.

Their strategic goal number one on public employment services was to contribute to decent employment creation. They had a target of 116 700 work-seekers to be registered with Employment Services of South Africa (ESSA) per year, and the actual number they had registered nationally was 206 904 work seekers -- a variance of 90 204.

The Department also illustrated that 92% of work seekers registered did not have any qualification equivalent to at least National Qualifications Framework (NQF) level 1 (Grade 9), and that a total of only 14 627 (7%) of registered work seekers had qualifications equivalent to NQF level 4 (Grade 12) and above. The Department’s challenges were that there were too few pathways to absorb large volumes of registered work seekers, and the data cleansing would be prioritized, given that work seekers’ status did change and the database needed to be kept up to date.

The counselling of registered work seekers was important, as some of them had no skills and depended on this counselling for employment. More than 50% (104 399 out of 206 904) of registered work seekers had been provided with employment counselling. The main provinces where the counselling was effective were Gauteng, the Eastern Cape, KZN, Limpopo and Mpumalanga, as these provinces had recorded a significant amount of counselling compared to other provinces. A total of 89 902 of work seekers who had received employment counselling were young people aged 16 to 35 years, 55 698 were adults aged 36 years and above, and three were not specified by age group. It was the Department’s wish that the work seekers left the Department having been counseled, rather than just registered.

The Department’s placement rate was very low, and it was making plans to change this.

Mr Morotoba said the Department’s strategic goal on labour policy and industrial relations was that of protecting vulnerable workers by giving them decent employment through inclusive economic growth. Policy instruments had been developed and promoted to enhance the implementation of the EEA by 31 March 2018, and to establish the introduction of the national minimum wage (NMW) by March 2018. The Department had failed to achieve 100% on their programme performance indicator, coming up with 33%, and this was caused by delays caused by collective agreements being received in mid-December and being published for comment only on 5 January 2018.

With regard to the supported employment enterprises (SEE), the Department prided itself on the permanent employment creation for people living with disabilities. As at March 2017, the Department had about 891 registered disabled work seekers and had created about 77 jobs between quarter one to quarter three.

At this moment Mr Morathoba handed over to Mr Maduna, NEDLAC, for the presentation of the expenditure information for the quarter 3.

Mr Bheki Maduna, Chief Financial Officer (CFO): Department of Labour (DOL), presented the economic classification for the Department for the third quarter (see presentation document).

Unemployment Insurance Fund

Ms Hilda Mhlongo, Chief Director: Corporate Services, Unemployment Insurance Fund (UIF) said that as part of the DoL’s strategic objectives it had planned to improve on the financial management sphere, and it had recorded a 100% overall achievement in this regard. On improved service delivery, the Department had achieved only two of five planned targets, and only one out of two targets for improved compliance with the UIF Act and Fund poverty alleviation schemes.

The UIF had set an annual target of dealing with 90% of unemployment claims within 15 working days by March 2018, and had achieved 86%. She maintained the 4% deficit was due to the Departmental system constraints, and they were working on that. She added that they were also facing challenges with their bandwidth, and were currently working on enlarging it. Overall in 2017/18, the UIF had achieved 89% of claims being processed within 35 calendar days. It should be borne in mind that it received just over 720 000 claims per year, and 80% of these were unemployment benefit claims. The balance was in other claims categories.

She gave a detailed report on the UIF’s financial expenditure linked to organisational performance, informing the Committee that it had spent R8.4 million of its R13.7 million budget allocation.  The challenges they were experiencing were with regard to verifying the invoices submitted, where the Fund had had to do due diligence, and that had caused a delay on the Department’s part.

Compensation Fund

Mr Vuyo Mafata, Commissioner, Compensation Fund, said the Fund’s annual performance plan (APP) had nine indicators, and the Department had achieved only two of them. Its total performance had been 57% of its targets.

Performance indicators not achieved included a request for prosthetics. The target was to have these requests approved within 10 working days.

The Fund was now working with specialised inspectors, who would focus solely on the compliance required by legislation.

Commission for Conciliation, Mediation and Arbitration (CCMA)

Ms Annah Mokgadinyane, Senior Manager: CCMA, said the Commission’s performance in the quarter had fallen from 86% in 2016/17, to 78% in 2017/18.

It had managed to meet its targets on the following strategic objectives: enhancing the labour market to advance stability and growth; advancing good practices at work and transforming workplace relations; and building knowledge and skills.

The successes of the CCMA had made a huge difference in public compliance, as 45 417 cases had been referred to it during the period under review, compared to 47 311 in the second quarter. On average, the CCMA had taken 23 days to deal with conciliation cases, compared to the legislated target of 30 days.

The CCMA had conducted 562 outreach activities, including those to increase awareness, capacity building and dealing with social justice blockages. She sid that 34% of jobs had been saved instead of employees facing retrenchments. The CCMA had received 99 complaints and all of them had been investigated and responded to.

Through its partnership with the Sheriff’s Board, the CCMA has assisted 2 645 vulnerable workers to enforce and execute CCMA awards. As at quarter 3, it had collectively delivered a total number of 1 872 outreach services, and 41142 of people had been reached.

Discussion

Department of Labour

Mr M Bagraim (DA) expressed concern about the listed companies which were non-compliant, and requested a list to see who these people were. It was important to see what was going on with them, as one invested in these companies. He wanted to know why there were only 207 000 work seekers registered on ESSA in the quarter, when there were about 10 million people unemployed, and saw this as a mere drop in the ocean. The Department had reported that it had filled 16 500 jobs, which he considered pitifully little. However, he commended the DoL for counselling people and getting them job-ready to ensure sustainability -- but then, the number of people was extremely low. He wanted to know if some of these duties could be sub-contracted.

Ms T Tongwane (ANC) was concerned about the amount of wasteful expenditure, and wanted an explanation for it.

Mr B Mashile (ANC), wanted to check whether the DoL was happy about what they were supposed to be doing, and if so what informed that satisfaction, I one compared employment with unemployment levels. Regarding companies not complying, the injuries that were happening in these companies, and the general conditions of employment in different sectors, he asked if the Department was satisfied that they were doing enough, and whether there were areas where they needed intervention. He had a concern that if the department spent 100% on their budget by quarter three, what they had done in quarter four, as there was no money. He wanted to know how the Department was dealing to the minimum wage issue.

Ms L Theko (ANC) wanted to know about the overall annual budget allocation. What intervention had been put in place to ensure that the situation where there were no achievements was addressed?

Mr Mashile wanted to know how the Department recorded its expenditure in relation to transfers to other entities. Did they record it when they had paid the departments, or when the departments had used the money?

Mr B Martins (ANC) commented that the DoL had raised their concern as to what Parliament could do to assist them by meeting them halfway with their programmes. After two years of consultation, it was the Department’s prerogative to come forward and address the challenges that they faced.

The Chairperson commented on the overall performance, and referred to the DoL’s under-spending, asking if this would result in money returning to the fiscus. Did the Department have plans in place to deal with wasteful expenditure? She also commented about the high levels of non-compliance in the wholesale and retail sector; and wanted to know what actions had been put in place to try and curb the challenges in this sector.

Ms Aggy Moiloa, Deputy Director-General: Inspection and Enforcement Services, DoL, responded by naming a few companies which were non-compliant. The companies included JSE Limited, Clientele, Discovery Holdings and Shoprite, to name but a few. She said the Department was not happy. They were most uncomfortable with the non-compliant construction companies, as it posed a high risk for employees. She expressed concern about the wholesale and retail sector, adding that along with hospitality and agriculture, these were the areas to which they paid a lot of attention, and they had intensified their inspection around these sectors. The Department believed that the issue of compliance was not an issue for the DoL, and that as a Department they had tried their best to rally around other entities to ensure this matter was addressed in the most efficient manner.

Mr Maduna said the Department was waiting for legislation where the minimum wage was concerned, and were putting in place a strategy for when the legislation came into effect.

Responding to the question about when they recorded expenditure as the Department, he said that expenditure got recorded the moment the Department pressed the button to make payment to the entities.

Regarding the 10 million unemployed people, he said the DoL worked with Stats SA, and this number was not recorded, so the government did not know who and where these 10 million unemployed people were. This meant that if one was not registered, one was declared to be working so the government did not account for that person. The database was also as not authentic, as people got jobs and new people came in.

Mr L Khorai, (ANC), commented that the CFO’s explanation for the irregular expenditure and fruitless expenditure had been vague. He expressed concern about the problem of the Department not spending all their money and thereby ending up returning it to Treasury, and wanted to know the reason for the problem. He said the DoL should strive to provide employment opportunities to the unemployed disabled persons.

Mr Mashile expressed his concern that the CFO was refusing to speak and respond fully to the challenge of wasteful expenditure.

Mr Morotoba responded that the DoL did not have any unauthorised expenditure. With regard to irregular expenditure, the Department had detected R116 923 in Programme 3. The process for irregular expenditure was that when it was detected, it gets reported to the audit department, and then investigation ensued. On the question of why the Department was not contracting private entities to do their work seekers programmes, he said there was the 1949 Geneva Convention that clearly indicated how government should work with private entities, because these agencies were for gain. The department has had quite a number of complaints where the private employment agencies were concerned, as they had hidden costs for employees.

He conceded that there was a need for work seekers who were registered to understand the meaning to that registration, otherwise it would not make any sense to other work seekers who were not registered. The DoL also found that more private employers were utilizing the Department’s search engine as they did not charge them for using their employee data base, something that the private agencies did.

He also referred Members to two conventions with regards to disabled persons. There was the United Nations Convention on the Rights of Persons with Disabilities, and Convention C159 of the International Labour Organisation (ILO), which called on government to establish special employment for people living with disabilities and supporting them. The Department had been funding salaries for organisations such as Disabled People South Africa (DPSA). This had expired at the end of March and would be opened-up and finalised by the end of May. He added that this was not much money.

Chairperson thanked the Department for the presentation,and allowed Mr Bagraim to follow up.

Mr Bagraim stressed the issue of non-compliance, saying that the matter needed special attention. He advised the department to copy the corporate model of workshops for work seekers, as it had proved to be a working model.

Mr Khorai wanted to know from the Department if they understood the repercussions that came from not spending all their money.

The Chairperson advised the Labour Department to submit a written report and account of their wasteful and irregular expenditure figures.

Unemployment Insurance Fund

Mr Khorai said he was happy with the presentation, but his concern was around the Department not meeting their set targets, saying that if they set a target they should be able to watch the system, and that excuse or reason was invalid as far as he was concerned. He commented that on the Fund’s property schemes, it was important that due diligence was performed without delaying the work.

Mr Mashile commented that the Department’s performance was bordering around 50%, and this should raise questions as to whether it was doing its work. Irrespective of where the UIF got its money, the principle was that when one transferred an amount to an institution, one must record it as expenditure, whereas the institution was also recording it as expenditure, and this was where his concern lay.

Ms Mhlongo said that the Department had improved on the turn-around time for paying beneficiaries, and they were now being paid more quickly than they used to be.

Chairperson requested the Department to provide an update on the issue of long queues.

Ms Mhlongo replied that they had looked at the queue management system, and it was improving drastically, and the glitches had been resolved too.

Mr Bagraim also expressed his satisfaction with regard to the drop in long queues.

Compensation Fund

Mr Bagraim commented that he understood the history of the last 25 years, and said there were still calls from people who had not been paid. He wanted to know when this would be settled.

Mr Mashile singled out Gauteng for missing its target, and asked if the Department appreciated the implication of having vulnerable and disgruntled people waiting for long.

The Chairperson said she was concerned about the Fund’s expenditure and needed an explanation for the 32% expenditure going towards the end of the book year.

Mr Mafata responded that they had dealt with large numbers of the backlogs. In most cases where a claim had not been assessed, it was due to outstanding information, such as medical reports, as this is needed for the Department to make a decision. He conceded that a lot was required before a claim got passed. The Department had started with a programme where they would publicise and get beneficiaries to come forward with the required documents.

Mr D America (DA) said that last year there had been serious financial challenges, and the Committee had been promised that the matter would be fully investigated. When would it get a report of the employee’s misconduct?

Mr Mashile wanted to know from all the departments what there challenges were. Why was it taking so long for transfers to be done? Were the departments communicating? What was the longest that a claim had taken to be settled?

Mr Mafata responded that it did not take longer than six months for a claim to be resolved.

Unemployment Insurance Fund

Ms Mhlongo requested that the UIF be allowed to submit a written response to the Committee.

The meeting was adjourned.