Employment Equity A/B: briefing; Committee Report on DEL quarterly performance with Minister

Meeting report

The Chairperson said the Department of Employment and Labour (DEL) would brief the Committee on the Employment Equity Amendment Bill (EEAB). Members would not deliberate on the Bill but only ask questions of clarity. She invited the Minister of Employment and Labour, Mr Thulas Nxesi, to make opening remarks.

Minister’s Remarks

Minister Nxesi said that while there was evidence of improved performance by the DEL, the Department had also flagged continual challenges that needed to be addressed.

He said the EEAB was gazetted on 20 July 2020. Sector engagement on sector specific equity targets had already started in June 2019. The motivation for the EEAB was to address challenges such as the slow pace of transformation in the workplace for blacks and people with disabilities. The bill had been approved by Cabinet in February 2020. It would empower the Minister to regulate sector specific equity targets and to prescribe criteria for the issuing of employment equity (EE) compliance certificates as a prerequisite for accessing state contracts. The targets would not be dictated by the Minister as the amendments specifically prescribed the processes of engagement and consideration with role players and allowed employers to put forward justifiable grounds for failure to comply.

Employment Equity (EE) Amendment Bill presentation

Mr Virgil Seafield, Deputy Director-General (DDG): Labour Policy and Industrial Relations, DEL, said that the rate of transformation in the labour market was extremely slow, as reflected in the Commission for Employment Equity (CEE) report. The Employment Equity Act was a critical tool to respond to the transformation of the labour market and something had to be done about the slow pace of transformation.

Mr Thembinkosi Mkalipi, Chief Director: Labour Relations, DEL, said that there had been little transformation over 22 years because the setting of transformation targets and goals was left to the companies themselves. He said the most important part of the amendments was that the Minister would be empowered to regulate the sector specific EE targets through consultation with the sector stakeholders.

The second major amendment was the promulgation of section 53, dealing with issuing of EE certificates of compliance as a condition for accessing state contracts or doing business with the government. He said section 53 was not a new provision. It was in the current Act but had not been put into operation, because 22 years ago there was no assuredness at that time that companies had or had not complied.

The Bill also introduced a new section, section 15A, which dealt with the establishment of sectoral targets and gave the Minister authority to publish a notice in the Government Gazette in terms of a sector. The Minister would, after consulting the sector and on the advice of the CEE, set targets for the sector or part of the sector. A notice might set different targets for different occupational levels or regions within a sector or on the basis of any other relevant factor. A draft of any notice that the Minister proposed to issue had to be published in the Government Gazette and interested parties would have at least 30 days to comment on the draft notice. Targets could be set for different occupational levels such as senior or junior management via section 15(2) and affected parties could comment on these targets. All employers employing more than 50 employees would have to submit reports and would have to show compliance when they wanted to do business with the state.

Mr Mkalipi referred to the EE regulations related to section 15A, which he said had already been negotiated at the National Economic Development and Labour Council (NEDLAC). Regulation 7A listed the criteria for the determination of numerical targets for economic sectors. This included the qualification, skills and experience required to be employed in a particular occupational level; the rate of turn-over and natural attrition within a sector; and recruitment and promotional trends within a sector. These were also all the justifiable reasons why a company could claim they could not meet the targets.

On how section 53 would be managed, he said that if one did not comply with the law, one could not do business with the state and the law allowed the Minister to issue a certificate of compliance. The certificates were issued online. If there were justifiable reasons for not complying, a certificate would be issued, but if inspectors found out that the reasons were not justifiable, then the certificate would be withdrawn. Employers employing less than 50 employees could apply for a certificate and would only have to answer two questions on whether they were involved in current cases on discrimination before the Commission for Conciliation, Mediation and Arbitration (CCMA). The other question was on compliance with the minimum wage. The certificates were only valid for 12 months.

The Department was already busy engaging with the mining; retail and wholesale; financial; and construction sectors on the setting of sector specific EE targets.

Discussion

Mr M Bagraim (DA) said the Committee was dealing with social engineering. He said the Minister had to consult, but ultimately the decision was his to make without having to take into account issues raised in the consultation process. Why could the bargaining councils not make the decisions on the targets to be set? He sought clarity on the question small businesses had to answer on CCMA cases. Did this refer to challenges before the CCMA or to findings by the CCMA? What would happen if a CCMA finding was taken on review to a labour court? He said that once the amendments were passed, the Minister could change regulations at will. What would happen if one was not happy with a refusal of one’s exemption? Would it not be subject to the Labour Court? Why was there no sunset clause? How would the structures, like top management or junior management, be determined?

Ms H Denner (FF+) said the sectoral targets had not yet been set. Would the targets form part of the Committee’s process, and if not, why not? Was a sunset clause considered and if not, why not?

Dr M Cardo (DA) said he thought the original intention of the Employment Equity Act was to broaden opportunities denied to designated groups in the past and therefore the emphasis should be to create opportunities through skills and staff development, not on manipulating outcomes. Rapid economic growth and an improved education system were the two factors that impacted on skills and staff development, not a Minister trying to bend the economy. Given the impact of Covid-19, the lockdown and the loss of jobs and weak economic growth, had the Department done a socio-economic impact assessment on the impact of the bill on the private sector’s incentive to create jobs?

Ms C Mkhonto (EFF) said it was good news that the Minister would look at all levels of work as women were limited to lower levels. There was high youth unemployment, and was youth equity included in employment equity? Would the Department consider the lack of skills as a factor for not complying with the act?

Dr N Nkabane (ANC) said the Committee would take cognizance of the impact of the Covid pandemic on employers and employees and on the employment equity plans of various institutions. What would the methodology of the Department be to come up with a balanced, integrated and holistic approach to implementing the amendments? Had the issue of labour inspectors been prioritised and assessed to ensure the inspection and enforcement of the act.

Mr S Mdabe (ANC) asked if the Department had put systems in place to ensure effective and efficient implementation of the Act. Was there collaboration and coordination with other government departments to ensure that companies applying for EE certificates were compliant in other areas such as tax and Unemployment Insurance Fund UIF payments?  The Auditor-General had raised the issue of the coordination of data and systems within government.

The Chairperson asked how confident the Department was that its systems were talking to one another and that online submission could be done without any challenges.

Responses

Mr Mkalipi responded to Mr Bagraim’s comment that the Minister ultimately was able to make a decision without having to take into account issues raised in the consultation process, He said this was correct and it was not new to labour law as one could not have a situation where consultation went on forever and no decision was made. The issue had been debated and agreed to at NEDLAC. 

On why the bargaining councils could not make the decisions on the targets to be set, Mr Mkalipi said there were only 26 bargaining councils and they did not represent the whole economy. Secondly, bargaining councils themselves were employers and therefore, by law, they could not be given the authority to set targets.

On the setting of targets being challenged, he said the rule of law applied and if there was a challenge, the final arbiter would be the courts.

On the Minister being able to change regulations at will, he said regulations could only be changed after consultation with parties at NEDLAC.

On how structures, like top management or junior management, would be determined, he said the structures of companies were decided by companies themselves. In the past 22 years there had never been an issue over the structures of companies.

On whether the sectoral targets would form part of the Committee’s processing of the Amendment Bill, he said the law said the Minister must set targets in consultation with the sector. If the sector was happy, there was no reason to bring it to the Committee.

On the questions around a sunset clause, he said he was unsure what was meant by a sunset clause.

On the issue of a socio-economic impact assessment, he said all Bills had to have an economic impact assessment done. The impact of Covid-19 on the economy would be a justifiable reason for a company not to meet its targets, but not all sectors were affected the same and not all companies within a sector were affected the same.

On the issue of youth and employment equity, he said that unfortunately, when speaking about employment equity, there was no youth sub-category. 

On the issue of a holistic approach to implement the amendments, he said there was a holistic approach.

On the issue of inspectors, he said that as soon as the Act was passed, the training of inspectors would start. At this stage the Department was busy with consultations with employers.

On whether the Department had put systems in place to ensure effective implementation of the Act in collaboration with other departments, he said all Bills had to be processed through the relevant ministerial clusters. There had been discussions with the Treasury and the Department of Trade and Industry about procurement and economic empowerment targets. Discussions were being held with all affected departments to ensure there would be no ambiguity and no duplication. If the Mining Charter, for example, determined targets, then those were the targets that would be adhered to. The Department’s systems could not determine UIF compliance, because the UIF covered all employers, while the Department would be covering only designated employers. On whether there was collaboration with the South African Revenue Service (SARS), he said it was not possible to access tax information. 

On how confident the Department was that its systems were talking to one another and that online submission could be done without any challenges, he said that the Department had been operating an online system for the last 15 years. The certificates would be linked to the same system and the Department was confident that the system would work seamlessly.

Ms N Ntlangweni (EFF) said Mr Mkalipi had said the inspectors would only be trained when the Bill was passed, but this should happen now, concurrent with the bill being processed if this was possible, or else they would be disadvantaged.

The Minister said that changing regulations was never unilateral and was the result of serious discussions with the social partners. The Department always tried to move to a consensus position through extensive consultation and not through imposition. Even the targets were the result of an analysis of a particular sector together with engagement with employers. It was wrong to think the Department was trying to manipulate the economy. It was trying to create a particular society where those who had been excluded were going to be included. It was clear that this was not going to happen voluntarily. If market failures were noticed, then intervention was necessary and this was not unique to South Africa. Governments intervened through laws.

He said he did not understand where the debate on the sunset clause came in, as the history of the sunset clause in South Africa was to enable guarantees that had been given to some apartheid institutions for the first five years of the transition to democracy.

Assessment of the Department’s annual performance in 2019/20

The Chairperson said the assessment was a continuation of the previous week’s discussion. It was a preliminary assessment in preparation for when the Department presented its Annual Report and to identify weaknesses as identified in the quarterly reports. She said the Department still had to present its Annual Performance Plan (APP).

Mr Bagraim said that in terms of the set targets, the Department seemed to have done well, but the UIF and the Compensation Fund had both failed miserably in their interaction with the public and service delivery  

Mr Mdabe said there were areas needing the Committee’s attention. These included the consolidation of a social wage through reliable UIF services; inspection and enforcement services; and issues of social cohesion and safe communities in terms of labour bodies and industrial relations. The Department had not met its strategic targets of protecting vulnerable workers and of monitoring the impact of legislation.

He said the construction sector showed a good turnaround in the levels of compliance, given that it was a high risk sector with regard to the Occupational Health and Safety (OHS) Act. The wholesale and retail sector was always found wanting regarding compliance with the OHS Act.

Ms A Zuma (ANC) said the Committee was there to assist the Department, not to criticise it.

The Chairperson said the Committee was involved in an oversight process. The Committee was not hostile or arrogant. It was supporting the Department by holding it accountable and therefore the Committee was critical of the work they did.

UIF oversight visit

The Chairperson announced that the Standing Committee on Public Accounts (SCOPA) had informed the Committee of an oversight visit to the UIF in Pretoria. The Committee had been granted permission to accompany SCOPA on the oversight visit. Three ANC members - the Chairperson, Mr Mdabe and Ms N Hermans - and two opposition Members - Mr N Hinana (DA) and Ms Mkhonto (EFF) - would join the delegation. 

Report of the Portfolio Committee on Employment and Labour on the Third and Fourth Quarterly Reports Regarding the Performance of the Department of Employment and Labour and Its Entities in Meeting Strategic Objectives for 2019/20

Mr Bagraim raised the question of whether the Committee’s Report should comment on the failure of the Compensation Fund to service the people.

The Chairperson asked whether it was right to say that the Compensation Fund was doing nothing right. She thought they were improving, even if it was at a slow pace. They had switched over to a new system and any new system would have its challenges.

Mr Bagraim said they were improving and the Commissioner was trying his best, but the system was not new, it was three years old. He felt a remark should be made that it had not met the expectations of the public. He knew of a case of a person who had not been paid for 19 years. It was true that the fund was better than they were five years ago.

Mr Mdabe said the fact that the Fund had paid old invoices to the value of half a billion rand attested to the improvement in the administration of the Fund. The challenge was for the Fund to inform the Committee of the sectors that were vulnerable or did not comply with safety standards and where there were large numbers of injured workers. This issue had been raised more than three times with them.

Mr Bagraim said the overall system appeared to be broken. It had been severely tested in the Covid period and this has exposed the flaws in the system. There had been problems with the UIF for the past decade. The Minister had hinted that there was a need to introduce new systems to ensure these problems were not encountered in the future. The problems experienced with the UIF should be referred to, at the very least, as an observation.

The Chairperson asked that Mr Bagraim propose a sentence for inclusion.

Dr Cardo proposed that the Committee suggest closer cooperation, collaboration and integration between the UIF and SARS as it had been revealed that SARS had a lot of the information at its disposal that could have speeded up the processing and payment of the Temporary Employer/Employee Relief Scheme (TERS) benefits. He recommended that the UIF and SARS look at ways in which SARS could strengthen the UIF. 

The Chairperson noted that the Committee was still only dealing with observations in the Report.

Dr Cardo said the observation would be that the UIF systems were revealed to be sub-optimal tin processing  and paying benefits on time and it was advisable to explore ways how this could be addressed by collaboration with other government agencies. SARS could explicitly be mentioned in the recommendation part of the Report.

Mr Mdabe said the Committee was dealing with the 2019/20 financial year report while TERS would be part of the 2020/21 financial year report. The Committee Report talked to pre- Covid actions, so how could this be included in the Report?

Dr Cardo accepted that point of view, but said that what he and Mr Bagraim were trying to point out was that there were underlying weaknesses in the system that existed before Covid anyway, so TERS need not explicitly be mentioned. It would be beneficial for those entities to collaborate with other government entities to get better outcomes.

The Chairperson said the focus of the comment would be on the ordinary claims and payments and not on TERS.

Mr Mdabe said written submissions should be made on which there could be engagement.

Ms Mkhonto moved for a written submission.

Dr Cardo said he could write it up on the chat function of the meeting.

Dr Cardo proposed an additional bullet. He said that the Committee gave no consideration to the unemployment crisis in South Africa. The Department was given a specific task to assist the private sector in the creation of jobs. There was no indication in the Report of whether the Department was fulfilling this essential mandate.

The Chairperson said that when this matter was raised in the presence of the Minister, he said that when the Cabinet process was completed there would be a presentation to the Department on what this mandate would entail in March. Then Covid struck and delayed that matter. It would not be fair to say the Department was not assisting in the creation of employment. It had to wait for the details of the mandate, but this did not mean it was not doing anything.

Mr Mdabe said the question was raised around the third quarter of the previous year. The Minister had replied that they were engaging with the social partners and a report would be tabled in Parliament. He was supposed to report back in March of this year.

The Chairperson then returned to the issue of Dr Cardo’s written proposals on the UIF as discussed previously.

Ms Mkhonto moved for the adoption of the Report, seconded by Mr Mdabe.

The Report was adopted with amendments.

The meeting was adjourned.