Presentation to the Portfolio Committee on Labour 11 October 2005 National Treasury Kathy Nicolaou Judy Naidoo
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.
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.
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 UIF’s 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.
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
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.
Consistent under spend on personnel every month by 2 per cent on average
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
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
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
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 DoL’s expenditure; Staff are DoL staff who have oversight over R1 billion (managed at Chief Director level) • Poor Accountability and no regular reporting
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.