Medium Term Budget Policy Statement Employment and Economic

Medium Term Budget Policy Statement Employment and Economic Development 31 October 2006 1

Introduction q South Africa has a two-tiered economy; q one rivalling other developed countries q the other with only the most basic infrastructure q 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 2

The Millennium Development Goals q Eradication of extreme poverty and hunger q Achieving universal primary education q Promote gender equality and empower woman q Reduce child mortality q Improve maternal health q Combat HIV and AIDS, malaria and other diseases q Ensure environmental stability q Develop a global partnership for development 3

Asgi-SA and JIPSA. q The primary aim of Asgi-SA is to halve unemployment and poverty by 2014. q To have the desired impact on poverty and unemployment, growth must be boosted to at least 6%. q 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. 4

Jipsa interventions • Mentoring programmes • Overseas placement to fast track development • Special training programmes • Expatriate repatriation retire re-employment • Recruitment of skilled immigrants 5

Asgi-Sa: Discernable Constraints and response initiatives in relation to the DPSA Of the six constraints to boosting economic growth to 6% those requiring specific DPSA attention are: q. Deficiencies in state organisation capacity and leadership and q. Shortage of skilled labour The two categories of intervention are thus: Beefing up public administration and Skills development 6

Sectoral Forecast Model Expected real average annual growth rates for major sectors of the South African economy – 2005 to 2014 7

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 Do. L in August 2006 8

Overview of the Public Personnel Expenditure Table 2: Employee Numbers – by sector 2001 2002 2003 2004 2005 Actual Growth 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, 293 170, 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) 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) 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) 2, 941 2, 892 1, 854 1, 806 1, 793 (1, 148) 11, 308 11, 895 13, 950 15, 252 15, 789 4, 481 1, 060, 192 1, 070, 084 1, 065, 747 1, 087, 355 1, 109, 495 49, 303 Sector Name Criminal Justice Education Health Other Welfare Grand Total 9

Overview of the P P Expenditure Table 5: Major Occupational Groupings in the Public Service – 2001 to 2005 Occupational Groupings December 2001 Total employ ment %share of total Public Service employment December 2005 % change 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 10

HR Management Practice Trends Vacancy Rates 11

HR Management Practice Trends Overtime 12

Quantitative Analysis relating to HR Management Trends RECOMMENDATIONS 13

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 14

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 15

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 16

Remuneration Framework in the Public Service Dual Career Pathing – Remuneration Structures Public Service 16 Salary 15 Scales 14 13 12 11 10 9 8 7 6 5 4 3 2 1 Physical, Mathematical and Engineering Sciences Health Professionals Information Technology 12 12 11 10 9 8 7 17

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. 18

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. 19

International Initiatives: Co-operation with India q Exchange of study tours q Exchange of expertise, capacity building comparative studies through joint research q Exchange of information q Reciprocal secondment of officials to each others countries. q Mentorship and exchange programmes: Math and Science, IT knowledge management. q HRD and training 20

THANK YOU 21