Department of Employment and Labour on Adjustment Budget and Revised Annual Performance Plan; with Deputy Minister

Meeting report

The Chairperson welcomed the Committee and the officials from the Department of Employment and Labour (DEL), the Deputy Minister, the Compensation Fund and the Unemployment Insurance Fund (UIF).

The Chairperson noted an apology from the Minister who was engaged in another meeting at the same time.

The Deputy Minister of Employment and Labour, Ms Boitumelo Moloi, thanked the Chairperson and the Select Committee for the platform to present. She said the Department will give an overview of the impact on the country, of the dual crisis related to health and the economy, specifically regarding government services. Department officials will give detail on the adjustments made. The Department can only attempt to give an overview and flag the challenges it faces in a nutshell.

South Africa was facing economic challenges already pre-Covid-19. It dealt with a falling Gross Domestic Product (GDP) and rising unemployment, causing reduced government revenues, increased deficits, and negative findings by rating agencies. At the onset of the pandemic, the decisions taken by government to prevent the spread of the virus further suppressed the struggling economy. National Treasury and the Reserve Bank forecasted a seven percent economic contraction by the end of 2020. This will result in approximately 1.7 million job losses. This will mean hardships for many families, reduced government revenue, and therefore also reduced budget allocations.

This is the reason why the Committee is meeting. Another reason is to announce a 7.2 percent downward adjustment in budget allocations across the Department. The projected increase in unemployment will increase the demand on the Department’s services, especially the Public Employment Services and Labour Policy.

There is a significant increase in the case load with retrenchment applications. This is a result of the lockdown. Deputy Minister Moloi said National Treasury agreed with the Department’s assessment. The cuts in the Commission for Conciliation, Mediation, and Arbitration (CCMA) are significantly lower than other departments. It is a situation DEL is planning to monitor closely. These are also the challenges the Unemployment Insurance Fund (UIF) is struggling with.

The Deputy Minister flagged a positive change in the Annual Performance Plan (APP). There is an addition to programme one’s output. It focuses on campaigns to change behaviour related to Gender- Based Violence. This is in line with government’s priorities.

The Department had to move funds around because of budget reallocations. The impact of the pandemic and cost saving measures can be seen through the way meetings are now held. This is a cut on travelling costs. The new working conditions require increased expenditure on electronic devices and data to allow more people to work from home. The pandemic calls for major expenditure on personal protective equipment (PPEs), deep cleaning equipment, and sanitisers. There is also the cost of reintroducing social distancing in offices and across all labour centres in the country.

There are 240 DEL staff members who were quarantined. 64 of those tested positive, while two tragically lost their lives. This number must be updated. It will have a knockdown effect on the offices which have to be closed for deep cleaning. This sort of crisis provides an opportunity to review the way the Department operated in the past and to work smarter in the future.

DEL: Vote 31 Adjustment Allocation 2020/21

Mr Thobile Lamati, Director-General: DEL, referred to the statement made by the Deputy Minister at the beginning of the meeting regarding the 7.2% downward budget adjustment and outlined the programmes affected by the downward revision.

Mr Lamati said with the adjustment made to the budget, the Department is left with R3 375 829 000 compared to the initial budget. He gave the Committee a breakdown of the budget adjustments of each programme under the Department.

Mr Lamati gave the Committee the breakdown of the 2020/2021 provincial budget information.

The APP outcomes for programme one will change only with the addition of one output. This output will focus on outreach initiatives to change behaviour related to gender-based violence. This will be done with awareness campaigns and the amendment of the DEL Sexual Harassment Policy by 31 March 2021.

The proposed APP for 2020/21 for programme two was revised. It takes into consideration aspects such as time lost from 1 April to 30 May 2020, with only Occupational Health and Safety (OHS) inspectors working during Level Four and Five lockdown. The letter issued by the Employment Equity Commission (EEC) to all designated employers to revise its employment equity plans will have an adverse effect on the employment equity targets for the Branch. The Employment Equity Act (EEA) inspectors will have to wait for the process to unfold. It is set for 31 July 2020.

There are quite a sizable number of workplaces closed and will be closed or partially operating during the lockdown period. This will require a revision of programme two’s inspection targets. Within the programme there is also limited operation of courts because of COVID-19. These factors require the programme to refocus its priorities for the 2020/2021 APP and associated budget. Programme two is proposing the following reduction in its targets for 2020/21 in two indicators:

• the number of employers inspected per year to determine compliance with employment law decreases from 220 692 to 188 323
• Percentage of non-compliant employers received by Statutory Services referred for prosecution within 30 calendar days decreases from 65% to 50%

(For further information, see the presentation attached)

Mr Lamati gave an update on the work done on Supported Employment Enterprises (SEE). SEE factories remained closed during the lockdown period since 23 March 2020. It only reopened operations to deliver finished products and urgent orders with limited staff. The SEE struggled during quarter one to secure business from provincial governments. This is because of the decentralisation of procurement, especially from Department of Basic Education and national Department of Health.

The projected sales decreased 22% in comparison to quarter one of the previous financial year. It will affect employment of additional people and expansion plan to Mpumalanga. The production resumed at one third of the human resource. This is according to the Covid-19 directive. There are regular stoppages as and when positive cases are confirmed. SEE was unable to reach quarter one target for 25 additional people with disabilities employed at SEEs. This target was also not achieved during 2019/2020 due to financial constraints. SEE realised operating losses of R18.3m and R2.8m in 2018/2019 and 2019/2020 respectively. This is due to some factories paying salaries and overheads, with little or no work, and losses in sales or non-payment by some departments.

The Chairperson said the budget the Committee initially voted for was R3.637 billion, and this was reduced to R3.375 billion. This translated to a 7.2% reduction. It influences the Department’s branches’ budget on the programmes, including provinces, and the APPs.

The DG emphasised some of the changes in the APP are not necessarily the result of the suspension of the budget. It also had a lot to with the lockdown.

Discussion

Ms S Boshoff (DA, Mpumalanga) shared her experience visiting Small Medium and Micro Enterprises (SMMEs). She wanted to know how long the SEEs will remain operable considering the huge losses, which are not its own fault. She said she will not like to see these go to waste, as they assist the vulnerable. She also wanted to know if the Department planned to get support funds for this. She asked about the inspections of non-compliant places, what will be done in this regard and the steps taken. She asked if every labour centre had a queue marshal. She wanted to know what the expenditure is to have these queue marshals, and from which budget will the expenditure come from.

There are Covid funds which were paid out. She asked for a list of applications made from April until the end of June, which were never attended to.

She made reference to the savings made from travel and accommodation, and asked how much was saved so far.

Mr M Dangor (ANC, Gauteng) said it is important for the Committee to look forward to the future. The past is important but the future is more important. He asked if using words such as “suspended” instead of “reduced” or “adjustment budget” meant the Department was hoping to get the money back sometime or the other.  He asked how the wording impacts the zero-budgeting process the Department goes through, and the implications through accounting.

Mr K Mmoeiemang (ANC, Northern Cape) said he is pleased with the presentation. It clarified the causes for suspending the budget. He said he is pleased programme one mentions gender-based violence. With this introduction, the revision is anticipated to go upwards. He was however worried about the Compensation Fund, bearing in mind women are on the receiving end. Out of the 709 applications received, the majority are women. Only 143 are men. There must be more focus on ensuring there is a gender-sensitive compensation system to absorb the reality.

In programme three there is a point of emphasis made on the budget reduction not affecting service delivery. The cut-off of R96 million, which was intended for employees, will result in 214 vacant posts – he asked for more clarity on this.

Mr Mmoeiemang said he is concerned about the private sector closing some or most of its branches, either fully or partially. More must be done for job creation. He asked if there is a possibility of reviewing the Unemployment Insurance Fund.

The Chairperson asked for clarity on ordinary benefits and Temporary Employee Relief Scheme (TERS) benefits, especially regarding the R40 billion. He wanted to know if ordinary claim benefits will be part of the R40 billion or if it is separate.

The Chairperson also wanted to know if centres will re-open at full capacity. If so, he asked how the payment will work, considering most workers receive the COVID-TERS benefit for three months.

The Chairperson asked if there is money which comes into Inspection Employment Services (IES) for inspection, from the Unemployment Insurance Fund.

Responses

Mr Lamati said the Commissioner is present to answer some questions. The Department put aside R40 billion for the COVID-TERS Fund. This money is meant purely for this purpose. In the meantime the Department has to continue doing the normal work of the Unemployment Insurance Fund, including maternity benefits and adoption benefits. Those benefits were being paid from the budget made for those benefits.

The Commissioner will respond to the question about the return to work during the period of TERS.

Mr Lamati said UIF contributes to inspectors’ salaries. The employees working for the two Funds are in fact employed by the Department – they are paid by the Department and the funds are then claimed back from the two Funds. There is a percentage split between the Department and the two Funds. There is a percentage which goes toward the inspectors. Most importantly, there is a group of inspectors called payroll auditors, who are solely responsible for doing the work of the Compensation Fund and UIF. Those inspectors are paid in full by the two Funds. There is a direct link between OHS and the Compensation Fund – 500 OHS inspectors would be added and funded by the Compensation Fund. These posts would not be affected by the budget suspension as the two Funds do not receive funds from the fiscus.

Mr Lamati said the suspended R96 million was initially meant for compensating employees. It will affect 214 vacant posts. These posts will not be filled now. Nothing stands in the way of the Department filling other vacant posts within the Department. The Department targets filling critical posts, specifically 315 critical posts. This is apart from the 214 vacant posts. This will not affect the functionality of the Department. Whenever an inspector is appointed, it takes six months for the person to be a fully fledged inspector. This is because of the process of recruitment, from getting a person with the correct qualifications to training. This will not affect service delivery as these people would not have contributed to the productivity of the branch during this period.  

The sustainability and performance of SEEs depends on several aspects; one is National Treasury granting preferential procurement status. The SEEs are government entities employing disabled people so when government departments want to procure furniture, they should go to government-funded entities. The same principles for normal factories cannot be applied to the SEEs as the SEEs employ disabled people. DEL wants the SEEs to break even and not sell at a lost. The factories would be sustainable if they provided work to government. It will go a long way to enforce government’s view of caring for the vulnerable. Even DEL itself and its entities must procure from these factories. Support is needed from other government departments to procure from these factories. Members are welcome to visit the factories and buy from them and display support in this way. It does not seem that the UIF could fund the expansion of the SEEs – the emphasis is on the factories increasing sales. It is not feasible that the UIF fund the establishment of further factories given the strain and pressure the UIF currently faced in light of unemployment figures.

The CCMA’s budget was revised down by 5.6%. In his opinion this will affect service delivery, given the large retrenchments which are inevitable. Already companies started filing Section 189 applications. When one of the Department’s entities is in distress, the Department goes to National Treasury and states its case for assistance – this would be done with the CCMA. This is not a reduction. It is a suspension of the amount of money that would have been used. This money will be brought back into the budget, according to the Department’s understanding. There is uncertainty on how this affects zero-based budgeting. He emphasised again these funds are merely suspended.

The situation in NEDLAC would not affect the social dialogue and the work of the entity in this regard.

Figures on the amount saved from travel and subsistence and using virtual platforms, will be provided to the Committee.

Regarding TERS applications made but not paid, Mr Lamati said there were close to a million not yet paid out. Payment will only be paid for competent applications. Everyone that submitted a competent application was paid. Those not paid were people which could not be located on the system i.e. they were never declared to the UIF as employees of the particular companies. The Minister has urged the companies to verify the information and confirm if those are indeed their employees and submit proof of this so that they can be made. The numbers can be provided to the Committee regarding applications and the amount not paid thus far.

The Department instructed provinces to have queue marshals in areas where there is a likelihood of long queues. Those marshals are paid from the Unemployment Insurance Fund as 90% of people visiting DEL offices are there to apply for UIF benefits.

On the OHS non-compliance inspections, a number of notices were issued to a number of companies in the public sector departments. Fortunately during this period, even where prohibition notices of closures were issued, the companies came back to the Department to say the issues were addressed. Companies must reduce the exposure of their employees to COVID19 infections so companies have corrected the defects and the notice would be revoked by the inspectors. Companies can approach the Chief Inspector if they disagreed with the findings.  

Mr Lamati thanked the Committee.

Follow up discussion

Ms Boshoff asked again for the list of applications received but not paid out. She wanted to know by when the list can be obtained, and if it can be done provincially.

Ms B Mathevula (EFF, Limpopo) asked for data on the increased capacity in call centres, and the volume of calls per day at call centres.

Responses

Mr Lamati said the list of the capacity in call centres and the volume of calls will be submitted to the Committee on the following day and it will be broken down provincially.

Unemployment Insurance Fund

Mr Teboho Maruping, Commissioner of the Unemployment Insurance Fund, referred to the issue of queue marshals. He said one of the key projects the Department runs is labour activation. It is also an output of one of the programmes. The output focuses on giving youth workplace exposure and experience. These young people are paid a stipend already. It is part of the work experience. Regarding the people who do not go back to work after three months, the Department is in engagement about it. The Department is aware of cases where there are some industries which will not come back and are co-morbid.

The Unemployment Insurance Fund is under pressure financially. It will spend R40 billion. As more people lose jobs, there will be more pressure. He reiterated the UIF pays over R3.5 billion in normal benefits for over 500 000 people. Normally per annum, the Department spends between R10 million and R12 million. If the UIF already spent over R3.5 billion in this period, one can already imagine what this signals. The UIF is in discussions with relevant departments. However, there is no money in the country, and it is trying to squeeze money from other departments.

Compensation Fund

Mr Victor Mafata, Commissioner of the Compensation Fund, referred to the question posed by Mr Mmoeiemang. He said the healthcare sector tends to employ more females than males. This is the reason for the reflection in the data of claimants. Mr Mafata said as more industries come into the picture, there will be an increase in male claimants. On an average basis, there are more male applicants.  By the time the Department presents again, there will be an update on this.

The Chairperson thanked the officials for the clarification and handed over to the Deputy Minister to close.

The Deputy Minister said that the DG and both Commissioners went through the report and questions posed sufficiently well. The Select Committee is able to see all the reductions made are in proportion, and it is too deep to normalise for functionality of the programmes. This taught the Department to do more with less.

There must be discussion about assessing current revenue functions. At some point the Select Committee will want to sit down and discuss future sustainability of the pogrammes, especially with the new mandates.

The Department also deserves similar special treatment as other departments, whose budgets are not touched at some point. The Deputy Minister thanked the Chairperson and the Select Committee for the opportunity.

The Chairperson thanked the Deputy Minister for the contributions made to the meeting. The Committee takes into account the points made. Parliament’s work structure does not accommodate the discussion being suggested. The nature of it does not allow for it. It is something Parliament must review.

The meeting was adjourned.