Keynote Address by TW Nxesi at Productivity SA Annual General Meeting
10 October 2019


The Chair of the Board of Productivity SA, Mr Mdwaba (I am not sure if I should address you as Advocate or Professor Mdwaba)
Members of the Board
The CEO, Mr Mothiba, the CFO, Dr Sabela, and the management of Productivity SA 
Chair of the Audit and Risk Committee, Mr Gordhan (I won’t ask if you are related – you probably get that question all the time.)
The social partners
Ladies and gentlemen

Thank you for including me in your busy programme for today. Although I have been in touch with your Chairperson, I am grateful for this opportunity to meet with the Board and Executive of Productivity SA. I had to be corrected some time ago for referring to the entity as ‘the PSA’. So I am now clear about the correct branding: ‘Productivity SA – inspiring a competitive South Africa’.

This AGM takes place at a critical point in the life of our Nation where we face a number of challenges:
A sluggish economy – reflected in falling productivity, as highlighted in the chairperson’s introduction to the 2018/19 Annual Report
Global economic uncertainty and rampant nationalistic protectionism
High unemployment – especially amongst the youth
Persistent poverty and inequality, and
A Fourth Industrial Revolution which brings with it disruption and new opportunities in equal measure.
On the political front, we face a massive problem of corruption and a fight-back by the corrupt forces – some hiding within the ranks of the liberation movement, seeking to frustrate attempts to defeat corruption and rebuild state institutions – a necessary pre-condition for any return to growth and jobs.

Now we can lament in the face of these challenges, or we can organise and act to change the situation. Remember the words of Karl Marx, written in 1852. I quote:

“(People) make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past. The tradition of all dead generations weighs like a nightmare on the brains of the living.” [end quote]

He might have been talking about South Africa today. So we are constrained by circumstances, but we still have agency – we make our own history.

I have mentioned the scourge of unemployment so let me start there – with the reconfiguring and renaming of the Department of Employment and Labour – to now include the mandate for Employment – so that there is no confusion.

Traditionally, the former Department of Labour was charged with developing policy and legislation to regulate the labour market with the objectives of:
Promoting healthy industrial relations
Promoting healthy and safe conditions at work
Promoting decent work and now a National Minimum Wage
Promoting Employment Equity – so that employment, at all levels, reflects the demographics of the country.
Providing social protection through the UIF (Unemployment Insurance Fund) and the Compensation Fund (for workplace illness and accidents), and
Inspecting and enforcing labour laws and conditions.

That mandate remains. The Department of Employment and Labour will continue to champion decent work and healthy industrial relations.

This is essential to creating a stable labour market – which in turn is conducive to investment, growth and employment. That is in the interests of all the social partners – socially responsible employers, labour and communities alike.

So, the renaming and reconfiguration of the Department to include the word ‘Employment’ needs to be unpacked. First, the renaming points to the President’s priorities: growth and jobs. The Department now has an additional focus - to implement active labour market policies with the objectives of leveraging the resources we have to preserve and create jobs, as well as to promote appropriate training and re-training which meets the skills demanded by the labour market – in rapidly changing conditions which accompany the Fourth Industrial Revolution. 

The focus on jobs and growth needs to be read with the other objectives and guidelines issued by the President in relation to:
Transformation and inclusive growth
Efficient, effective government – what the President terms ‘joined up government’ – where departments are expected to collaborate and align their activities. No more silos and duplication.
Also the importance of social dialogue and a social compact – all social partners are going to need to work together to re-invigorate the South African economy.

The specific implications of the renaming/reconfiguring of the Department of Employment and Labour include the following:
The department will be required to change its approach from only compliance enforcement, to facilitating job preservation and creation.

So, a much clearer focus on job creation – and providing a conducive environment for investment, growth and employment, which includes:

o A stable labour market and labour relations
o The coordination of government job creation initiatives – including providing leadership in the implementation of the Presidential Jobs Summit commitments
o Leveraging the UIF (Unemployment Insurance) and CF (Compensation Fund) resources to preserve and create jobs (eg the UIF invested in the recapitalisation of Edcon saving 140,000 direct and indirect jobs. This came with strict guarantees and a sustainable turnaround plan). 
o Implementation of the Temporary Employee/ Employer Relief Scheme (TERS) to assist companies in distress which face the prospect of retrenchments and/or short time or layoffs. 
o We also need to promote synergies between the CCMA – which receives retrenchment applications – and Productivity SA - which is in the business of developing turnaround strategies and supporting businesses in distress. I am convinced that the reconfiguring of the Department to include Employment – must include an enhanced role for Productivity SA – which is already supporting and training SMEs (small businesses).
o We have also partnered with the Department of Higher Education and Training and SETAs for training directed towards the actual demands of the labour market.
o We are also beefing up Public Employment Services to streamline the placement of work seekers (eg the roll-out of on-line Youth Centres – providing a free service to employers and work seekers including psychometric testing, career counselling, generating of CVs and verification of qualifications.)
o We are also charged with strengthening NEDLAC to promote social dialogue between the social partners and government.

In spelling out the new employment-related mandate of the Department – which is still very much a work in progress - I also want to make the point very strongly that under this government, wholesale deregulation, as advocated by some people, is a non-starter. Workers’ struggles over decades for decent work will not be overturned. 

But we do encourage engagement with business to see where red tape can be removed and bureaucracy eliminated – easing the cost of doing business – supporting investment, growth and jobs. 

This last week, I attended the second monthly report-back to the President on the progress towards implementing the commitments made by government, the private sector and social partners as part of the Presidential Jobs Summit agreement. I was encouraged by the great strides that we have made towards realising these important commitments and addressing key constraints to growth. But I was even more encouraged by the ways in which social partners are finding each other to collectively solve problems, unblock barriers and accelerate the implementation of interventions that will support job creation. 

Concrete achievements include:
70% of commitments made are now underway. Remember this Summit put in place a monitoring tool to track implementation. The following programmes are all up and running:
o the Business Process Programme has created some 15,000 jobs
o Business reported that they have exceeded expectations in accelerating the transition of youth not in employment education or training (so-called NEETs) onto pathways for earning income. To date, 110 000 jobs and work experiences have been provided.
o The Installation, Repair and Maintenance (IRM) Initiative is up and running - focusing on four key sectors; namely, Plumbing, Electrical, Automotive and Infrastructure Maintenance.
o The Temporary Employee/ Employer Relief Scheme (TERS) is now being implemented to assist companies in distress which face the prospect of retrenchments and/or short time or layoffs.
o Government is addressing administrative barriers to ease the burden of doing business, particularly:
Policy and regulatory hurdles in relation to the immigration regulatory regime; 
streamlining the water use licensing application; 
decarbonizing the economy through legislative instruments to achieve carbon reduction; and
regulating the pharmaceutical regime.

As the Ministry of Employment and Labour, we are actively working to support the Presidential Youth Employment Intervention which has prioritized a comprehensive set of interventions to create no fewer than two million new jobs for young people within the next decade - over and above the average rate of employment growth. 

One of the barriers for youth seeking job opportunities is the lack of work expereince. We have already adopted measures to address this particular challenge, such as abolishing work experience as a requirement for entry-level posts in the public service and adopting the YES (Youth Employment Services) initiative.  We will be announcing measures to scale up these interventions. 

And we are already seeing positive results. I refer you to the article in Monday’s Business Day by the CEO of YES – Tashmia Ismail-Saville – and the amazing example she gives of a young man at the YES Tembisa Hub, registered on his first coding course, who designed a fully-fledged tourism app – after just six weeks. Given the opportunities, our young people can achieve great things.

I wanted to share with you a flavour of the direction the Department is moving in. As I say, it is still a work in progress – the reconfiguration of government departments is not an event, but a process. And the Department’s entities have to play a central role in that process. Clearly, Productivity SA will be critical to the success of this project – given its legislated mandate: ‘to promote employment growth and productivity, thereby contributing to South Africa’s socio-economic development and competitiveness’. We will need to work much more closely together to deliver on Productivity SA’s potential as a labour market instrument capable of promoting jobs and productivity.

The Chairperson’s Foreword to the Annual Report makes the point strongly when he argues that increased investment, on its own, will not improve our economic performance - without reviewing, restructuring and re-engineering the way we do business as a country. This is where Productivity SA has to lead and, in the words of your logo: ‘inspire a competitive South Africa.’

So Productivity SA is an institution whose time has arrived. That is the good news. Another theme running through the Annual Report, is a clearly expressed concern at the adequacy of present and future funding and resources to run the organisation and its programmes. Let me share with you my understanding of the situation prevailing and where we hope to go from here.

Productivity SA continue to receive its Annual Treasury allocation from the Department in line with their legal mandate and the transfer agreement concluded with the Director General. Challenges continue to exist in the following areas:

(a) that the entity has taken additional work that is not part of the Treasury allocation but remains crucial for companies to attain Turn Around Solutions and improve their productivity and competitiveness levels and thereby saving jobs;
(b) the inability of the entity to generate sufficient additional revenue through services that they provide to various entities to assist them in improving their Productivity Initiatives. [- although I see from the Annual Report that the trend is upwards in relation to revenue.]
(c) The Workplace Challenge Programme in partnership with the DTI that is costing the entity about R23 million to implement when the allocation from The Department of Trade and Industry is around R10 million.
(d) the Turn Around Solutions Project that is funded by the UIF and the unresolved disputes with regard to Project Management, Accountability and Governance.

The Entity was assisted with a bail-out after securing Treasury approval from Department's savings during the last consecutive 3 years, with an amount of R23 million during the 2018/19 financial year. Discussions were also held with Treasury to increase the entity’s allocations from the fiscus and to do away with other sources of funding, however this could not be realized given the current economic situation.

To address the challenges stated above, the Director General has established a Committee that has developed a number of proposals to resolve challenges in all these areas including a single funder mechanism to enable the entity to fulfil its mandate. As part of this proposal, PES (Public Employment Services) will fully fund the mandate of Productivity SA. 

This kind of arrangement is made possible by the provisions both in the Public Employment Services Act and the recently amended UIF Act which makes funding of job schemes a priority. Through this arrangement, UIF will sign a funding agreement with PES. This issue is being dealt with by the office of the DG who assures me that the matter will be wrapped up at the end of October 2019.

In conclusion, it is unfortunate that I should be meeting with the Board just as its term of office ends next month. Let me assure the Executive that the necessary governance processes are already underway to ensure continuity. It remains for me to thank all Board members for their service and the value added over the last five years – as they steered Productivity SA out of the difficulties it was facing at the time. I also commend the Executive and staff of Productivity SA for maintaining an unqualified audit. [Maybe you should advise some of the other entities of the Department who faced tough questioning this week by the Portfolio Committee regarding adverse audit findings.]

So, in summary, I am encouraged that the entity is being well-run and that Productivity SA has a major role to play in the reconfiguration of government and the Department – with the focus now on jobs. It is now our task to make the case for improved competitiveness and productivity as major drivers of growth and employment.

I thank you.