Stats SA Responses to the Report of the Portfolio Committee on Finance on the 2004-2005 Annual Report of the National Treasury

The response by Stats SA to issues raised by the Portfolio Committee on Finance

1. Introduction

Statistics South Africa presented its Annual Report to the Portfolio Committee on Finance on 11 October 2005, for the financial year 2004/2005. After the presentation the Committee recorded that it "was impressed by the format of the annual report which was a significant improvement on the previous year and which achieved greater clarity in the presentation of substantive issues." It must be noted that for the past three years Stats SA had a qualified audit. This was the first report in three years that was not qualified.

The Committee resolved that before 18 January 2006 Stats SA should provide a report with detailed steps that will be taken to:

Improve the general management of the department;

Improve the financial management of the department;

Put in place proper risk management within the department; and

Improve the planning system of the department.

It is important to note that Stats SA is a special case among statistical offices in any part of the world. It is an office in transition and has a comparatively short history as the break away from apartheid marked a major discontinuity in South Africa's social and economic fabric. Coupled with this issue are the enormous skills shortages witnessed in particular in the area of official statistics compared to what may prevail in financial and accounting skills.

In 2003, Finance Minister Trevor Manuel described the training challenge as follows:

(There are too few South Africans who love statistics or have a passion for it ... This too is embedded in South Africa's apartheid history. On 17 September 1953, the Minister of Native Affairs, HF Verwoerd, said in Parliament 'What is the use of teaching the Bantu child mathematics when it cannot use it in practice?' Thus Bantu Education was introduced in 1954, consciously deemphasising the teaching of Mathematics and Science. A generation of maths students was destroyed and thereafter, successive generations of maths teachers. To this day, the teaching of maths and science ... is too frequently mediocre. Ten years into democracy, this residue of apartheid decision lives on. It must be reversed - not merely at universities or in the work place, but at primary and pre-schools.

It is with regard to appreciating these fundamental shortcomings to which there may be no quick fixes that Stats SA for its management and future stability has deliberately chosen to seek steady support from a well-known, capable and respected statistical institution. In time this support has begun to bear fruit and will be buttressed with a deliberate internship programme that holds the hope for an intellectually well-equipped Stats SA in the next five to ten years. There are three main dimensions to this:

Proactivity: the ability to detect clouds on the horizon and advise on measures to be taken to avoid accidents, losses of credibility, doubts about competence and so on. Only an outside look can help focus attention on weaknesses, fragile methods and systems, lax supervision, and poor quality of output.

Replacement: Stats SA's young professionals have a desperate need to acquire training and managerial experience and confidence. They do not lack the motivation or the intelligence but they have no free time if they are expected to simultaneously carry on with their regular duties.

Seal of approval: young institutions find it hard to increase credibility at the same time as they broaden their scope and improve the quality of their output. This second imperative inevitably leads to mistakes, yet the first demands an error-free environment. A respected and independent institutional process capable of reassuring users about quality, integrity and professional competence facilitates management of the tension between broadening of scope while increasing credibility.

Below is an outline of steps that the Statistician-General has undertaken in responding to the resolutions of the Committee on the four areas raised above.

2. General management of Stats SA

Stats SA has not been running on a full management complement for a considerable period of time. Of the five DDG positions that are approved in the structure, only two are in office. One of these two DDGs is due for retirement at the end of January 2006. This implies that Stats SA would operate with one DOG responsible for Statistical Support and Informatics by then. Stats SA outlines below a manner in which it will address issues of management.

It is as regard the above that the organisation in the last two years has engaged reputable experts

Population Statistics: Having terminated the services of DDG Population Statistics on 10 November 2005, this post was advertised in the Sunday papers of 13 November 2005. Arrangements for interviews are being made with the Minister's office for early January 2006. The profiles of candidates that have applied gives the Statistician-General the confidence that Cabinet at the recommendation of the Minister will be able to get at least a choice of level headed candidates who would fit in the existing culture of Stats SA without difficulty. The Statistician-General has prepared a shortlist of four candidates that should be considered by the Minister.

By February 2006 a DDG for Population Statistics will have been appointed.

Economic Statistics: The post of DDG Economic Statistics was advertised on 23 October 2005. From the list of applicants, the organisation is yet again unlikely to get a candidate for appointment. The Statistician-General approached some local institutions with the view of soliciting a secondment of a suitable candidate to the organisation. This attempt has not yielded a result superior to an alternative of an internal programme of grooming prospective leadership material for economics statistics.

Over the last three years, the organisation deployed a team of three experts who assisted in shaping up and implementing the economic statistics strategy. With their assistance, three people have been identified out of which in the next three years, one could be anointed to head economics statistics. In the meantime the contract of the three experts has been extended for a further three years to provided assistance in the implementation of a new labour force programme, the weighting of the CPI by the beginning of 2008, further enhancements of the business register and providing overall support to the leadership of the organisation.

In three years time, Stats SA will have chosen from amongst three home-grown candidates, a DDG for economics statistics.

Quality and Integration: The post of DOG Quality and Integration was advertised on 23 October 2005. The applicants hold promise for an appointment and arrangement for interviewing the short listed candidates are being made with the Minister's office. Stats SA now has appointed three senior methodologists and five junior ones. Through targeted recruitment and head hunting the plan of getting 10 more methodologists by end of 2006 look feasible.

By February 2006, a DDG for Quality and Integration will have been appointed.

Corporate Services: The services of the DOG for Corporate Services were terminated on 06 December 2005. The post has been advertised in the Sunday newspapers of 12 December 2005 and closes on 23 December and a shortlist of candidates will be prepared for consideration by the Minister by close of business on 24 December.

By February 2006, a DDG for Corporate Services will have been appointed.

Chief Financial Officer: The post of the CFO was advertised in July 2005 and no suitable candidates were found. The Statistician-General resorted to a headhunting process and interviews for a shortlist of three candidates will be held on the 15 of December. By January 2006, a Chief Financial Officer will have been appointed.

Internal Audit: Stats SA has strengthened the Internal Audit Unit by hiring an extra human resource at a managerial level.

Statistics Council and Audit Committee: Stats SA enjoys a healthy and good working relationship with the Statistics Council and the Audit Committee. The Chairpersons of both structures are involved with Stats SA in addressing management and capacity problems that face Stats SA, and the Minister is part of this process.

3. Financial management

Stats SA has established two teams to manage the audit process and to work on preparations of the annual financial statements (AFS). The audit team is currently working with budget managers to rectify and establish processes and procedures to address the areas where the Auditor-General raised emphasis of matter in his report for the 2004/05 financial-year. The focus is to address these matters in the remaining three months of this financial year.

The team on the preparation of the AFS is currently obtaining all the necessary information required for completing the financial statements. A dry run will be conducted in January 2006 during which time Stats SA will acquire the services of an independent consultant to audit the statements and to suggest improvements. An additional resource at a managerial level has been appointed to improve budgeting and budgetary control. The devolution of financial management to budget managers and provinces has been concluded and an extension to the fifty four regional offices is being planned for rollout firstly with the pilot for the community survey in 2006 and full implementation by the end of 2006.

The travel account has been identified as a high-risk. We are currently looking at sourcing an in-house agency as well as trying to negotiate with current suppliers to provide us with accurate monthly statements providing more details reporting on their services. These measures should improve the turnaround time for payments to the travel agencies. Stats SA is also establishing a reconciliation section that will perform daily, weekly and monthly reconciliations with respect to creditor payments. Stats SA will also engage the Department of Transport to improve the billing system for the hired vehicles. Currently we have not received any invoices form Department of Transport since September 2005. This has the potential of affecting the accuracy of our financial reporting.

4. Risk Management

Stats SA has aligned its risk management approach to the risk management framework of government as well as the international best practice enterprise risk management framework of Committee of Sponsoring Organisations of the Treadway Commission (COSO). This risk management process that will be applied across the organisation both on strategic and operational level includes objective setting, event identification, risk assessment, risk response, control activities, information and communication, and monitoring.

Stats SA will establish a dedicated unit to coordinate and drive risk management in the organisation. The unit will consist of a manager and five professionals (one for each cluster) who will be reporting to the Executive Manager Strategic Planning and the risk management steering committee. The risk manager will have responsibility for monitoring progress and for assisting other managers in reporting relevant risk information up, down, and across the entity. Line managers through performance agreements assume primary responsibility and have accountability for managing risk within their respective areas.

5. Planning

Stats SA employs an integrative planning process which links the Estimates of National Expenditure (ENE), strategic planning, business planning, and operational and project planning. As part of the strategic planning cycle, the senior management team of Stats SA held a strategic planning session during November 2005. The purpose of the meeting was to identify the information and quality gaps in our economic and social statistics and to define how to respond to these over the medium-term.

5.1. Economic statistics strategy

The 2006 economic statistics strategy will focus in the medium term on improving information provided on economic growth, economic stability and job creation.

Economic growth: Increased emphasis to grow the economy has been placed on capital formation by both the public and private sectors and will be boosted by several major construction projects and industrial investments over the period ahead. Government investment spending on key transport networks - road, rail and ports infrastructure - will increase markedly in 2006 and beyond. Stepped up investment in the residential and local built environment - housing, community services, water and electricity - has also been prioritised. These priorities of government have informed the economic statistics strategy to measure economic growth. The Gross Domestic Product (GDP) is the key economic indicator that measures economic growth. In order to ensure that the GDP accurately reflects South Africa's economic growth, Stats SA has identified that increased emphasis should be placed on understanding and measuring the tourism sector, the services sector, construction and transport sectors. Over the medium term Stats

SA will re-conceptualise and plan the accurate measurement and reflection of these sectors and industries that feed into the calculation of the GDP.

Economic stability: The Consumer Price Index (CPI) and Producer Price Index (PPI) are the key economic indicators informing economic stability. Stats SA has introduced new collection methodologies for both the CPI and the Income and Expenditure Survey, which forms the basket of goods and services of the CPI. These two projects will remain key priorities on which Stats SA focus its effort and allocate resources to. Over the medium term Stats SA will also focus on reengineering the PPI.

Job creation: We need to understand far better the dynamics of South Africa's labour market. Stats SA has received funding over the medium term to reengineering the labour force survey which measures unemployment in South Africa. This project is still in the conceptualization and planning phase and will be rolled out over the medium term. The project will also be looking at the matter of public concern regarding definitions of employment and unemployment in South Africa.

5.2. Social statistics strategy

South Africa's growth strategy aims to reinforce modernisation and deepen the competitiveness of the economy, while also broadening participation and addressing structural constraints that inhibit the development of small businesses and cohesive communities. It is a strategy for both accelerated and shared growth, recognising that economic prosperity must be built on a broad-based foundation of social solidarity.

The 2006 social statistics strategy aims to address these social concerns by focusing in the medium term on providing information on basic services, poverty and the second economy.

Basic services: From a period where there was no inclusive census, the community survey comes after the successful execution of censuses in 1996 and 2001. The community survey is one way in which we aim to pace ourselves relative to our capacity and future growth. It provides the kind of information that is needed within the context of conducting a census every ten years rather than in five-yearly cycles. A key aim of the community survey is to measure the outcome of access to basic services on municipality level. The community survey remains a key priority for Stats SA over the medium term and Stats SA will monitor and report on the progress of this high profile project.

Poverty: Promoting opportunities for participation of marginalised communities in economic activity, and improving the quality of livelihoods of the poor is a key priority of government. Stats SA has no dedicated survey on measuring poverty in South Africa. Stats SA has used different data sources in the past to produce poverty reports and maps. We have now prioritised providing poverty information in response to user needs. Strategic conceptualisation and planning is required to develop measurement tools and consult relevant stakeholders. Stats SA plans to initiate a poverty survey over the medium term.

Second economy: A better understanding of the second economy is required to inform social debate. The second economy is characterised by high levels of unemployment, poverty, limited access to essential services and limited opportunities for economic participation. Stats SA has introduced a survey of employers and the self-employed (SESE) as a regular series to address the need for information on the informal sector. Further research, conceptualisation and planning with key stakeholders are required to provide adequate information on the second economy. This will become a priority for Stats SA over the medium term.

5.3. Frames

Both the economic and social statistics strategy is dependent on a complete and accurate coverage of the business and geographic frame. Stats SA has allocate adequate resources to both the frames to ensure that this strategic goal is achieved. Complete and accurate frames will assist Stats SA in compiling an economic map of business activity in South Africa in response to the Programme of Action.

6. Stats SA Internship Programme

An initiative to build sustainable statistical capacity for Statistics South Africa

Purpose of the programme

The Internship Programme is aimed at addressing the lack of skills in the organisation, especially in the statistical core areas. The purpose is to identify suitable university graduates who are then recruited into the Programme. These interns are given intensive training for a period of 12 months. During the training the interns are assessed regularly on a number of tasks with a view to ascertaining their suitability for permanent employment at Stats SA. At the end of the year successful candidates are then offered permanent employment in areas of their respective choices within Stats SA. The Internship Programme is currently being co-ordinated from the Methodology and Standards Division. The office of the Statistician-General as well as the Human Capital Development is providing additional support.

The 2005 Pilot

In January 2005 Stats SA embarked on internship programme on a pilot basis. 15 graduates from different South African universities were recruited into the programme. During the year two left the Programme: one intern went to the private sector as a trainee while the second one took up permanent employment with a Provincial Government Department. The remaining interns have been finally assessed and are being absorbed on a permanent basis. The 13 interns are being deployed as follows:

4 for LFS re-engineering project in Social Statistics

3 for CPI Development Project

1 for Vital Statistics

1 for National Accounts

4 will remain in Methodology and Standards

The 2006 Cohort

The experience of the past 12 months has been very encouraging, Stats SA the new round of recruitment at the beginning of December 2005. 4 000 applications were received, of which 172 met the formal criteria. A competency test was run in November 2005. 65 candidates who passed the test are being currently interviewed and the successful candidates will be informed of the outcome on 13 December 2005. Although there is a desire to take 60 interns for the coming year, the internal capacity constraints to support the programme are such that this year's intake will be capped at 40 interns. Those successful candidates that accept the offer will start as interns on 9 January 2006.

The Underlying Rationale to the Internship Programme

What is a measure of success?

The programme would be considered to have achieved its aim if 90% of the interns have successfully completed the programme and are found to be eligible for permanent employment and at least 70% of the interns have been recruited permanently into the organisation.

Who is eligible for permanent employment?

Candidates who have shown potential and initiative during the programme, who have favourable quarterly reports and have met all other requirements as determined by the project sponsor, will be eligible for permanent employment.

What the interns do at Stats SA?

The intern is first and foremost, still a student. This student should get as much exposure to the different areas of the organisation as is possible during the 12 months. The idea of assigning an intern to a particular work area is to give this intern an opportunity to learn everything about the division and its relationship to other work areas. While it is important to experience some of the work

processes first-hand, it is not the intention of this programme to turn the intern into an expert data capturer, for example. Some processes may have to be learned through the reading of documents or self-discovery under the supervision of the coach.

The recommended approach

It is recommended that each intern be given a project to work on that would involve a certain amount of self-study, interaction with the different work areas in the division, practical experience on the work processes, writing skills, analytical skills and presentation /communication skills. At the end of the quarter the intern must demonstrate an understanding of the division and the processes that take place within that division, the linkages with other divisions I processes and the contribution of the division to Stats SA's outputs and outcomes as stated on the value chain. The assessment of the intern should be along these lines as well.


The interns will be rotated each quarter so that exposure to at least 4 work areas will be achieved. The thinking behind this approach is that the interns are given an opportunity to gain a holistic view of the workings of the organisation that can only be of benefit when finally placed in one division after the programme has ended.

Implications of the Internship Programme

Should the current Internship Programme prove to be a success, then Stats SA will consider it as the norm for filling positions in the lower grades of professionals in the entire organisation.

Further development of interns

The development programme does not end with permanent employment following the initial 12 months of the Internship Programme. A detailed career path programme is being currently developed and will be applicable to the 2005 cohort. This could involve short-term sojourns at other statistical agencies.

Leadership and management modules are also contemplated.