Supported Employment Enterprises (Trading as Service Products and previously referred to as Sheltered Employment Factories ) Presentation to the PORTFOLIO COMMITTEE ON LABOUR 25 MAY 2016 1

Table of contents Background Overview SEE organizational Structure SEE Turn around strategy SEE legal status Transition to a full government component entity Draft Annual Financial Statements (2015/16) Budget overview (2016/17)

1. Background Overview The Supported Employment Enterprises (Sheltered Employment Factories) were established in 1943 for the sole purpose of creating employment for ex-service man. Until 1999 the SEF had Preferential Procurement Status that compelled government departments to buy office and school furniture as well as hospital linen and uniforms from the entity The factories provided employment for South Africans with special disabilities, and in return the state ensured their continued employment by continuing to procure from the factories.

Background Overview This reduced the burden on the state and increased the number of people that participated in the economy. The department continues to subsidize salaries of Deaf and Blind workers in private factories similar to SEF and also subsidize National Councils to assist in placing People with Disability in formal employment. When the Preferential Procurement status was revoked ; The number of people employed in the SEE declined from 3000 during 1991 to currently 904. The factories are now supported by 125 staff members The skills levels of the employees stagnated The demographics in the factories became imbalanced

2. SEE Organizational structure Chief Executive Officer PA Chief Financial Officer Deputy Director (SCM) SCM Clerks X 9 Deputy Director (Finance Management) Finance Clerks X 14 Operations Director Production Manager (Wood) Factory Managers & Technical Instructors Woodwork Factories (740 workers) Production Manager (Textiles) Textiles Factory Workers (230 workers) Business Development Director (Vacant) Deputy Directors X3 (Vacant) Client Services Clerks Deputy Director Human Resources Assistant Director HRM 12 X Personnel Officers

3. SEF Turn Around Strategy A turnaround strategy was developed and approved for implementation and aims to: Stabilize factories through growth in sales. Increase the numbers of people with disabilities employed in the SEF over time to beyond 3000 by the end of 2019. Become a repository to the public and private sector organizations that wants to meet their Employment Equity targets in terms of disability. Partner with SMMEs and Government organization to achieve an inclusive economy with no boundaries for people with disabilities.

4. SEE Legal Status Chapter 6 of the Employment Services Act 4 of 2014 prescribes that the SEE is established in terms of the Public Service Act as a section 7A National Government Component. The functions of SEE are to: Facilitate supported employment; Provide work opportunities for persons with disabilities; develop and implement programmes that promote the employability of persons with disabilities, including persons with permanent disablement as defined in the Compensation for Occupational Injuries and Diseases Act, 1993 (Act No. 130 of 1993), in the light of their evolving needs in a changing economy; and Perform any other functions may be prescribed by the Minister.

SEE Legal Status Implication The Employment Services Act No. 4 of 2014 chapter 6, section 42(1) confers a legal form to the SEF by making provision for the Establishment of Supported Employment Enterprises (SEE) as a national government component contemplated in section 7A of the Public Service Act, 1994 (Proclamation No. 103 of 1994), to promote work and employment opportunities for persons with disabilities. For the legal status to be effected the President must proclaim the SEE as a national government component.

Implications of the ES Act Amongst the implications of this legislation are the following; The SEF will be expected to operate optimally and generate adequate sales revenue to sustain itself. Policies will have to be reviewed to reflect the requirements of a National Government Component. The Head of the National Government Component is the accounting officer.

Implications of the ES Act (continued) The SEE would have to have its own governance and assurance structures such as the Audit and Risk Committees. An advisory committee would have to be established to oversee the strategic direction of the entity and advise the Minister of Labour. Government procurement from NGC is will be easier as it will be regarded as government to government business.

5. Transition to a full government component entity SEE will still require time to prepare its business processes and governance structures to be able to become and operate as a National Government Component. A considerable amount of support from the Department of Labour is still required for the coming number of years to help with the transition into an NGC. The Department of Labour would still be required for technical support, governance and strategic leadership of the entity. Consultations with Public Works are underway to explore possibility of opening two more factories in Mpumalanga and Limpopo. The entity continues to employ additional PWD’s to assist in the assembly and maintenance of school furniture closer to delivery sites.

Projects to Reposition the SEE A number of projects are underway to reposition the SEE in the market and to ensure that the entity generates adequate revenue to obtain self-sustainability. A study trip was undertaken to Algeria for the purposes of building collaborations and drawing lessons on the manufacturing of prosthesis. Some of the current SEF factories have been identified for re-commissioning to be used as manufacturing plants for prosthesis and assistive devices. There exist huge potential in the market for prosthesis and the SEE will play a huge role in ensuring that affordable quality prosthetics and assistive devices are manufactured locally for persons with disabilities. Algeria has provided a case study that would assist the SEE to map out the requirements of converting some spaces within the existing factories into manufacturing plants for these products.

Projects to Reposition the SEE (continued) Other projects include; A project is being finalized that will include National Treasury and DPSA to conclude the administrative process for the entity to become a national government component Securing long-term contracts with provincial and national government with regards to the manufacturing and supply of school furniture and Hospital linen. Some of the current signed contracts are with the National Department of Basic Education, The Western Cape Department of Health, Coega Development Agency and the Eastern Cape Department of Education. Product development initiatives are underway to ensure that factories provide new products that are in demand. New products are being produced made from recycled material Due to decline in wood supply, the entity is exploring the possibilities of manufacturing furniture that uses less natural wood

6. Draft 2015/16 Annual Financial Statements SHELTERED EMPLOYMENT FACTORIES STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 31 MARCH 2016   Note 31-Mar-16 Revenue from exchange transactions Sale of goods and services 1 52 404 193 Cost of sales ( 36 318 515) Gross profit 16 085 678 Other Revenue from exchange transactions Interest earned - external investments 2.1 1 573 538 Interest earned - outstanding receivables 2.2 443 746 Other income 2.3 818 782 Revenue from non-exchange transactions Transfers and sponsorships 3 135 050 000 Net Impairments 4 3 580 633 Operating expenses 5 ( 117 138 330) Operating surplus 40 414 047 Finance costs 6 ( 175 611) Surplus for the year 40 238 436 Total Comprehensive Income / (Loss)

Draft 2015/16 Annual Financial Statements (Continued) SHELTERED EMPLOYMENT FACTORIES STATEMENT OF FINANCIAL POSITION AT 31 MARCH 2016   Note 31-Mar-16 ASSETS Non-current assets 5 760 193 Property, plant and equipment 7 Current assets 213 134 174 Inventories 8 3 314 854 Trade and other receivables 9 19 286 578 Cash and cash equivalents 10 190 532 742 Total Assets 218 894 367 EQUITY AND LIABILITIES Equity 88 672 259 Retained earnings Total NET ASSETS Liabilities Non-current liabilities 63 362 Non-current finance lease liability 11 Current liabilities 130 158 747 Trade and other payables 12 128 533 209 Deferred income 13 1 239 622 Current portion of finance lease liability 385 916 Total Liabilities 130 222 109 Total Equity and Liabilities

7.Budget overview of SEE (2016/17) The budgeted Sales for the year amounts to R72 M Cost of Sales are at R42 M (with a gross profit of R29 M) The GP percentile is 41% based on the above Sales and Cost of Sales The National Treasury subsidy amounts to R144 M Based on employees, both Factory and Administration, the budget Cost of Employees is R117 M The Operating Expenditure for the year is R32 M Capital Expenditure is budgeted at R16M The budgeted Employee headcount numbers are at 1 099 and includes 98 vacant posts

THANK YOU 14