Presentation to the Portfolio Committee on Labour

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Presentation to the Portfolio Committee on
Labour 11 October 2005 National Treasury Kathy
Nicolaou Judy Naidoo
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Expenditure Trends 2003/04 to 2004/05

• Programme 1 Administration - Marginal
  increase of 0,35 percent due to shifting of
  capital works expenditure from Administration
  to Programme 2 Service Delivery
• Programme 2 Service Delivery 13,6 per cent
  increase in spending due to shift towards
  service delivery and implementation and the
  inclusion of OHS as a sub-programme.
• Programme 3 Employment Skills Development
  Services/HRD - Baseline increase of 28,2 per
  cent due to changes in programme structure and
  an increase in personnel in the latter period.

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• Programme 4 Labour Policy and Labour
  Market Programmes 14,8 per cent increase in
  spending is attributable to changes in programme
  structure i.e. the shifting of Sheltered
  Employment Factories from Programmes 3 to 4.
• Programme 5 Social Insurance R250 m, and
  R150m deferred to the NRF in the 2003/04 and
  2004/05 financial year. UIF had a healthy cash
  flow and was able to meet its operational
  requirements.
• MoL relieved from Statutory obligation of
  contributing R7 million (Revision to UI Act).
  Amount reduced to R1 000.00 for inclusion in
  departments budget.

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Statutory versus Non-Statutory Spending

• Non-statutory spending from R1,3 billion in
  2002/03 to R1,1 billion in 2004/05, an
  average decrease of 7 per cent, due to
• success of the UIFs turnaround strategy
• under spending on personnel
• Under spending on capital works.
• Statutory allocations increased from R3,3
  billion to R4,7 billion , for the same period
  reflecting an average increase of 23,1 percent
  over the three years as a result of successful
  levy collection by SARS.

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Capital Works
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Personnel Expenditure

• In 2004/05, personnel expenditure represented
  nearly 34 per cent of the departments
  non-statutory allocation increasing from 32,5
  percent in 2002/03.
• Vacancy rate increased from 17,7 percent in
  2002/03 to 21,4 percent in 2004/05.
• Department under spent by R133 million in
  2004/05.
• Approximately half of this amount could be
  attributed to high vacancies across the
  departmental programmes increasing nearly
  three-fold when compared to 2003/04 where under
  spending on personnel was in the region of about
  R20m

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• Its expected that the vacancy rate will remain
  high over the MTEF period with a marginal
  decline due to a restructuring process which
  has already started by unfreezing posts and a
  drive to fill posts at the lower level by hiring
  contractors on a six-month basis until the
  restructuring strategy is in place.
• The department however, is unwilling to share
  the restructuring process and policy with the
  Treasury hence no assessment of this process is
  possible.

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• Consistent under spend on personnel every
  month by 2 per cent on average

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Unemployment Insurance Fund
Revenue vs Expenditure
8 000
Revenue
6 000
Expenditure
4 000
R' million
Surplus()/deficit(-)
2 000

2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
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Compensation Fund
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Sheltered Employment Factories

• Established in 1956 by a Cabinet Memorandum
• Objective Provide economic empowerment to
  mentally and physically disabled persons
• Total employment at the 13 factories situated
  nationally is on average 1290 disabled persons
• Income generated from sales of manufactured
  goods ranging from wood and metal furniture,
  linen and bedding, upholstery and bookbinding
• Expenses covered by income from sales and
  transfer from Department of Labour

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• Sheltered Employment Factories (cont.)
• Government transfers in 2004/05 was R45,4
  million
• Restructuring of these factories has been
  ongoing since 1998.
• In 2001 a feasibility study was done by KPMG
  costing the department R484 500 with no
  constructive developments
• Treasury views this study as being outdated
  and recommended a PPP feasibility study.
• DoL delays resulted in transaction advisors
  not being appointed. Due to project stagnance
  since the beginning of last year the NT has
  terminated this PPP feasibility study.
• Contrary to the requirements of the Cab Memo
  DoL has not established a management
  committee to oversee these factories

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National Skills Fund

• The NSF has no legal form
• The Auditor-General requires it to be a listed
  public entity (3A) to comply with the PFMA
• NSF expenditure included in the DoLs
  expenditure Staff are DoL staff who have
  oversight over R1 billion (managed at Chief
  Director level)
• Poor Accountability and no regular reporting

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National Skills Fund (cont).

• NT requires business case No progress has
  been made and no response received from DoL
  despite NT Requests
• In 2004/05 the NSF experienced a net deficit
  of R91, 9 million due to increased pressure on
  NSF funding especially for unemployed
  learnership campaign and EPWP
• In March 2004, the NSF had a net surplus of
  R223,5 million
• The cash and cash equivalents for 2004/05
  closed at R6,695 million, however investments
  in the PIC (cash) amounted to R1,2 billion.