1. A Critical Appraisal of the EPWP Component of the Department of Public Works Annual Report 2004/5 Parliamentary Portfolio Committee on Public Works 2 November 2005 Anna McCord SALDRU School of Economics, UCT

2. Overview of Presentation Overview of unemployment Overview of EPWP Review of achievements Review of EPWP objectives against plans and performance Conclusions Issues for consideration arising from Annual Report

3. The Reality of the Labour Market for the low/un-skilled 1 With current growth path, even at 6% GDP growth for 10 years, unemployment among low and unskilled is likely to remain above 30% (World Bank 2001, UNDP 2005) Growth will not provide the solution to unemployment in the medium term

4. The Reality of the Labour Market for the low/un-skilled 2 Unemployment in South Africa is structural and not the result of a temporary shock (eg the Asian crisis in Indonesia) Low/unskilled unemployment has been rising rapidly since the 1970s Therefore large scale employment creation (and/or alternative social assistance) is required in the medium to long term to address poverty

5. EPWP Objectives (Annual Report) To create 1 million temporary work opportunities, coupled with training, over the first 5 years of the programme, namely 2004-2009 [200,000 short term temp jobs/year] To facilitate training of all EPWP participants The provision of public goods and services that Government needs, at the quality level demanded by Government Providing EPWP participants with the potential to earn future income by providing work experience, training and information related to work opportunities, further education and training and SMME development

6. Nature of the EPWP ‘Attempt to use public sector expenditure on goods and services to create additional work opportunities coupled with training for the unemployed’ ‘Public sector body attempts to facilitate exit strategies to build ladders between the second economy and the first economy’ (Overview of the EPWP, EPWP 2005)

7. How Might the EPWP Offer a Ladder ? Internationally PWPs provide a ‘ladder’ through; 1.Wages 2.Infrastructure 3.Training/experience (leading to improved labour market performance) In South Africa; 1.Wage: Negligible impact on poverty likely due to short term nature of transfer (except social sector) 2.Infrastructure: Being created anyway, only the means of production is changing (shift from capital to labour based) 3.Training/experience: Most important

8. The Ladder and the EPWP The desired outcome is not the provision of temporary work opportunities themselves, these are a means to an end... The desired outcome is improved labour market performance by participants

9. EPWP Sectors Infrastructure (labour intensification of construction industry) Environment (eg Working for Water providing services using labour based approaches) Social (HCBC and ECD, government funding for increased employment) Economic (creating entrepreneurs)

10. Share of EPWP Employment by Sector (planned) EPWP web site

11. Achievements (Annual Report) IndicatorProgress Number of EPWP projects being implemented or completed 3,483 Expenditure to date on EPWP projectsR3.2bn Number of gross work opps created223,410 gross Number of net work opps created174,845 net Person-years of employment created71,087 Average duration of work opportunity4.4 months

12. Budget Lines Supporting EPWP? Number of EPWP projects being implemented or completed: 3,483 Expenditure to date on EPWP projects: R3.2bn Which expenditure lines are currently funding the EPWP? What is the source of R3.2bn if MIG finance is not included in the analysis? (p29)

13. Number of EPWP Work Opportunities Created? Target: 100,000 work opportunities with associated training Actual: 174,845work opportunities (p29) Successful implementation What are the criteria for calling a work opportunity an ‘EPWP’ job? Important to ensure real additional jobs being created, not just ‘renaming’/ ‘repackaging’ existing projects as EPWP This could mask limited value added under the EPWP

14. Cost of Workdays created? Average project cost R919,000 Average cost per work opp R14,000 (gross) Average duration of work 4.4 months/95 days Cost per day of work created R150 Estimated wage cost R45 (30% of total spend) What are the management, admin and material costs, and % spent on labour wages of EPWP projects? How does this compare to non EPWP projects? Important to indicate if the EPWP is really promoting labour intensity

15. Expenditure Queries ‘EPWP’ spending is required to conform with ‘labour based’ conditions of the Division of Revenue Act (DoRA) – does it? (MIG and PIG) When will MIG data be available? (DPLG) Is PIG data available? What is expenditure in each sector on EPWP, and what is the cost per job created? Essential to make assessment of efficiency of EPWP

16. Review of EPWP Objectives

17. Objective 1 To create 1 million temporary work opportunities, coupled with training, over the first 5 years of the programme, namely 2004-2009

18. Actual Employment Achievements Reported employment 174,845 (p29) Goal achieved for 2004/5 (100,000 jobs) But some inconsistency in figures; 174,800+ in infrastructure sector (p30) 58,790 in environment sector (p31) Total: 233,590

19. Scale of Objective 1 Size of objective is modest Particularly if compared to levels of unemployment 4.3 million unemployed (Stats SA 2005) 200,000 EPWP employees (4%)

20. Unemployment and EPWP Employment

21. Employment Impact The potential job creation impact of the EPWP is extremely limited in terms of the unemployment problem NB: 3.6 – 7.7 million additional jobs required to meet the objective of halving unemployment in South Africa by 2015, compared to the 200,000 temporary jobs offered at any one time, under the EPWP

22. Objective 2 To facilitate training of all EPWP participants, through; Learnerships, ‘life-skills’, and ‘on the job training NB: This objective represents the ladder – means to improve future employment prospects

23. EPWP Learnership Targets (EPWP web site) SectorTotal temporary work opportunities Total learnerships Infrastructure900,0003,000 Environment200,000400 Social - HCBC122,24017,400 Social - ECCD66,30019,800 Economic12,0003,000 Total1,300,54043,600

24. EPWP Employment and Learnerships – A Perspective

25. Limited Number of Learnerships Learnerships are only accessible for a small minority (3%) of EPWP participants. For the majority of the workers, the training options are far more limited 2 days training per 20 days worked (not learnerships)

26. Content of Training for 97% Labour intensive construction industry employment opportunities last only 4 to 6 months Gives entitlement of only 8 to 12 days of paid training Not sufficient to train unskilled labourers to become skilled/semi-skilled eg artisans Therefore the DoL is creating a training course for these workers that will consist of: General Life skills, awareness of HIV and AIDS, and labour markets and the world of work.’ (Infrastructure Sector Plan for the EPWP)

27. EPWP and Training ‘ …job creation without skills development, upgrading and training,... will have no long-term economic impact on the lives of the unemployed…’ (EPWP 2004, citing the GDS) Therefore the training component for the 97% of PWP workers is likely to be of limited value in terms of labour market performance as there is no significant skills development, upgrading or training, only lifeskills

28. Problems with Training Severe shortages of both SETA accredited trainers for learnerships and accredited lifeskills trainers Challenge assertion that “sufficient training capacity exists to provide all the training required in the EPWP” p31 Need for evaluation of content and quality of lifeskills training How do workers perceive value of lifeskills training? Impact of lifeskills training?

29. Problems with Work Experience Construction sector accounts for 71% of planned EPWP employment There is no indication of unmet demand in the construction sector for low/unskilled labour Approx 190,000 unemployed workers with construction experience in 2005 (Stats SA 2005) Risk of substitution: those who participated in EPWP replace others who would have been employed Limited net employment benefit EPWP work experience for majority of workers (construction sector) does not match skills shortages for artisans (currently being imported) Lack of demand for low/unskilled labour

30. Objective 2 - Query Can the EPWP demonstrate that all workers are; Receiving training? That the training is of use in terms of subsequent labour market performance in the formal or informal sectors?

31. Objective 3 The provision of public goods and services that Government needs, at the quality level demanded by Government Using labour based techniques

32. Objective 3 - Queries Is the EPWP leading to the provision of public goods and services using labour based approaches as intended? What % of MIG and PIG projects and expenditure have shifted to labour based methods? What % of DoPW own expenditure has shifted to labour based methods? Is the CIDP promoting labour based approaches? Are quality standards being met? What are the cost implications - is there a cost premium?

33. Objective 4 Providing EPWP participants with the potential to earn future income by providing work experience, training and information related to work opportunities, further education and training and SMME development [NB Also part of ladder]

34. Objective 4 - Queries Are workers receiving; work experience training information related to work opportunities, further education and training SMME development?

35. Objective 4 - Queries Is EPWP employment likely to have an impact on earning capacity and future employment performance? Unlikely in construction sector given excess supply of labour Is employment performance being monitored? This is central to achieving EPWP objectives

36. Comment on Indicators in Annual Report Do not measure performance against objectives Input indicators: money spent and temporary work opportunities created Not impact/outcome indicators Evidence of performance in terms of expectations, eg contribution to reducing poverty and unemployment Not evidence to justify claim in Report: ‘Government’s offensive on poverty and unemployment took a major leap when the Expanded Public Works Programme (EPWP) was officially launched...’ (p8)

37. Sector Performance Summary Key initiative progress reports for the sectors are based primarily on input & process indicators ie what plans are in place Not performance or outcome indicators ie whether plans/guidelines have been implemented, and the result of implementation on the ground Need for quantitative and budget based data and indicators to assess performance against key initiatives

38. Conclusion Annual report does not address questions of impact and efficiency Focus on inputs rather than impacts and outcomes Lack of management information In part understandable as programme is new - M&E systems under development But problematic in terms of reviewing performance of this critical programme Need to know if the programme is creating significant additional temporary employment opportunities AND the impact of those opportunities

39. Issues for Consideration by Committee Not clear that EPWP can deliver on anticipated labour market outcomes given programme scale, training limitations, and lack of demand for low/unskilled labour EPWP may attempt to cover too many areas some of which may be outside DoPW’s core competence, rather than focusing on core areas offering maximum impact ie labour intensive infrastructure provision and increased social sector employment Exaggerated claims about EPWP performance may block appropriate government response to unemployment and social protection Critical importance of data to justify claims and expectations

40. Risks for Consideration by Committee Using scarce management resources to implement programmes of uncertain impact Using scarce management resources on small scale low impact projects Pressure to expand the EPWP before initial lessons on impact are assessed Renaming of existing programmes and activities in order to meet targets, without significant additional benefits to economy or employment

41. Thank you