Productivity SA Chairman, Prof Mthunzi Mdwaba’s, speech- 12 November 2020 – Annual General Meeting
Productivity SA Chairman, Prof Mthunzi Mdwaba’s, speech at the occasion of Productivity SA virtual Annual General Meeting held on 12 November 2020
Representatives of Organised Labour; Union Federations and Union Members
Representatives of Business and Members of the Business Community;
Representatives of Government and State-Owned Entities;
My fellow Productivity SA Board members;
The Executive Management and Productivity SA staff;
Members of the media;
All stakeholders
Ladies and gentlemen
Good morning
Dumelang
Sanibonani
Molweni
Happy Productivity Month to all!
Productivity SA declared October as Productivity Month in South Africa in 2008. It is key for Productivity Month to be recognised as a government-wide programme galvanising all South Africans to celebrate same, as well as the Productivity Awards that are an annual climax of its efforts show-casing the work it does.
Productivity Month is a yearly campaign and its objective is to promote the importance of productivity and inculcate a sense of competitiveness in every South African. The purpose of the month is to highlight the importance of productivity in the country and treating productivity as an enabling tool for transforming our economic growth and the creation of jobs. While our lead department is the Employment and Labour Department with our Minister being the champion for this, we need to inculcate an environment in which the Presidency takes a hugely active role in leading by example, with the President himself seen to be in the forefront. The creation of employment and jobs equates to a better life for more people.
Today sees the new Board of Productivity SA hold its first Annual General Meeting since appointment in December 2019 by the honourable Minister of Employment and Labour, Mr Thulas Nxesi. I am pleased to inform you that for the past nine months I have been working with new, dynamic and vibrant Board members. It is fair to say I am the only relic on the new Board as well as the only return soldier.
It is with immense pleasure that I announce the Board Members, namely Ms Farida Khan (Business Representative), Ms Marsha Bronkhorst (Government Representative), Dr Anneline Chetty (Business Representative), Mr Welile Nolingo (Labour Representative), Ms Shivani Singh (Business Representative) and Mr Godfrey Selematsela (Labour representative). The collective acumen and tripartite stakeholder experience brought on board by these members is exceptional.
Allow me to also formally thank the members of the Board you saw at last year’s AGM, and who ended their terms in November 2019 for amazing work done during a very difficult period of our journey. I have been very fortunate to serve with such committed productivity champions and patriots. I will say more about our previous Board members a little later.
I tweeted and posted on LinkedIn as well last night, that this AGM, held annually in October on Productivity Month, should be the 3rd most important event after the State of the Nation Address and the Budget Vote, if we were to re-prioitise and recalibrate our economy. I was then asked on social media, why this is not the case. My response was that we have a lack of leadership, attitudinal issues, denialism, ideologues, a failure to appreciate and embrace productivity asa critical component of the building blocks that concomitantly contributes to the enhancement of our competitive and employment creation. We must change this, we shall change this, one step at a time, one brick at a time and one person at a time!!I will also come back to this later.
Productivity friends, colleagues and partners,it is my pleasure and privilege to table the 2019/20 Annual Report for the Financial Year that ended on 31 March 2020. The 2019/20 Financial Year can best be characterised as an eventful year, with unprecedented and unexpected events, requiring unprecedented courage and action to shape the geo-political order and the socio-economic landscape. Reflecting back on this year, it is apt to cite the long-held saying that “change is the only constant” and the African idiom “of not letting the sunrise find you where the sunset left you”. You must keep moving forward to stay relevant and impactful. This of course resonates with productivity and the Kaizen principle of continuous improvement.
In performing its duties in the past year, Productivity SA was guided by the Medium-Term Strategic Framework (MSTF) 2014 – 2019 (which is a high level 5 Year National Plan to guide the implementation and monitoring of the National Development Plan (NDP) 2030.
The MSTF 2014 – 2019 has a set of focused priorities and Sectoral Outcomes accompanied by a set of sector-specific priorities. The sector-specific priorities are key to improving the impact and delivery performance of individual government sectors as outlined in high level strategic documents to guide the MSTF five-year implementation and monitoring of the NDP 2030. Within the MSTF priorities, there are two priorities that are of critical importance to Productivity SA and these are namely: (i) Economic Transformation and Job Creation, and (ii) A Capable, Ethical and Developmental State.
To achieve these priorities, Productivity SA also leveraged on inputs by stakeholder partners such as the International Labour Organisation (ILO). In June 2019, the ILO held its meeting at its 108th Session (10 – 21 June 2019) on its Centenary. The ILO adopted the ILO Centenary Declaration on the Future of Work; and Convention No. 190 on 21 June 2019. The latter, which South Africa is in the process of ratifying, called for the Elimination of Violence and Harassment in the World of Work, which have implications for the socio-economic and labour market landscape, and consequently, the business environment of National Productivity Organisations (NPOs).
The above instruments confirm the added responsibility of National Productivity Organisations (NPOs) to lead a productivity driven agenda, giving priority to the implementation of the human-centred approach for the future of work. They also confirm the need to prioritise the creation of employment, a productivity focus, advancement of decent and productive work as well as an inclusive economic growth considering the impact that technological change, financial, economic and trade policies have on employment, the world of work, workers’ protection and the need for appropriate education and new skills.
The African Continental Free Trade Area (AfCFTA), which is one of the flagship projects of the African Union’s Agenda 2063 was officially launched at the 12th Extraordinary Summit of the African Union (AU) in Niamey, Niger on July 7, 2019. The AfCFTA will amongst others, address the challenges of youth unemployment, skills development, industrialisation, women empowerment, infrastructure development, as well as create a single supermarket for goods and services, which is intended to strengthen trade and inter-African investment. The NPOs on the continent, including the Pan African Productivity Association (PAPA) member countries whose secretariat is in our offices, are called upon to unlock the continent’s productivity potential for sustained competitiveness and economic growth on the continent.
The above events were given credence by the adoption of the Abidjan Declaration by Government, Employers’ and Workers’ delegates from 49 African countries who met at the 14th ILO African Regional Meeting from 3 to 6 December 2019 in Abidjan, Côte d’Ivoire. The ILO African Regional Meeting also marked the 60th year of the Organisation’s presence in the continent, with the aim of forging a regional framework to unleash Africa’s potential for inclusive growth and shaping a future of work with social justice. The 2019 Abidjan Declaration confirms that there is more than ever before, a need for Africa to urgently accelerate transformative processes for the realisation of the Sustainable Development Goals, the African Union Agenda 2063, and the African Continental Free Trade Area.
Addressing the development challenges on the continent requires structural transformation through value-addition across the broad sectors of agriculture, manufacturing and services, domestic resource mobilisation, investment in the care economy and improving productivity. Given Africa’s largely young and energetic population of 1.3 billion, and its abundance of natural resources, Africa’s potential for further growth is promising. However this is only possible if action is undertaken in a collaborative manner by all stakeholders. This is a further clarion call for countries in the continent to unlock the continent’s productivity potential for sustained competitiveness and economic growth on the continent.
During the 2019/20 financial year, Productivity SA achieved a significant milestone as the entity notched a remarkable 50 years of existence underpinned by decades of job-saving and doing its best to galvanise the South African economy into higher levels of productivity. We also celebrated the 40th Productivity Awards last year and have had to postpone them this year due to the pandemic and hope to have them in February/March. These milestones were celebrated by the previous Board whose term of office ended in November 2019. I wish to take this opportunity to reiterate our gratitude to them for their commitment to resolving the maladministration and irregularities that beset the entity prior to their tenure as Productivity SA Board members.
The outgoing Board members left Productivity SA with a positive unqualified audit opinion and ensured there was no irregular expenditure during their term through their relentless efforts to ensure that the entity is adequately funded to deliver on its mandate. The highlight of the Board‘s term was ensuring the Unemployment Insurance fund (UIF) pledged R104 million towards Productivity SA‘s Business Turnaround and Recovery programme (BT&R)(formerly known as the Turnaround Solutions Programme/TAS). Another significant and commendable development is that Productivity SA achieved a 100% completion of its targets on the Annual Performance Plan (APP). This is a monumental milestone for the entity which averaged 70% over the past financial years and I would like to also thank the Executive Management and all staff for this remarkable achievement.
I equally congratulate the new Board for picking up the baton and completing the race of getting funds in, when they came into office. The R104 million commitment for the Business Turnaround and Recovery Programme had not yet been signed off when they started. The new Board ensured this matter reached its rightful conclusion expeditiously and lifted the programme suspension on 15 June 2020 so we could attend to business. I shall elaborate on this later.
Regarding the expansion of the funding provided for Productivity SA, I am optimistically hopeful that the matter will be resolved during the 2020/21 financial year, given the commitment by the Minister of Employment and Labour and the Director-General of the Department of Employment and Labour Mr. Thobile Lamati. In resolving this matter, the new Board has its work cut out and this includes ensuring Productivity SA sustains its 100% performance whilst taking Productivity SA to new heights, to lead a productivity driven agenda for South Africa’s sustained competitiveness and economic growth.
Whilst Productivity SA remains committed to delivering on its legislative mandate, which is to promote employment growth and productivity thereby contributing to South Africa’s socio-economic development and competitiveness, as outlined in section 31 of the Employment Services Act, No. 4 of 2014, the entity must consistently adapt to change. Its ability to adapt enables it to continually deliver on its mandate.
The global outbreak of the Covid-19 pandemic which necessitated a national state of disaster and a nation-wide lockdown in the latter part of the 2019/2020 Financial Year, hit South Africa at a point when most of the macro-economic and labour market issues which matter most, including our productivity and competitiveness levels were at an all-time low. Productivity, specifically in some formal and productive sectors of the economy was brought to a grinding halt, with distressed companies, mostly Small Medium and Micro Enterprises (SMMEs) closing shop, declaring bankruptcy, and some scaling down operations to stay afloat. This resulted in some firms being unable to pay full salaries and paying workers the bare minimum in line with the UIF Act threshold or the National Minimum Wage, therefore, adding to our poverty challenges.
Over the MTSF 2019 – 2024, the focus of Productivity SA’s strategic and operational intervention will be on vigorously unlocking South Africa’s productivity potential for sustained economic growth and competitiveness, thereby improving the competitiveness and sustainability of enterprises, specifically SMMEs, to preserve existing jobs and to create new decent jobs.
Productivity SA’s work during and post the Covid-19 pandemic will become more critical than ever, given the devastation the pandemic has left in its wake, with retrenchments at an all-time high, adding to the millions of South Africans already unemployed (unacceptably high at 30.1%, with even higher rates at above 45% in certain provinces) and some under-employed and facing extreme poverty.
The added consequence is that, this is reversing the policy and programmatic gains made since the introduction of the Workplace Challenge Programme (WPC) in 1998 which is administered by Productivity SA and funded by the Department of Trade, Industry and Competition (the dtic) and the Business Turnaround and Recovery Programme, administered by Productivity SA and funded by the Department of Employment and Labour‘s entity, the Unemployment and Insurance Fund (UIF). This further erodes gains made to address poverty in employment through sectoral determinations and the National Minimum Wage, inequality (including opportunity, income and wealth and through the EEA and the B-BBEEA).
It is worth reporting that during the 2019/20 Financial Year, the Business Turnaround and Recovery Programme remained suspended. The suspension was necessitated as you shall recall from our report last year, by the unavailability of funds since early 2017. It is lamentable that during all this time, Productivity SA was rendered unable to respond to the calls to provide turnaround strategies and plans to restructure and improve the productivity and operational efficiency of the companies facing economic distress to save jobs or minimise the retrenchment of employees. This naturally contributed to matters getting messier on the ground as there was a complete inability to respond to pleas for interventions in the economy for over two years.
The good news is that as reported earlier, on the 15th of June 2020, the suspension was lifted and the Department of Employment and Labour provided for same in terms of section 5 (d) of the UIF Amendment Act. The commitment of R104 million for the programme in the new Financial Year has already seen the first tranche of R23 million transferred to Productivity SA. This is a good and welcome start.
The allocation of funds for implementing turnaround strategies will go a long way to enabling Productivity SA to fulfil its mandate as outlined in section 32 (g) of the Act, and objectives of the Presidential Jobs Summit Framework Agreement to save jobs and create conditions conducive for job retention and creation. It will of course not be able to do this alone and will need the close collaboration of all other entities within the department and external agencies that are charged with building the economy to collaborate.
It has been a battle to get to this point and we thank our key stakeholders, including those who attended the previous AGMs and NEDLAC constituencies for their support. We also thank the Honourable Minister of Employment and Labour Mr. Thulas Nxesi for making the funding of Productivity SA a priority upon his appointment as Minister of Employment and Labour in 2019.
The department is also aware that due to the Covid-19 pandemic, the previously requested funds leading to the R104 million commitment will not even scratch the surface, and substantially more funds will be required for meaningful economic interventions. Far more than R104 million will do justice. All it does is get us on the runway. Quite frankly, I would urge Treasury and the Presidency to allocate a sizeable amount of the IMF $4.3 billion loan to Productivity SA programmes for any impact to be felt…even 1% of same would be huge!
While the allocated funds in no way address the Covid-19 related adverse consequences, the funds afford us an opportunity to begin with much needed assistance for business continuity and interventions that can make a difference. The department has given notification that there is work underway to address the additional funding due to the expanded mandate of Productivity SA we have been lobbying for.
The next progressional improvement will come when the Department, as promised finalises the development of a single source funding model in line with Section 12 of the Employment Services Act urgently to resolve Productivity SA’s funding challenges in time before the start of the 2021/22 financial year, as also referred to earlier. We urge that this should happen now, there is no time to waste.
Productivity SA will also require additional funding for its Competitiveness Improvement Services Programme, noting the low productivity growth and competitiveness of our economy. Our Labour Market Performance has over time been dismal, with the Gross Value Added by key labour absorbing sectors of the economy, such as Agriculture, Mining, Manufacturing and Construction having been sub-minimal and at times declining. Should the labour-intensive and productive sectors of the economy continue shedding jobs significantly, with Productivity SA unable to make interventions for reasons I have already shared above, we face a calamity beyond the Covid-19 crisis. I raise this alarm having observed that signs are already there, that the outbreak of the Covid-19 pandemic is worsening pre-existing conditions, with the challenges of poverty (including in employment), unemployment (including under-employment) and inequality reaching unprecedented levels and the highest by world standards. The UN World Food Programme Executive Director is quoted as having said the whole world is facing unprecedented hunger of unimaginable proportions, with a staggering number of over 265 million people projected to go hungry by end of 2020. South Africa unfortunately is not excluded from these numbers.
The above situation is compounded by our country’s lack of appreciation for the value of and accountability for productivity (which is defined as the efficiency and effectiveness with which labour, capital, materials, energy and other resources are combined and utilised in an environmentally and socially sustainable manner to produce quality goods and services for the satisfaction of human needs). The declining productivity growth and rising inequality are two of the biggest obstacles to improved economic performance (OECD report, 2016). These two main factors are behind slowing productivity gains and rising or persisting inequalities as well as the risk of a vicious cycle setting in, where individuals with fewer skills and poorer access to opportunities are confined to unproductive and often precarious jobs. This confirms South Africa’s dire competitiveness and economic growth challenges, which require a different approach to doing things.
The recent IMD Global Competitiveness Report in which South Africa now moved to position 59 (from 56) out of 63 countries is evidence of how dire the situation has become. Over the last 10 years, the ranking has declined from position 44. On the World Bank Ease of doing business index, we are number 84 out of 190 countries and a lot of commentators are very critical of how inaccessible our decision makers are, shrouded in high levels of red tape just to secure a meeting. I am advised that the State President would like to see us at number 50. My humble advice would be that the Competitiveness Index is far more important and if we must focus, we should rather do both simultaneously to reap more impactful benefits.
The outbreak of the Covid-19 pandemic coupled with the advancement in technology presents South Africa with an opportunity to place productivity at the centre of the country’s long-term competitiveness and economic activity and recovery. This is an opportunity to calibrate and attend to pre-existing economic structural flaws, an opportunity to seize the moment and build back better. The crisis is also creating an important opportunity for those in authority in government to lead by creating an enabling environment and partnering with leaders in business, labour and civic organisations to take decisive and urgent action to turn things around.
The global call for collaboration by the International Organisation of Employers (IOE) that I am one of the leaders of, to have enhanced and urgent working together between the private and public sectors must be heeded. We should collectively as government, business, labour and civil society collaborate in developing a response, and if not done urgently, there is a risk of more South Africans losing their jobs and many more millions facing starvation and joining the large numbers of the poor we already have in abundance.
While urgently reviewing and addressing deep structural problems (some of which I have referred to above), we should design and implement productivity-enhancing policies and frameworks as we look to create new jobs, absorb job losses from those sectors hardest hit, manage the necessary transition of those threatened with unemployment and the unemployed, to sectors that can absorb them, and restructure the urban and rural economies, towards prosperity and a more just and equal society that allows for broader access to opportunities and resources.
We also need to urgently focus on business continuity and recovery and ensure an enabling environment for business development and resilience. It is no time for timid thinking and staying with traditional approaches that have clearly failed, it is a time to change gears, think big, think bold and act.
The country should utilise the capability of Productivity SA as a labour market institution, to harness with urgency and diligence the productivity capability of South Africa to improve our competitiveness and sustainable growth to address the most persistent structural economic inequities that have existed for too long in post-Apartheid South Africa. This crisis presents an unrivalled opportunity to re-imagine and re-design our Labour Market system, finding innovative ways and initiatives to improve the competitiveness and sustainability of our enterprises, specifically small businesses, and safeguarding our citizens’ well-being. This would be the only way to re-calibrate our economy and re-invent ourselves, not only as a political miracle of the Mandela era, but also as an economic miracle, with resultant impact and the realisation of social justice. I reiterate that determined collaboration between the public and the private sectors is more important than ever now, while also ensuring actions to protect and promote productive employment and incomes.
Productivity SA’s programmes are geared towards supporting the country to achieve a productive high-income economy which is globally competitive, targeted at the priority economic sectors which have a potential for labour absorption. The interventions are structured to contribute to sustainable, inclusive growth and development, as well as growth with rising decent employment creation; wealth and income growth; sustainable enterprises; job preservation or minimising the retrenchment of workers; and promote workplace collaborative relations and dialogue on productivity and competitiveness issues.
We call upon the Department of Employment and Labour to urgently lead (as provided for in section 2.2 of the Employment Services Act) in coordinating the activities of public and private sector partners, whose activities impact on employment growth, to develop a non-ideological, pragmatic, implementable and action-oriented economic recovery and revitalisation plan, premised on unlocking South Africa’s productivity potential to improve its competitiveness and sustainable economic growth, targeting SMMEs as a catalyst for full and productivity employment and consequent decent work for all. These call for leadership, accompanied by radical and bold measures to review policies and institutional arrangements aimed at transforming and restructuring the economy and the labour market, as well as significant investment in productivity enhancing programmes, if we want to improve our prospects for improved competitiveness and future economic growth.
We therefore need to turn our attention and focus to mitigating, with urgency and diligence, the capability to enhance the competitiveness and sustainability of SMMEs to prevent further job losses and create new jobs, targeting the priority economic sectors which are identified in the Sector Master Plans. These should include finding new and innovative ways to: 1) Expand the capability of the current Public Employment Services System and Labour Activation Programmes, including Temporary Employer/Employee Relief Schemes (TERS) to buffer against the loss of jobs by reintegrating or re-absorbing / transitioning the retrenched workers into other economic sectors, 2) initiate new strategies, including the Turnaround strategies to restructure and improve the competitiveness and sustainability of industry sectors and companies facing economic distress to save jobs or minimise the retrenchment of workers, and transitioning of workers between jobs and industries or securing alternative employment for those affected by possible job losses, and 3) to support SMMEs to create new jobs.
To drive this agenda, we recommend that our interventions should focus on the following pillars: –
(i) An Integrated Training and Skills Development Eco-system that also encourages life-long learning, with active involvement of employers’ organisations in the governance of skills systems order to ensure that the supply of skills responds to labour market needs;
(ii) An Integrated Enterprise Development Ecosystem to improve the competitiveness and sustainability of enterprises, with a focus on SMMEs. Driving this, should be the simple appreciation that without enterprises, there is no employment, and without employment, there can never be any work, let alone decent work. Helping SMMEs to restructure and move up the productivity value chain through well-coordinated assistance programmes is critical. Experience to date is that there is limited policy cohesion and programme alignment, resulting in efforts to support enterprises (SMMEs in particular) being very fragmented, which often results in duplication and/or even competition amongst public sector entities for scarce resources to provide such assistance. One critical policy decision we recommend is that government should be the funder of first resort, and that funding disbursements should be linked to productivity outcomes.
The centrality of the private sector as a principal role player in the creation of employment as well as the role of sustainable enterprises as generators of employment and promoters of innovation and decent work is also crucial; which reaffirms the ILO Centenary Declaration for the Future of Work (2019). Therefore, supporting the role of the private sector as a principal source of economic growth and to ultimately take the lead in creating the bulk of the jobs and opportunities that our country and its people so desperately needs is crucial.
(iii) An Integrated Research and Innovation Eco-system to ensure the provision of productivity and competitiveness related value-added information and statistics to inform evidence-based planning as well as monitoring and evaluating the impact of our interventions; and
(iv) A national Productivity Movement to promote a stronger culture of productivity at all levels and build awareness of the importance of and a new mind-set about productivity in South Africa, which could pave the way for many more ‒ and more highly paid – jobs and ultimately a more inclusive society.
The centrality of Productivity SA in leading a productivity driven agenda is critical, therefore, the entity’s adequate resourcing is both urgent and critical as mentioned above. Its Competitiveness Improvement Programmes should promote a productivity and entrepreneurship culture and consciousness to promote decent work. At the centre of its programmes is the recognition that social dialogue contributes to the overall cohesion of societies and is crucial for a well-functioning and productive economy. We are confident that our programmes will contribute immensely to the enhanced industrial strategy and Master Plans targeting industries with high-growth potential, which plans are founded on partnerships between government, industry and labour.
As we enter the next phase of the NDP and of course we also note it is all systems go following the announcement of the Presidential Employment Stimulus. The Presidential Employment Stimulus is an ambitious plan to create and support over 800,000 jobs within the next six months. This is the first phase of a medium-term plan that will build on the lessons learned and capabilities created to innovate further – and to reach even greater scale.
For all implementing departments and partners, the employment stimulus involves “stretch targets” that require new ways of working and new forms of collaboration within and beyond the state. The immediate task is to implement programmes supported by the stimulus at an unprecedented speed and scale and Productivity SA needs to also be at the forefront of those efforts.
The Board and Productivity SA would like to take this opportunity to thank the Honourable Minister of Employment and Labour, Mr Thulas W Nxesi as well as the Deputy Minister, Ms Boitomelo Moloi for their support. Some of the key outcomes from the engagements with the Minister resulted in Productivity SA being included, for the first time, in the NEDLAC deliberations and participation in the Jobs Summit TERS Task Team monitoring the implementation of the Job Summit resolutions, particularly on job preservation.
We also thank the Director General, Mr Thobile Lamati for the continued support and relentless efforts to ensuring that Productivity SA is adequately funded. We believe that his commitment will come through during the 2020/21 financial year. We also commend him for ensuring the UIF remains a critical partner for us as this is also the only way it can continue to be sustainable. This working together will yield a lot for the country.
The dtic remains our valuable strategic partner in the implementation of the Workplace Challenge Programme, which is our flagship programme to improve the competitiveness and sustainability of enterprises, particularly in support of the SEZs and Industrial Parks. We thank you for the continued support.
Finally, I wish to the thank my colleagues on the board and the staff of Productivity SA for the good work done in 2019/20.
We invite you all to follow us on the various social media platforms @productivitysa on twitter as well as follow me on @Tzoro1 without hesitating to offer suggestions , comments and feedback that can assist us to build a better sustainable South Africa. We have also built a strong presence on LinkedIn.
Thank you.
Ke a leboga
Thank you
Dankie
Chairman of Productivity SA Board
Prof Mthunzi Mdwaba.