Department of Labour Budget Vote 2007/08 delivered by Minister of Labour Mr M Mdladlana, National Assembly, Cape Town

Madam Speaker
Honourable members of Parliament
Fellow South Africans
Ladies and gentlemen

Madam Speaker, my department has heeded the President's call in his State of the Nation Address of February 2007, when he called on us to "roll up our sleeves and get down to work". We are unlocking human potential through work. In the last year we have refused to be strangers unto seasons and sought to always find ways of contributing to the creation of jobs in our country, aimed ultimately at eradicating poverty. We do this fully guided by the commitments we made in this house exactly a year ago. Last year we undertook in this house to examine the extent to which our labour market is enhancing job creation, particularly for small, medium and micro enterprises (SMMEs).

We undertook this task in a very inclusive manner involving all the key stakeholders in the labour market and those that participate at National Economic Development and Labour Council (Nedlac). Roundtable discussions and bilateral meetings were convened with all the social partners. I must upfront, Madam Speaker, take this opportunity to thank all the social partners for their contribution and dedication towards addressing the challenges facing us today.

It is important to point out that arising from these deliberations; a common understanding has emerged in three critical areas affecting the labour market. Firstly, the broader context underpinning our legislative framework including the objectives of our policies and their redistributive role in improving the working and living conditions of our society is sound and shall not be altered.

Secondly, social partners agreed that the issues of job creation and small business development have to be located in a broader legislative context inclusive of macro-economic, social and trade policy issues and not be limited to labour market policies alone. Thirdly, whilst fundamentals of our legislative framework are sound, weaknesses remain on the implementation and operational side that impact on the efficiency and effectiveness of our labour market systems. Implementation is therefore an area we need to work harder on. We have also requested the International Labour Organisation (ILO) to conduct a swift review of our labour market, in a manner that would help shape our approach to resolving these institutional challenges where they exist.

Madam Speaker, we have begun dealing with the institutional and operational weaknesses identified in our discussions with social partners. One of the first areas that we dealt with related to the information gaps that existed at the time. We consequently commissioned research looking at various aspects of the functioning of our labour market. One of these studies looked at the overall efficiency and efficacy of dispute resolution in South Africa. For the first time we now have objective data that confirms our long held suspicion that, lawyers are milking our labour market regime to death by unnecessarily complicating and consequently prolonging cases to the detriment of both employers and employees. In view of this, we have to closely examine the role and functions of legal representation within the Commission for Conciliation, Mediation and Arbitration (CCMA), in a manner that would limit the damaging role lawyers are having on our system.

Despite these challenges, it might please the house to note that last year we celebrated the tenth anniversary of the CCMA which was as much a celebration of social dialogue. From November 1996 till 31 January 2007, the CCMA has processed 1 069 400 labour disputes. To this end, it has been a resounding success. The number of working days lost due to industrial action has decreased by 68% since the coming into operation of the Labour Relations Act (LRA). The average time taken to resolve conciliation is 26 days and for arbitration, 48 days. The combined average to resolve a case is 66 days (inclusive of all processes). This is a far cry from the years it took in the Industrial Court dispensation. These achievements are despite the fact that the CCMA receives about 120 000 referrals a year, a caseload far higher than ever expected.

It still manages to consistently settle an average of 70% of those cases. One of the issues that arose during our discussions with social partners was the need to improve the capacity of the CCMA in the context of this increasing caseload. The CCMA has thus been able to further recruit and train commissioners to deal with the many disputes that come to it from workplaces. Over 1 250 commissioners have been trained and passed through the doors of the CCMA since its inception. This is a huge pool of talent, a rich investment of human capital who can all claim to be "provocateurs" of our new work place order.

Government's Accelerated and Shared Growth Initiative for South Africa (AsgiSA), is about growing the economy, creating jobs and consequently eradicating poverty. AsgiSA fully acknowledges that "all knowledge is vain save when there is work". Consequently, skills development is central to the achievement of our growth and job creation objectives.

Working closely with our colleagues in the Joint Initiative on Priority Skills Acquisition (JIPSA), we have initiated a process to identify scarce skills in the South African economy and those needed for the achievement of AsgiSA targets. This process has resulted in the publication of the National Scarce Skills list and the State of Skills Report, which for the first time tells us about skills in short supply and the magnitude of the shortage. The scarce and critical skills list assisted us in establishing parameters and quota list for skills importation. All Sector Education and Training Authorities (Setas) have now aligned their skills development interventions to the National Scarce Skills list. We are also putting in place an employment services system which will enhance our active labour market policy regime by linking the unemployed to vacancies, training, unemployment insurance and placement. I will soon sign into law regulations in terms of the Skills Development Act, which will make it compulsory for all employers to register all placement opportunities, including vacancies with my department.

Madam Speaker, I want to take this opportunity to urge our education and skills development provider institutions that in the context of our high unemployment rate, which affects most of our young people, we cannot continue to produce graduates who cannot find work. Previously, we claimed ignorance in the absence of a skills guide, and now with the National Scarce Skills list, there is no more excuse. Last year I made mention of the Thuthuka Education Upliftment Project which we undertook in partnership with Further Education and Higher Education Institutions. I also mentioned how this project contributed to the increase in learners in the financial sector. After the successful completion of the first phase of the Thuthuka Eastern Cape project, my department approved its extension as well as a roll-out to KwaZulu-Natal and Limpopo provinces at a cost of approximately R129 million.

Madam Speaker, the House will be pleased to learn that as a result of this project, the University of Fort Hare in the Eastern Cape has been granted conditional accreditation by South African Institute of Chartered Accountants (SAICA) and additional 22 students from the project will graduate in 2007 and bring the total of those thriving to become Chartered Accountants to 62. A total of 15 680 learners and 3 361 educators attended the programme in the Eastern Cape throughout the extension period of the project. There are currently 269 Thuthuka students enrolled on the BCom Accounting degree programme. In Limpopo, 398 students enrolled at the University of Limpopo since its inception. A total of 40 426 learners and 9 905 educators attended the programme in KwaZulu-Natal (KZN) and Limpopo.

Our quest to unlock human potential continued in December 2006 when we launched the second generation of the National Skills Fund projects. In support of the provincial governments' growth and development strategies my department has approved nine provincial projects, with a total value of approximately R900 million for implementation over the period 2007-2009. These projects are envisaged to have a direct benefit to about 360 000 people. Human potential will be further unlocked when 89 224 unemployed people trained in various skill programmes during 2006/07 throughout the country under our Social Development Programme enter the labour market. In addition R300 million will be used over the next 18 months to roll-out projects that will benefit 60 0000 unemployed learners in Adult Basic Education and Training (Abet) programmes.

My department also contributed significantly towards the Tshwane Municipality's Electricity for All Project through the training of 35 learners to become qualified electricians. Twenty-five more learners have been approved for this financial year. We are also supporting five Masters Interns jointly with the University of the Witwatersrand. These interns, all women, will be joining our department within two years as labour market experts, having completed and intensive two-year honours and masters programme on the labour market at Wits University. This is a partnership unprecedented in our quest to unlock human potential.

Foreign Direct Investment (FDI) and Domestic Saving and Investment have been a major challenge for the economy of the Republic of South Africa. Business Process Outsourcing and Off-shoring is seen as one of the major drivers to promote foreign direct investments. During the past four years, Setas and the National Skills Funds spent a total of R96 million to train 4 357 learners in Business Process Outsourcing learners in various levels. During the 2007/08 financial year we have allocated a further R41 million to train a further 6 400 learners under the National Skills Fund (NSF) Strategic Project allocations in Gauteng, Western Cape and the Monyetla project that we are undertaking in collaboration with the Department of Trade and Industry.

The acquisition of intermediate artisan and technical skills for the AsgiSA infrastructure development programme remain a major challenge if we are to successfully host the 2010 World Cup. Since 2001 to the end of March 2006, we have been producing on average 5 600 artisans and 16 000 learnerships in various occupations per annum. As part of our response to the JIPSA call to increase the artisan numbers to 12 500 per annum we have already allocated R316 million to thirteen Setas towards scarce and critical priority skill including artisans under the National Skills Fund. I am happy to announce that we have ring fenced a further amount of R300 million in the 2007/08 National Skills Fund budget for the identified 16 priority artisan trades. In order to qualify for a slice of this budget, Setas will have to adjust their artisan target in their Service Level Agreement, they will have to demonstrate to us how they reprioritised their finances and their levels of contribution from their reserves towards the identified priority trades. I want to take this opportunity to thank Steel and Engineering Industries Federation of South Africa (SEIFSA) and the Manufacturing, Engineering and Related Services Seta (Merseta) in particular for heading to this call and for taking leadership in this regard.

We are currently repositioning Institute for National Development of Learnerships, Employment and Labour Assessment (Indlela) to play a major role in the assessment standard, moderation of assessment and training of artisan trainers in order to maintain and or surpass international standards. We have also established a number of working group in partnerships with Setas to address some of the systemic issues including disparities in the learnerships and apprenticeship incentives. Human potential is immense and the quest to unlock it is like "a flute through whose heart the whispering of the hours turns into music". Our skills development interventions cannot be exhausted here, safe to mention that they include the Bonani Work Readiness Programme, the Thusanani Work Readiness Programme, the Thuthuka Education Upliftment Project and the Thuthuka University of Johannesbyrg Postgraduate Programme among others.

Whilst we have registered these immense achievements on skills development, labour market debates on our institutional reforms and efficiency issues have not escaped our skills development institutions. We are currently working on the listing of the National Skills Fund as per recommendations of the Auditor-General, as a public entity with designated powers. The agreement about the Industrial Policy Framework will require that Setas are aligned accordingly. I must say however that having been involved in the amalgamation of up to five very distinct Industry Training Boards into a single Seta during 1999, and having initiated the first review of Setas during 2004 after their first five years of existence, I understand the complexities associated with this process. This suggests that Setas and other education and skills development provider institutions will have to learn to work in clusters in order to assist us in addressing skills shortages in the country and the plight of the unemployed.

The Umsobomvu Youth Fund represents a key lever in ensuring that the department reaches out and delivers on its commitment by implementing various youth programmes. The Fund received R400 million from this year's budget allocation to amongst others mainstream and scaling up the National Youth Service Programme to ensure that 20 000 youth are engaged in the programme as well 30 000 volunteers are participating. It is envisaged that 11 500 micro and small and medium businesses will receive loans as well as provide business support services to 18 000 new and existing business. We have put together a task team comprising of members of the Umsobomvu Youth Fund and the department to finalise by June this year a submission to cabinet on the long-term mandate of the fund. This will provide a basis for future funding for continued support and development of our youth. National Economic and Development and Labour Council (NEDLAC) has also come under review in the last year, the process of which has now been completed. We are now preparing to table the report to the Cabinet before a public announcement could be made on the matter.

The institutional form of the Unemployment Insurance Fund (UIF) has also undergone radical changes in the last year; it is now a ring-fenced entity reporting directly to myself. The fund has since 2005 introduced an improved benefit administrative system (Siyaya), which is now the envy of many. The fund boosts a comprehensive database of more than 7,2 million workers with individual accounts. More than 546 968 unemployed workers sought relief from the UIF since April 2006. The fund has approved 526 097 or 96% of these claims. The high rate of approval is again evidence of non-sense free claim processing without red tape. All benefits paid are done electronically into the bank accounts of unemployed workers and workers no longer have to suffer the indignity of standing in long queues to claim their benefits, the processing of claims has been highly simplified, meaning that workers have hassle free access to their benefits (which have grown by almost R1 billion). The UIF currently has an operating surplus and reserves of R19,8 billion, which is up 40% on the previous year and these funds are invested productively with the Public Investment Corporation.

I also launched the U-Filing system in 2006, through which employers can submit their declarations and payments electronically via the internet, thus reducing the administrative burden on employers. To date more than 160 000 employers have been pre-registered and more than 34 000 employers are using this facility. We recognise the need to emulate the achievements we have registered with the UIF into the Compensation Fund. We have therefore put mechanisms in place to re-focus the Compensation Fund in a manner that would streamline its activities and bring its management information systems into the new age that we all are part of. So far a number of key achievements have been registered. These include the fact that we have been able to reduce the backlog claims, which were ring fenced for the period ending in December 2004, by 83%.

We have also seen significant improvements in the settlement of claims since December 2004 from the then settlement rate of roughly about 48% to the current 58%. In this financial year, we intend to register pharmacists, medical orthotics and also prosthetics practitioners as designated providers in the Compensation Fund's database. We are hopeful that this step will enable us to control rising medical and rehabilitation costs and at the same time improve our settlement rate, which still needs to improve significantly beyond the current 58%.

Madam Speaker, the representivity of bargaining councils is a problem. With increasing casualisation of workers, the capacity to organise by labour is increasingly being weakened with the resultant effect that more and more bargaining councils are becoming less representative, which means that their collective agreements cannot be extended to non-parties. Whilst some might see the weakening of trade unions and bargaining councils as a positive development, I do not see it as such. Our history and experience has painfully shown us that sectors that are less organised tend to be more prone to strike activities, which of themselves tend to be unprocedural and easily become uncontrollable and violent. The private security industry strike of last year is a chilling reminder in this regard. Equally disturbing is that globally, investors are less reluctant to put money in countries whose labour markets do not have rules of the game agreed upon and governing all players. Thus the weakening of trade unions and bargaining councils is an extremely worrying and negative development which should be debated openly and solutions found.

In the last year thirty-eight collective agreements of bargaining councils were extended to non-parties. Forty-four labour organisations (trade unions and employers' organisations) who failed to submit audited financial statements and those who were considered not genuine were cancelled. This left the register with 355 trade unions, 226 employers' organisations and 58 bargaining councils. In the past financial year, I also reviewed minimum wages for the private security, contract cleaning and civil engineering sectors. Today Madam Speaker, I want to take this opportunity to promulgate a sectoral determination for the hospitality sector. This is the sector, like private security as we saw during the violent strikes of last year where there is a perception that working conditions are notoriously hard.

On employment equity, I would like to refer the House Madam Speaker, to the constitution of our country, Chapter 2 Bill of Rights Section 9(2). "Equality includes the full and equal enjoyment of all rights and freedoms. To promote the achievement of equality, legislative and other measures designed to protect or advance persons or categories of persons disadvantaged by unfair discrimination may be taken."

Therefore the Employment Equity Act seeks to give effect to this section of the constitution by prohibiting discrimination on the one hand and entrenching equity in the workplace through the use of affirmative action on the other. These twin objectives are designed to complement one another. Removing discrimination on its own will not ensure equality in employment opportunities for those who have been denied access to jobs, education and skills in the past. The Act therefore has to go further and place an obligation on employers to introduce affirmative action steps to redress these imbalances. Furthermore the Act seeks to bring our labour law and practices in this area on par with those in the rest of the world. We are now able to meet our obligations in respect of one of core conventions of the International Labour Organisation, Convention 111 which deals with discrimination in respect of employment and occupation.

Madam Speaker, we have entered into a Memorandum of Understanding (MoU) with the ILO for the training of five associate experts in an ILO programme on labour market statistics for a two-year period. These ILO associate experts on completion of their training at the ILO will be absorbed into the department as part of our endeavour to enhance our capacity in this field. I want to also inform this house that our efforts towards the resolution of the Myanmar question are beginning to bear fruit. For the first time, Myanmar has been resolved.

In conclusion Madam Speaker, the institutional form of the department itself cannot be left untapped. In the last year we began decentralising a number of critical functions to our provincial offices and labour centres in our quest to demystify this notion of a bloated head office that 'knows all and does all'. Our people want government to render services to them where they are not in some head office somewhere in Pretoria. Today, Madam Speaker, unemployed workers can submit their UIF claims at their local labour centre and have it processed and finalised in that same office and paid into their bank account. Our provincial executive managers can now be able to execute most of their provincial functions without having to repeatedly resort to headquarters for approval.

Finally, let me express my gratitude to the Portfolio Committee, particularly the Chairperson Mrs Rebecca Kasenyane, for their continued support and my department's Director-General, Dr Vanguard Mkosana, and his staff for their hard work.

I thank you

Issued by: Department of Labour
15 May 2007