Productivity SA, Unemployment Insurance Fund and Compensation Fund: Strategic Plans 2009-10

NCOP Public Enterprises and Communication

25 August 2009
Chairperson: Ms M P Themba (Mpumalanga, ANC)
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Meeting Summary

The Committee was briefed by three entities reporting to the Department of Labour.

Productivity SA was highlighted as an entity that primarily dealt with aiding ailing companies and assisted in saving jobs. Its vision was to lead and inspire a productive South Africa. This would be realised through productivity promotion campaigns for South African citizens, as well as promoting productivity within enterprises and the corporate services. It was working with Sector Education and Training Authorities to enhance skills, and was aligned with the Minister’s programme of action.

Members questioned the role of Productivity SA in creating jobs, bailouts of companies, why it was not in all provinces, and a list of companies with whom it was working. The problems with Further Education and Training Colleges were highlighted, and Members also asked how many people were employed, how many were female, what was the situation with the clothing and textile industries, how many of those employed had found work, and what was the interaction with the labour unions.

The Compensation Fund noted that all employers were classified by the Fund in terms of their operations and two mutual associations operated under license from the Minister of Labour to process claims under the Compensation for Occupational Injuries and Diseases Act (COIDA). Government departments were exempt form annual contributions. The Act contained a schedule of disability and benefits were based on earnings. The Fund did not have a policy for rehabilitation and early return to work. Although rehabilitation centres were established both were on the verge of closing down. The major challenge was the time taken to process claims. The claims process was described. Lack of adequate budget, the fact that employers failed to submit claims and inadequate IT systems were further challenges, but the latter was being addressed. Members asked about the slow claims process, corruption challenges, the reasons for decentralisation, how workers were protected during the claims process, and how the Fund struck a balance between employer and employee, and how it was ensured that the beneficiary would get the benefits.  It was clarified that this Fund did not compensate for mining accidents.

The Unemployment Insurance Fund noted its aim of contributing to the alleviation of poverty in South Africa by providing effective short term unemployment insurance to all workers who qualified, and by administering the Fund in a professional manner. The three components of the Board were organised business, organised labour and community constituencies and government, and the sub-committees were described. The State remained the guarantor of the UIF and 2% was paid into the Fund from monthly earnings; of which 1% was contributed by the employer and 1% by the employee. Funds were invested through the Public Investment Corporation (PIC). The Fund covered unemployment, maternity and illness benefits. It covered over 7.3 million workers and 1.3 million employers, and its funds stood at R37 billion. Challenges included service delivery and increased claims due to the recession.  Members asked why certain forms were not yet available electronically, what the plans were for the call centre, how many South Africans were employed, what correlation existed between the UIF and the Department of Home Affairs to improve the system, and which workers were regarded as vulnerable. Members commented that payments were too slow, that many farm workers were not registered and that the Fund needed to conduct better inspections.

Meeting report

Productivity SA: Strategic Plan briefing
Mr Bongani Coka, Acting CEO, Productivity SA,  stated that the vision of Productivity SA was to lead and inspire a productive and competitive South Africa. The mission of the entity was to enhance and develop South Africa's productivity. Its key focus areas were productivity promotion campaigns for South African citizens, productivity in enterprises and corporate services. The strategic objectives were to promote productivity in the workplace, to develop relative productivity competencies and to support initiatives aimed at preventing job losses. The strategic objectives were also contained in the Skills Development Act. The entity was also contributing to creating job opportunities. It was working with Sector Education and Training Authorities (SETAs) to enhance skills, and was aligned with the Minister’s programme of action. This programme of action included contributing to employment creation, enhancing skills development, promoting sound labour relations and monitoring the impact of legislation.

Key objectives for productivity in the industry included interventions aimed at providing decision makers in Government, business and labour with information and knowledge, to enable better productivity in economic sectors and to improve the competitiveness of the economy. Turnaround solution objectives were to prevent a decline in the country’s employment levels in organisations and sectors in distress through assistance. Further objectives were to retain jobs by sustaining companies through proactive solutions, and to conduct future forums and early warning systems. No company would be assisted unless it worked with and co-operated with Productivity SA. However, Productivity SA was not a consultancy.

Most of the entity’s work had been done in the agricultural sector and could be located in the Eastern Cape. Productivity SA essentially responded to the demand for its skills. The objective for the productivity in Small, Medium and Micro Enterprises (SMMEs) was to develop an increased number of small and micro enterprises through productivity improvement. Productivity SA wanted to instill a culture of productive behavior and best productive practices amongst the SMME sector.

Discussion
The Chairperson referred to Slide 22 and asked why there were no interventions in Gauteng and the Western Cape. He also wanted to know with whom the entity was working in the provinces regarding training. Concerning Slide 17, he asked with which companies the entity was working.

Mr Coka responded that the exclusion of Gauteng and the Western Cape was due to the way in which Small Enterprise Development Agency (SEDA) had funded the programme, and this was not Productivity SA's decision. He said that information regarding the entity’s interaction within the provinces and towns would be provided, and he was not aware he had to bring it to the meeting.

Mr H Groenewald, (North West, DA) referred to Slide 15 and asked what successes had Productivity SA achieved. There were a lot of problems with Further Education and Training Colleges, and the North-West province was particularly problematic in this area. He asked if the figures in the presentation were accurate. He also enquired how large was the workforce of Productivity SA. He noted that Slide 18 raised concerns regarding the clothing and textile industry, as there was a huge influence from Eastern countries in South Africa. This had resulted in the job loss of many South Africans. Productivity SA should be ensuring that jobs went to South Africans. He asked why was the representation for the North-West low, as indicated in Slide 19. Finally, he enquired what Productivity SA was intending to do with those individuals it had trained, since there were currently no jobs available.

Mr Coka admitted that FETs were a problem, but said that Productivity SA would work hard, especially in the North-West, to enhance productivity. The workforce of the entity was currently eighty persons, but the target was to bring this figure into the nineties. Funding restricted the workforce to under one hundred, but accredited service providers would be engaged by the entity to improve delivery in the future. Regarding the issue of the textile and clothing industry, Productivity SA had selected a company and applied its expertise on it, with the objective of turning that company around. The lessons learnt from this would then be applied to other companies. A port manager was employed to look into the issue of why Gauteng and the North-West had low figures. He noted that persons trained by the entity were already employed.

Mr D Feldman (Gauteng, ANC) said that he was glad that stand alone enterprises were mentioned in the presentation. He asked why there was no mention of any interaction with the labour unions.

Mr Ike Sathekge, Productivity SA, said that further details would be provided to the Committee regarding the creation of awareness in the provinces. The interaction with the unions was largely around productivity. A relationship with the unions definitely existed and this was not just at board level.

Mr O De Beer (Western Cape, COPE) asked what the entity was doing that was in line with Government's plan to create 500 000 jobs before the end of the year. There was a skills shortage in the country and countries such as China and France had said that South Africa was not productive enough. He wanted to know if South Africa was learning from the international community.

Mr Coka responded that Productivity SA was primarily concerned with saving jobs as opposed to creating them; as this was part of its mandate. The entity had no direct involvement in job creation. In the international community the entity was working mostly with Japan, but not so much with China. Working with China tended to create tensions with Japan.

Mr Sathekge added that lessons learnt in the international arena were used to develop South African companies. A government department would also be identified and developed according to a similar model.

Mr Feldman asked if Productivity SA would play a role in those companies that received a bailout.

Mr Coka said that bailouts would not be a shortcut option for companies and they would be required to work with Productivity SA in the event of receiving a bailout.

The Chairperson asked about female representation within the entity.

Mr Coka responded that females were in the majority within the entity and plans were in place to increase their number at the executive level.

Compensation Fund Briefing
Mr Shadrack Mkhonto, Commissioner, Compensation Fund, stated that in terms of the legislative framework, the Compensation Fund took its direction from the Constitution. Employers were classified according to the nature of their operations. Two mutual associations operated under license from the Minister of Labour to process claims under the Compensation for Occupational Injuries and Diseases Act (COIDA). The Director General determined provisional settlements in order to monitor the mutual associations. He noted that government departments were exempted from annual contributions.

Permanent disabilities were set out in Schedules 2 and 3 of the COIDA. Benefits were based on the employee’s earnings as well as his or her medical condition to determine permanent disablement. Mr Mkhonto highlighted that the Compensation Fund did not have a policy for rehabilitation and early return to work. Rehabilitation centres were established by the Compensation Fund in Durban and Benoni. Mr Mkhonto stressed that since the previous manager for the two centres had left, standards had dropped and both were on the verge of closing down. Mr Mkhonto also stressed that the major challenge facing the Compensation Fund was the processing of claims, which took between thirty months and three years.

The Chairperson requested Mr Mkhonto to explain the process that was applied when claims were being made.

Mr Mkhonto explained that when an employee was injured whilst on duty, the employer had to report this to the Compensation Fund. The Compensation Fund generated a claim number for the employee. The claim number enabled the employee to receive treatment and the doctors to claim from the Compensation Fund. Doctors had to compile a first medical report. The Compensation Fund proceeded to compare the first medical report and the employer’s initial report to ensure that claims were legitimate. Once the claim was accepted, doctors could send invoices to the Compensation Fund. The doctor reported on the number of days that an employee was absent. Compensation was paid only if the number of days absent amounted to three days and above. Compensation was paid by the employer, who then claimed from the Compensation Fund. The entire process depended on the submission of documentation from the employer and doctors. Most workers and employers did not understand how the Compensation Fund worked. Lack of communication between the various parties was also cited as a problem.

Provincially, Gauteng had the highest number of claims, the Western Cape was second. The financial challenge that faced the Compensation Fund was budget-related. Further challenges included the slow settlement of claims, employers not submitting claims, a lack of IT resources and a disparate IT system.

Current interventions included the development of a new business process and a new IT system. The organogram was currently being re-drawn. The decentralisation of claims would be in four new provinces by 30 March 2010.

Discussion
The Chairperson requested an elaboration of the claim process.

Mr Mkhonto responded that the claim process was slow due to claims not being submitted on time by doctors. In addition, the Compensation Fund did not pay on time.  40 000 documents were received every day and half of them were duplicates. To overcome this, the Compensation Fund would move away from paper to automation.

Mr Groenewald noted that the Fund did not mention corruption as one of its challenges, and he asked how rife it was, and what investigations were currently taking place.

Mr Mkhonto replied that the Compensation Fund was fraught with problems of corruption. Employers tried to pay lesser premiums, certain claims were selected and processed ahead of others, as examples. Two employees were being investigated for the embezzlement of funds amounting to R1 million and R2 million respectively. Four companies had been employed to track acts of fraud and to do the auditing for the Fund.

Mr R Wees (KwaZulu Natal, DA) asked why the Compensation Fund was decentralising when a new IT system was being implemented.

Mr Mkhonto explained that the decentralisation process was more of a public relations exercise and the tariff regime was also being changed.

Mr M Jacobs (Free State, ANC) asked how workers were protected during the claims process and how the Compensation Fund had struck a balance between the employer and the employee. He requested a breakdown of the provincial payouts and what measures were currently in place regarding mine accidents.

Mr C Lengoa, Acting Executive Manager, Compensation Fund, responded that part of the Fund's internal policy was to improve relations between the employer and the employee. Employers were charged R500 for every claim that was not reported. 30% of claims went beyond three months because of the wait for the employee’s medical condition to stabilise. With regards to mines, the Compensation Fund only monitored claims. The Fund did not have a mandate over mines.

Mr Jacobs asked what was being done to ensure that a beneficiary benefited from his claim.

Mr Mkhonto replied that the Compensation Fund did not pay anyone other than the beneficiary, through a direct transfer into the claimant's account.

Unemployment Insurance Fund (UIF) briefing
Mr B Serume, Commissioner, Unemployment Insurance Fund, presented to the Committee that the vision of the Unemployment Insurance Fund (UIF) was to strive to contribute to the alleviation of poverty in South Africa by providing effective short term unemployment insurance to all workers who qualified. Part of its mission was to administer the fund professionally.

The Board for the Fund comprised three membership bodies: organised business, organised labour and community constituencies and government. The UIF Board played a more advisory role in terms of statute. The Board also had sub-committees which included a Financial and Risk Advisory Committee, an Investment Committee and a National Appeals Committee. Critical stakeholders included the Government, employers, unions, civil society, South African Revenue Services (SARS), the Public Investment Corporation and Department of Home Affairs (DHA). The Fund operated in ten provinces as Gauteng was divided in two parts. The State remained the guarantor of the UIF and 2% was paid into the Fund from monthly earnings; of which 1% was contributed by the employer and 1% by the employee. Funds were invested through the Public Investment Corporation (PIC). The type of benefits under the Fund included unemployment, maternity and illnesses. The fund covered over 7.3 million workers and 1.3 million employers. The Fund's call center had a staff complement of 54 agents and it handled faxes, letters and emails. Agents were well trained and subjected to continuous assessments. The Fund’s assets had grown from R2.6 billion in 2001 to R37 billion in 2009.

The challenges facing the fund included service delivery, due to the recession and currently it was paying in excess of R450 million a month. Capacity was being increased to meet the demand and the Fund had made adequate provisions to withstand the current storm of high retrenchments.

Discussion
Ms L Mabidja (Limpopo, ANC) expressed disappointment at the fact that presentations were not province-specific and they tended to focus too much on the national sphere.

Mr Serume referred to the slides and pointed out UIF payments per province. He mentioned that the Limpopo province was a success story in the sense that former Post Offices were turned into decentralised UIF centres.

Mr Rees commended the UIF for its efficient electronic system. He asked why Form UI 19 was not submitted electronically. UIF was absent in Northern KwaZulu Natal. He asked what the plans were regarding the Fund's call centre and how many South Africans were employed.

Mr Serume responded that UI 19 was in the process of being automated. Labour centers were created based on demand, and he promised to look at the situation in Northern KwaZulu Natal. He admitted that call centres were helpful but not impeccable.

Mr Feldman asked if there was a correlation between the UIF and the Department of Home Affairs to improve the system.

Mr Serume said that a relationship did exist with the Department of Home Affairs and methods of better efficiency were being pursued.

Mr Z Mlenzane (Eastern Cape, COPE) asked if there was a barometer to measure the vulnerability of employees.

Mr Serume replied that all workers were considered vulnerable but commercial farm workers and domestic workers were considered especially vulnerable.

Mr De Beer commented that the Fund’s Employment Equity reports seemed accurate but he felt that at a practical level this was a different story. He understood that, due to the recession, payments were slow.

Mr Serume responded that the Employment Equity figures were accurate and were being closely monitored.

Mr R Tau (Northern Cape, ANC) commented that most farm workers were not registered deliberately; he asked how the entity planned to deal with this issue. He asked about the issue of labour brokers.

Mr Serume responded that inspectors from the Department of Labour did regular check ups on employers. Commercial farm workers were exposed to blitz inspections. Labour brokers had to pay the Department from whatever amount they made in commission earnings.

The meeting was adjourned

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