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Medium Term Budget Policy Statement

Employment and Economic Development

31 October 200631 October 2006

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IntroductionIntroduction

South Africa has a two-tiered economy;

one rivalling other developed countries

the other with only the most basic infrastructure

It therefore is a productive and industrialized economy that exhibits many characteristics associated with developing countries, including a division of labour between formal and informal sectors, and uneven distribution of wealth and income

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The Millennium Development GoalsThe Millennium Development Goals

Eradication of extreme poverty and hungerAchieving universal primary educationPromote gender equality and empower womanReduce child mortalityImprove maternal healthCombat HIV and AIDS, malaria and other diseasesEnsure environmental stabilityDevelop a global partnership for development

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Asgi-SA and JIPSA.Asgi-SA and JIPSA.

The primary aim of Asgi-SA is to halve unemployment and poverty by 2014.

To have the desired impact on poverty and unemployment, growth must be boosted to at least 6%.

JIPSA is an Asgi-SA initiative to address the issue of scarce skills that will negatively affect the capacity of public(own emphasis) sector in terms of service delivery imperatives.

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Jipsa interventions

• Mentoring programmes

• Overseas placement to fast track development

• Special training programmes

• Expatriate repatriation retire re-employment

• Recruitment of skilled immigrants

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Asgi-Sa: Discernable Constraints and Asgi-Sa: Discernable Constraints and response initiatives in relation to the DPSAresponse initiatives in relation to the DPSA

Of the six constraints to boosting economic growth to 6% those requiring specific DPSA attention are:

Deficiencies in state organisation capacity and leadership and

Shortage of skilled labourThe two categories of intervention are thus:Beefing up public administration andSkills development

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Sectoral Forecast Model

0% 2% 4% 6% 8% 10%

Agriculture, forestry and fishing

Mining & quarrying

Manufacturing

Electricity and water

Construction

Trade (Wholesale, retail, hotels andrestaurants)

Transport and comunications

Finance, real estate and business services

Community, social and other personalservices

Average % per Annum

Expected real average annual growth rates for major sectors of the South African economy – 2005 to 2014

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Sectoral Growth Prospects and Skills Implications

• It may be concluded that there is a strong demand for both a larger variety and a higher level of quality of skills, particularly in the following broad areas: – Programme and project management; – Engineering;– Finance and economics; – ICT professionals– Spatial planning; – Intergovernmental relations; – Education management and professionals, and – Health and Welfare Service management and professionals

• This is supported by the Report on Scarce and Critical Skills produced by DoL in August 2006

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Overview of the Public Personnel Expenditure

Table 2: Employee Numbers – by sector

Sector Name 2001 2002 2003 2004 2005ActualGrowth

Agriculture 50,448 47,703 45,092 43,154 40,089 (10,359)

Arts/Sport 4,001 4,428 3,243 3,593 5,294 1,293

Criminal Justice 170,281 181,032 187,923 199,141 205,437 35,156

Defence Force 76,720 76,266 75,913 76,969 77,858 1,138

Economic/Environmt 13,784 13,598 11,279 11,603 13,015 (769)

Education 426,215 434,460 434,664 436,017 440,824 14,609

Finance 5,164 4,925 4,869 5,369 5,592 428

Foreign Affairs 1,659 1,656 1,597 1,756 1,952 293

General Admin 16,610 13,625 11,674 11,495 14,110 (2,500)

Health 219,924 218,497 217,680 224,937 232,377 12,453

Home Affairs 5,916 5,995 5,880 6,808 6,936 1,020

Infrastructure 55,221 53,112 50,129 49,455 48,429 (6,732)

Other 2,941 2,892 1,854 1,806 1,793 (1,148)

Welfare 11,308 11,895 13,950 15,252 15,789 4,481

Grand Total 1,060,192 1,070,084 1,065,747 1,087,355 1,109,495 49,303

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Overview of the P P ExpenditureTable 5: Major Occupational Groupings in the Public Service – 2001 to 2005

Occupational Groupings December 2001 December 2005 % change

Total employment

%share of total Public Service employment

Total employment %share of total Public Service

employment

Unknown 76742 7.4 0 0 -7.4

Elementary Occupations 166406 16.1 139689 13.5 -2.6

Admin Office Workers 101859 9.9 132503 12.8 2.9

Professions & Managers 104243 10.1 133393 12.9 2.8

Technical & Associate Professionals

8489 0.8 7996 0.8 0

Service Workers 6767 0.7 11436 1.1 0.4

Social, Natural, Technical and Medical Sciences Supplementary and Support Personnel

63502 6.2 67195 6.5 0.3

Craft Related Worker 11205 1.1 9501 0.9 -0.2

Driver Operator Ships 12018 1.2 9477 0.9 -0.3

National Security Services & Custodian Personnel

122652 11.9 138500 13.4 1.5

IT Personnel 1060 0.1 1145 0.1 0

Other Occupations 1000 0.9 9051 0.9 0

CS Educators 346631 33.6 374982 36.2 2.6

TOTAL 1031594 100 1034868 100 0.0

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HR Management Practice TrendsVacancy Rates

Table: Vacancy Rates in December 2002 and December 2005

Sub major Number of Vacant Posts

December 2005

Vacancy Rate December 2005

Vacancy Rate December 2002

Clerks & related person 40,490 26% 27%

Computer programmers 70 45% 52%

Computer systems designers & analysts

206 39% 37%

Health professionals (except nurses)

13,894 46% 40%

Nursing 17,193 25% 26%

Nursing professionals 23,875 31% 27%

Managers & related personnel

22,103 36% 33%

Physical & engineering science associates

1,458 45% 44%

Physical mathematical & engineering sciences

1,594 42% 42%

Police 8,984 8% 7%

Power production & related plant

1,591 57% 51%

Rescue services 2,770 27% 32%

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HR Management Practice TrendsOvertime

Table 15: Overtime by cluster 2005/2006

Cluster Overtime Cost (000’s)

% of Compensation

% Share of Total

Overtime

Core: General Admin, Home Affairs, Finance, Foreign Affairs

R 64,371 1.4% 2.5%

Criminal Justice R 835,575 3.1% 32.3%

Economics & Environmental Affairs R 97,918 1.6% 3.8%

Infrastructure R 136,157 2.6% 5.3%

Other R 12,582 2.7% 0.5%

Social: Arts & Culture, education, Health, Welfare

R 1,444,055 1.7% 55.7%

Total R 2,590,658 2.0% 100.0%

Additional Breakdown

Health R 1,320,237 5.3% 51.0%

Education R 64,071 0.1% 2.5%

Police R 320,834 1.8% 12.4%

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Quantitative Analysis relating to HR Management Trends

RECOMMENDATIONS

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Recommendations:• The findings of the analysis on public personnel expenditure trends

indicate that there is scope for upward movement in personnel expenditure.

• These findings have revealed fairly significant shifts in the relative priorities of key economic categories of government expenditure over the past decade.

• In this process, personnel expenditure has declined in relative terms, although it has continued to increase in absolute terms (at rates that exceed inflation). These shifts in expenditure priorities have been relatively more pronounced at provincial level.

• The scope for upward movement in personnel expenditure must factor in the following key issues:

– Increases in remuneration for specific occupational groups as one of the mechanisms in ensuring retention of such skills; and

– Improving critical infrastructure development capacity in all spheres of government

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Recommendations:Remuneration Framework in the PS

• The following remuneration principles have been identified as critical for the implementation of a new Public Service Remuneration Framework:

– Total rewards approach (employment value proposition)– Equitable and fair differentiation – Affordability– Performance based remuneration– Market related remuneration– Openness and transparency – Occupational Differentiation– Governance and oversight

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Recommendations: Remuneration Framework in the PS

Proposed New Remuneration Framework

• Implement a Total Cost of Employment (TCE) for salary levels 1 -10

• Occupational Differentiation

– Introduction to Dual Career Pathing – Scarce skills – Remuneration process

– Flexible Employment Contracts for Professional/Specialists

• Salary Progression and Performance Related Remuneration

– Equate Levels 11 – 15 and Professional/Specialist Levels 7 – 12

• Broad banding & Performance Based Salary Increases

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Remuneration Framework in the Public Service

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10

9

8

7

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11

10

9

8

7

12

11

10

9

8

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Physical, Mathematical

and Engineering

Sciences

Health Professionals

Information Technology

1

2

3

4

5

6

7

8

9

10

11

12

13

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Public Service Salary Scales

Dual Career Pathing – Remuneration Structures

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Remuneration policy framework: Key policy considerations and principles

• The principle of a total cost to employer remuneration system should be considered.

• System underpinned by an appropriate JE system to ensure the continuation of the key guiding principle of equal pay for work of equal value.

• Establishment of a review panel to be considered – to review from time to time all aspects of the remuneration dispensation applicable to Senior and Middle Managers and professionals at levels 11 to 16.

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Remuneration policy framework: Key policy considerations and principles

• Performance management to be improved. Possibly greater emphasis on performance related pay.

• Macro benefits to be maintained and further strengthened where required.

• Allowances should as far as possible be rationalised and where justifiable, incorporated into salary. Allowances retained should be reviewed and adjusted where necessary.

• Personnel growth in specific sectors• Affordability is a key consideration.• The policy framework must seek to ensure stable labour

relations.• The elements of the policy framework must be transparent,

perceived to be fair by employees and easy to administer.

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International Initiatives:Co-operation with IndiaInternational Initiatives:Co-operation with India

Exchange of study toursExchange of expertise,capacity building

comparative studies through joint researchExchange of informationReciprocal secondment of officials to each

others countries.Mentorship and exchange programmes: Math

and Science, IT knowledge management.HRD and training

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THANK YOUTHANK YOU