Compensation Fund, Unemployment Insurance Fund, Umsobomvu Youth Fund, National Youth Development Agency: Strategic Plans 2009-2012

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Employment and Labour

09 June 2009
Chairperson: Ms L Yengeni (ANC)
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Meeting Summary

The Committee met with delegates from the Department of Labour, the Compensation Fund, the Unemployment Insurance Fund, the Umsobomvu Youth Fund, and the National Youth Development Agency, who all briefed Members on their Strategic Plans for 2009-2012. Each outlined their Strategic Plans, as more fully outlined in each of the attached presentations.

The Compensation Fund, whilst highlighting some of its achievements, stressed that it faced serious organisational challenges such as inadequate capacity, which delayed processing of claims. There was an overwhelming load of paperwork. Electronic submission of claims was of the utmost urgency. The Compensation for Occupational Injuries and Diseases Act was poorly enforced. There was failure or delay to report accidents, and failure to submit relevant information and documents, in particular banking details. The turnaround time for claims was still too slow. The Auditor-General had issued a disclaimer for 2007-2008 as a result of incorrect assessments, incorrect information on debtors, a backlog in scanning of documents, unavailability of supporting documents, and an unexplained charge regarding a breakdown in internal controls with regard to bank reconciliations and lack of completeness and accuracy in statements of investment income.

The Unemployment Insurance Fund sought improved compliance by employers, especially taxi operators. The Fund would seek amendment to legislation to require employers to make declarations monthly, with annual reconciliations, and intended to extend the period of benefit payment to clients from eight to twelve months. It would also include public servants. Actuarial valuations had been performed and indicated that the Unemployment Insurance Fund was in a sound financial position as at the end of March 2009.

The Umsobomvu Youth Fund, soon to be merged into the new National Youth Development Agency, had sought to augment young people's social skills and social connections. Its outreach programme was multifaceted and included an accessible and highly navigable web site, job skills training and assistance with finding employment. It had a solid ITC strategy in place and noted that it had achieved world-wide recognition of the brand and expertise.

The new National Youth Development Agency would be the primary custodian of youth development, with a mandate to advance young people's economic development and implement South Africa's integrated youth development plan and strategy, and to provide socially cohesive development of young people. The Agency would also create jobs for the young through the Expanded Public Works Programme and help skilled young people to find work.

Members only discussed the presentation of the Compensation Fund. Several members commended the Fund on its honest approach, but nonetheless expressed their concerns that the “crisis management” situation and current problems could not be allowed to continue. They asked specific questions about the composition of the Fund, problems through claimants not being rehabilitated or offered assistive devices speedily, whether the Fund could require employers to re-employ injured but recovered employees, the position in regard to compensation paid to municipal workers, the lack of timeframes noted in the presentation, and the problems that were recurring year after year. Further questions addressed the separate funds to compensate construction or mine workers, appeal mechanisms, and the need to monitor developments.

Meeting report

Department of Labour entities’ Strategic Plan presentations
The Chairperson welcomed the delegates from the Department of Labour (DoL / the Department), the Compensation Fund (CF), the Unemployment Insurance Fund (UIF), the Umsobomvu Youth Fund (UYF), and the National Youth Development Agency (NYDA), and assured them of Members’ willingness to engage.

Mr W Madisha (COPE) objected to the failure of the Department to supply documents to the Committee in sufficient time before the meetings, so that Members could read them and prepare themselves to engage with the Department and its entities. He insisted that such failure was unacceptable and that the Committee had endorsed this in a previous meeting. He said that he was not ready for the meeting to continue.

Ms R Tsotetsi (ANC) agreed with Mr Madisha about the lateness of documents, but said that the Department had apologised.

An ANC Member proposed that the Committee note the lateness, but agree to move forward. He appealed that all Members should remain to hear the presentation from the Department and the public entities.

Mr I Ollis (DA) said that the was concerned about the meeting scheduled for Friday, 19 June 2009, and asked the Department to provide those documents immediately, so that Members could read them in good time.

The Chairperson ruled that the meeting would proceed. She noted that the Committee had requested the documents in advance, but said that the problem lay more with the Committee Staff and Members.

An ANC Member noted that she had received documents in her pigeon hole the previous day, and had read the Compensation Fund's documents that night. It was noted that documents had been placed in Members’ old pigeon holes.

The Chairperson asked that Members must check their pigeon holes frequently, but also asked the Department to supply the Friday, 19 June 2009 documents by the end of Wednesday, 10 June.

The Acting Director-General explained that the Department had received the invitation only on Thursday, 04 June 2009, and he had made the delegates work through the weekend to prepare the documents. The documents were ready on Monday. Best efforts had been made under difficult circumstances.

The Chairperson thanked the Department, and asked Parliamentary staff members to take note of the comments, and in future to send invitations and request documents at least five working days in advance. If they had any difficulty in informing Members, they should telephone them and ask them how best to get documents to them in time. She accepted the Department's apology.

Compensation Fund Presentation
Mr Shadrack Mkhonto, Compensation Commissioner, briefed the Committee on the Compensation Fund (the Fund) , a public entity of the Department of Labour. The Fund was responsible to administer the Compensation for Occupational Injuries and Diseases Act (COIDA) Act. Its accounting officer was the Director General of the Department of Labour. The Compensation Fund also monitored licence conditions for the two mutual associations - the  Federated Employers Mutual Assurance (FEMA), which administered compensation to construction workers, and the Rand Mutual Assurance, which administrated compensation payments to mineworkers. The Fund provided compensation for death or disablement caused by occupational injuries or diseases sustained or contracted by workers. It was financed from levies paid by employers.

Revenue consisted mainly of annual assessments, paid by registered employers, at a percentage or fixed rate of the annual earnings of workers. The Compensation Fund sought to provide accessible services of high quality as set in consultation with stakeholders, while maintaining the Compensation Fund's liquidity.

The Compensation Fund's strategic objectives for the forthcoming period were to provide an efficient social security net, be financially viable, effectively manage its cash and investments, reform its management and restructure itself, enhance quality and access to services and information around the legislation, and establish effective data and information management.

The Compensation Fund faced serious organisational challenges such as inadequate capacity that  resulted in delays in processing claims. Manual submission of claims resulted in an overwhelming load of paperwork, so it was urgency to facilitate and implement electronic submission of claims.  The Compensation Fund's information technology (IT) provider needed to improve its capacity and capability to serve the Fund.

There was no proper case management system for cases not reported in terms of the Compensation for Occupational Injuries and Diseases Act (the Act). The Act was poorly enforced. There was failure or delay to report accidents and submit relevant information and documents, in particular banking details.

There had been an overall slight decline in the number and amount of payments made directly to employees.  IN 2006, there were 331 672 payments and R655 million paid out, but this decreased by 2008 to 327 647 payments and R630 708 449 respectively. Payments made directly to medical service providers  decreased in the number of payments, but increased in amounts (see attached presentation). However, there had been a 7% increase of collection from assessments to R3.9 billion.

With regard to the Fund itself, Mr Mkhonto reported that assets grew to R21.4 billion in 2008-2009, a 17% increase. 70% of senior management posts had been filled. The process of business was re-engineered and benchmarking was completed. Policies were finalised and implemented. Electronic payments were implemented. Board members were appointed and orientated.

A workshop on the Early Return to Work programme had been held with stakeholders, but policy on the programme had not been completed.

He noted that the challenges were that the turnaround time for claims was still too slow, progress in the decentralisation of legislative functions was slow, and that progress in the implementation of the integrated claims and revenue management system was also slow.

The Auditor-General had issued a disclaimer for 2007-2008, due to incorrect assessments, incorrect information on debtors, a backlog in scanning of documents, unavailability of supporting documents,  and an unexplained charge arising from the Treasury function in relation to internal controls, as well as lack of completeness and accuracy in statements of investment income.

Department of Labour Unemployment Insurance Fund (UIF) Presentation
Mr Boas Seruwe, Unemployment Insurance Commissioner, noted that the Unemployment Insurance Fund (UIF) had been established by the Unemployment Insurance Act of 2001 (the Act). This empowered the UIF to register all employees and employers in South Africa. The Unemployment Contributions Act (UCA Act) empowered the e South African Revenue Service (SARS) to collect monthly contributions from both employers and workers. These contributions were utilised to pay benefits and any other expenditure reasonably incurred relating to the application of the Acts.

Key issues, achievements and challenges for the Unemployment Insurance Fund were financial performance, operations, stakeholders and human resource management.

The UIF strove to contribute to the alleviation of poverty by providing effective short-term unemployment insurance to all workers who qualified for unemployment and related benefits. It aimed to render an effective and accessible service to all stakeholders; become a sustainable organisation with sufficient reserves; and to administer itself professionally.

In 2008-2009 the UIF performed remarkably well. There was a recorded surplus of R9.2 billion, a 34.28% increase from the previous year. This was achieved by reducing overpayments, improving the recovery of overpayments and recovering R22.2 million from clients. By the end of 2008 the UIF had registered a total of 1.2 million employers, which ensured that more vulnerable workers were covered and protected. There was, however, much work to be done in this area, especially in the taxi industry. The total number of registered employees on the database in March 2009 was 7.6 million. It had approved claims from 627 244 clients.

Benefit payments per category as at 31 March 2009 were summarised in a table.

There had been a major marketing and advertising drive, with the assistance of the Government Communication and Information Systems (GCIS) and the South African Broadcasting Corporation (SABC), to advertise the UIF's services, serve clients by processing their claims and further educate them about the services .

To develop human resource capital, UIF had awarded new bursaries to five staff, continued to train and develop all staff, and trained officials on more than 150 courses. It developed and implemented the workplace skills plan.

The 2009 strategic goals were to participate in social security reform and report, to build and support schemes to alleviate poverty by job creation and retention (including a pilot project to train unemployed beneficiaries), to extend the processing capacity for processing of claims by studying the virtual office concept, to strengthen the processing centres, and to improve the turnaround time for claim applications. It sought to improve employer compliance, especially in the taxi industry, and would seek the necessary changes to legislation to require employers to make declarations monthly, tallied against annual reconciliations.

The UIF intended to extend the period of benefit payment to clients from eight to twelve months; and to include public servants.

An actuarial valuations indicated that the UIF was in a sound financial position as at the end of March 2009. However the economic turmoil facing the world and the country could have negative implications because of the risk of job losses. Some clients in the labour centres had been turned away. The implementation of the social security plan would help to address these challenges.

Umsobomvu Youth Fund (UYF) Presentation
Mr Malose Kekana, Chief Executive Officer, Umsobomvu Youth Fund, noted that the UYF was now being realigned to become part of the new National Youth Development Agency (NYDA)

The UYF had sought to augment young people's  social skills and social connections. Its outreach programme was multi-faceted and included an accessible and highly navigable web site. It had a solid information and communications technology strategy in place. It had achieved world wide recognition for its brand, and other countries had sought its expertise or engaged in co-operation. The Fund had continued to make a significant contribution to society, and, since its inception, had trained over 200 000 youths and supported over 80 000 young entrepreneurs. It also sought to assist unemployed graduates, and foster workplace skills.

Mr Malose Kekana explained the merger process. He would remain in the new structure as Executive Officer.

National Youth Development Agency Presentation
Mr Andile Lyngisa, Chairperson, National Youth Development Agency, briefed the Committee on how the National Youth Development Agency would replace the National Youth Commission and  the Umsobomvu Youth Fund. Its launch was on 16 June. The two former institutions were to be merged to enhance service and development opportunities provided to the youth. The Agency would link up unemployed young graduates with economic opportunities, strengthen efforts to expand the National Youth Service Programme, and support young entrepreneurs. It would be the primary custodian of youth development. Its mandate was to take initiatives to advance young people's economic development and implement South Africa's integrated youth development plan and strategy. It would ensure the cohesive development of young people. It would also work to create jobs for the young through the Expanded Public Works Programme (EPWP) and help skilled young people to find work.

Discussion
Ms W Newhoudt-Druchen (ANC) asked the Compensation Commissioner about the Compensation Fund's organogram. She wanted to know if he was the only commissioner and how many members served on the boards.

Mr Mkhonto replied that the Compensation Fund's Board had 15 members, including one from the Rand Mutual Assurance, which administrated compensation payments to mineworkers, one from the Federated Employers Mutual Assurance (FEMA), one from the Department of Health, one from National Treasury, and three from Congress of Trade Unions (COSATU).

Ms Newhoudt-Druchen said that in the last Parliament questions about workers injured at the workplace, and who had remained in hospital for months, had been repeatedly raised by one Member. She noted that the Commissioner had said that the Fund tried to fast track the rehabilitation. However, the previous Committee had found, in the instance cited earlier, that delays were caused by lack of certainty as to which authority should assist. There were also cases where a worker, after becoming disabled, found that he or she could not return to work in the same environment, which was unsuitable for a disabled person. Accessibility of buildings was always a problem. She asked what the Department of Labour was doing about such issues, and how much was spent on wheelchairs and assistive devices. She asked if chronically disabled workers could be compensated for life.

Mr Mkhonto replied that he had been open in admitting that disability was one area in which the Compensation Fund was lacking. It had constantly been operating in “crisis mode” and had not had the chance to improve. The biggest challenge the Compensation Fund faced was paying doctors' accounts for the treatment of its clients. He would have to revert with details on expenditure on assistive devices.

Mr Mkhonto said that long stays in hospital were problematic. There had been cases of patients remaining bedridden for nine months at Groote Schuur Hospital because the Commissioner had been unable to provide assistive devices. When a cost analysis was carried out, it was found that the payment for the hospital stay amounted to R400 000, whereas the cost of an assistive device would have only been R25 000. The Fund had a culture of scrutinizing every application from a service provider thoroughly, but this unfortunately contributed to the delays in processing claims. It was reviewing its processes and was considering introducing nurses as case managers. They would be able to go to the hospitals across the country to visit patients and approve assistive devices on time. Currently, everything was done by one or two employees in Pretoria.

Mr Mkhonto said that he recognised the problem of employers who were reluctant to re-employ chronically disabled workers.

Ms Newhoudt-Druchen also asked why a municipality would fail to compensate a worker. She asked whether injuries sustained in working hours would attract compensation, and if it would be paid to the family of the worker.

Mr Mkhonto replied that municipalities were the third tier of government, and they received their funding predominantly from the State. That was one reason why the Compensation Fund extended the privilege to them, but it was done only by making application for exemption. In terms of the legislation, even if the Compensation Fund had given exemption to a municipality, the Fund must take over the compensation if the municipality was unable to meet the obligation. That was why from time to time the Commission Fund had to obtain certificates from the municipalities to guarantee that they had sufficient funds to meet their obligations.

An ANC Member thanked Mr Mkhonto for his honesty in admitting that the Compensation Fund faced  challenges. There were many cases in which a claim was made, but a person following up would be told by the Pretoria office that the claim was never received. This cast doubt on the reasons for the existence of the Department, and criticisms would then, in his view, be justified. He asked why many temporarily-disabled workers were not allowed to return to work after recovery. He questioned whether he had understood correctly that the Compensation Fund was powerless in such cases. He asked what the purpose of Schedule 8 of the Labour Relations Act, governing employees who were injured on the job, was
 
Mr Mkhonto said he would obtain information to respond to the Member about Schedule 8 of the Labour Relations Act. He said that the Compensation Fund was unable to compel employers to take back employees after their recovery, and once again attributed this to the “crisis mode” of operation. The Fund was forever struggling to pay accounts, and he conceded that often its responsibilities to workers could not be addressed. Some overseas countries practised “early return to work” systems, obliging employers to take responsibility for their workers. The Employment Equity Act required an employer to create a reasonable accommodation around finding jobs, but it did not force the employer to do so. The Compensation Fund gave guidance to the employers about reasonable accommodation but it could not compel them. Where the employer, under reasonable circumstances, was unable to take back an employee after injury, the Department of Labour was supposed to intervene through training or rehabilitation to enable that employee to be redeployed elsewhere, or to take up sheltered-employment. The early return to work programme was a policy that the Compensation Fund hoped to table in Parliament in due course.

Mr A Louw (DA) thanked Mr Mkhonto for his presentation and explanations, and said he pitied the Department’s situation. It had increased its workforce by 70%, but the challenges were still enormous. He asked at what point the Department would be able to address these challenges. The Commissioner had said that by March 2010 the Department of Labour would be fully staffed. However, things were not well as the Auditor-General's report for 2007-2008 carried a disclaimer. He asked if one might expect another disclaimer for the next financial year.  He asked about the Performance Management System. He asked what methodology the Department currently used to evaluate its employees. He asked if he should surmise that the Department used a carte blanche approach. 

Ms R Tsotetsi (ANC) asked for an organogram of senior and executive staff, which analysed the staff structure by gender and race, which would indicate whether transformation was taking place. The lack of time frames for the objectives would make it difficult for the Committee to conduct oversight.

Mr I Ollis (DA) said that, reading the Compensation Fund's reports, he inferred that the same problems were occurring year after year, and he asked if the Compensation Fund was making any progress to resolve them. This was most frustrating. The computer system was and still remained a problem, as did access, and delays in processing claims. He asked what would be done with the R400 million that had not been disbursed to people who were entitled to it, if it was to be allowed to accumulate, and if beneficiaries would be compensated in some other way.

Mr Ollis asked about the separate Federated Employers Mutual Assurance, which administered compensation to construction workers, and the Rand Mutual Assurance, which administrated compensation payments to mineworkers.
 
Mr Mkhonto replied that the funds were private funds. He said that the Compensation Fund should learn from the sister organisations, who had managed to address their challenges. The Compensation Fund had a blueprint for information technology. However, it was inundated with claims, constantly dealt with lawyers, and had issued a tender for debtors.

Mr Ollis asked if there were appeal mechanisms.

Mr Madisha noted that the Compensation Fund had been open and honest, and seemed to have worked hard, but the main problems lay in implementation. He asked about organisation and systems. Time lines must be adhered to. The injured were not being paid on time. Benefits paid late should be paid with interest. He asked why payments were not made on time, saying that the beneficiaries were poor people who had to pay doctors and hospitals from their own scanty resources. He also asked for clarity on some claims dating back some 17 years.

The Chairperson also appreciated the Compensation Commissioner's honesty. She asked why some service providers claimed more than once, and how this was possible. She asked what criteria the Compensation Fund used when authorising payments. She also asked how claims and payments for claimants living far away were handled. Insisting that the problems could not remain forever unsolved, she asked if there were any deadlines for meeting the challenges of the Compensation Commission's debtors and creditors.

The Compensation Commissioner replied that the Commission paid claimants when they came to collect their entitlements.

Mr P Moloto, Executive Manager for Finance, Compensation Fund, said that he believed that a central system was needed, such as the Siemens Triple P system. He noted the problems raised in the 2007/8 Auditor-General’s report, and said that it was vital for claimants to provide banking details. He could send details in writing of debtors and creditors and balances. He commented that the Fund had paid out a great deal but was not meeting the expectations of the public.  No bonuses had been awarded, as the Minister had been very clear on the issue. The Compensation Commissioner had inherited many of the problems.

Mr Louw said that the Compensation Fund was by far the most urgent item on the agenda. He asked for contact details.

The meeting was adjourned

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