Unemployment Insurance Fund & Productivity SA on their Strategic and Annual Performance Plans 2015/16

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Employment and Labour

25 March 2015
Chairperson: Ms L Yengeni (ANC)
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Meeting Summary

The Unemployment Insurance Fund (UIF) and Productivity SA briefed the Committee on their Strategic Plans for 2015-9 and their Annual Performance Plans for 2015/16.

UIF was set up to provide short term unemployment insurance to all workers who qualified for unemployment and related benefits. Its central purpose was to render effective and effective service accessible to all stakeholders, to administer funding professionally and ensure that it remained a sustainable organisation with sufficient reserves. In the period to date, UIF had invested R4 billion in job creation initiatives, had paid 91% of claims with complete information approved or rejected by December 2014, noted that 11 999 claims were submitted through U-filing systems by December 2014 and 4 535 learners were recruited since December 2013, with 3000 of those having completed training. The five year strategic goals for 2015-2019 were to improve financial management, improve service delivery, improve compliance with UIF Acts and fund poverty alleviation schemes. Quarterly targets in the Annual Performance Plan were presented and described.

Members appreciated the clear presentation but raised concerns that one of the main issues that UIF needed to focus upon was that many domestic workers were still not registered on the system by their employers, never received any confirmation whether the employer was paying UIF, and were unaware of their rights. One Member invited the UIF to visit the constituencies of his party, to hold awareness sessions, commenting that those that it was holding were not reaching far enough. It was also suggested that it should conduct spot-checks and send correspondence, although the UIF explained that this had not been particularly successful in the past because of the numbers of returned letters. They encouraged prompt and decisive prosecutions of those who failed to pay. Members were also concerned about, and asked how it could happen that foreign workers would pay into the UIF, only to be told, when they tried to claim, that the necessary documentation was not in place. They pointed out that many people experienced huge frustrations in trying to get service delivery, and wondered if it could increase benefits through u-filing, and how the decrease in budget would affect programmes. Members asked how over-payments occurred, and what it did about them, whether UIF could actively reach out to companies in distress and how it reached entrepreneurs, as well as the kinds of training that it offered and what kinds of training lay-off it could offer. They asked for details on the investments, and how the UIF was intending to cut its administrative expenditure.

Productivity SA, an organisation for South African businesses, industries and general public, advised, implemented programmes, monitored solutions and evaluated progress in order to promote a more competitive South Africa. Its key priority sectors were manufacturing, agriculture, mining and the public sector. It offered turn around solutions, productivity organisational solutions, value chain and competitiveness and productivity awareness. Each of these concepts and the interventions to support them were described. Its budget for the current year was R127.602 million. Owing to a misunderstanding on the scope of the presentation, only the current figures were presented.

Members wondered why Productivity SA was offering much the same services as other private companies and what was distinguishing it. They questioned also what its outreach was, given that it had offices only in Gauteng, Western Cape and KwaZulu Natal, and how sustainable it was, since it was only able to self-raise 9.3% of its income, as also whether it was likely to be absorbed into other departments when the public service was reviewed. They wondered what the spending was on consultancies and why its targets were decreasing. Members questioned why there were no quarterly targets shown, and wondered what sort of intervention it was able to make into the public sector, where productivity, particularly in local government was declining each year, how it would persuade companies to accept its recommendations and how binding these were. They wondered if it had the power to intervene proactively and noted that its current targets were large companies.  One Member suggested that it could learn some useful lessons from the Western Cape's Red Tape Reduction Programme, pointed out the need to get buy-in from unions, and felt that a major focus must be the current public service where there were numerous suspensions. The suggestion was made that it establish a hot-line for potential smaller firms in agro-processing. 

Meeting report

Unemployment Insurance Fund (UIF) 2015/16 Annual Performance Plan and 2015-2020 Strategic Plan
Mr Boas Seruwe, Commissioner, Unemployment Insurance Fund, said that the Unemployment Insurance Fund (UIF) aimed to contribute to the alleviation of poverty in South Africa by providing effective short term unemployment insurance to all workers who qualified for unemployment and related benefits. UIF/s central purpose was to render effective service accessible to all stakeholders, and to administer funds professionally. UIF was a sustainable organisation with sufficient reserves. It had invested R4 billion in jobs creation initiatives. By December 2014, 91% of claims with complete information had been approved or rejected, 11 999 claims were submitted through U-filing systems and 4 535 learners had been recruited since December 2013, with 3 000 of them having completed training.

The five year strategic goals for the years 2015-2019 were to:
- Improve financial management
- Improve service delivery
- Improve compliance with UIF Acts
- Fund poverty alleviation schemes

The remaining part of the presentation was divided into presentations of the quarterly targets that the Fund had set for itself in attempting to reach these aims (see attached presentation for all details).


Mr M Bagraim (DA) appreciated a good, clear and easily-understandable presentation. He commented that one issue that must be addressed was the concern that many domestic workers were not registered by their employers with the UIF, and never got any indication that the employer was paying UIF. He suggested that something must be done about this. Domestic workers were the most downtrodden in the country. He suggested the need for the UIF to do spot-checks of households and alert the workers and their employers about the importance of paying into the UIF. Some of these workers, after 20 years of working, would seek help from the UIF offices and be told that their former employers had never registered them. Even worse, some employers would deduct the UIF but did not pay it over to UIF. There was often an observation that most liquidated companies had not paid PAYE, compensation and UIF. There was a need to ensure solid prosecutions against directors of those companies, to set a good example that UIF must be paid. The most serious challenge was for foreigners who worked in South Africa and who contributed to UIF but were later told they could not claim because they were foreigners.

Mr D America (DA) said although good service was experienced from UIF service centres, there were often still complaints from applicants who felt frustrated in trying to access benefits. Some of the regional offices did not answer their telephones. Some people would go off on maternity leave without benefits. He asked if the UIF had any strategies in place to increase access to benefits through U-filing. He noted the decrease of the budget, and asked where this would be applied and what programmes it would affect. He asked also what kind of service level agreements the UIF wanted to sign with universities and FETs.

Mr P Moteka (EFF) asked how an over-payment could happen. He also asked how UIF reached out to distressed companies and how it reached potential entrepreneurs. He wanted more information on poverty alleviation schemes.

Ms F Loliwe (ANC) asked how long UIF would be able to sustain the deficit caused by revised budget.

Ms S van Schalkwyk (ANC) asked if investment portfolio funds were a result of interest or profit. She wanted more detail on the current vacancy rate? She asked what kind of training lay off schemes UIF might do, and how these would affect the unemployed.

Mr M Ollis (DA) asked if the learners were drawing money from tax or development levy, where they were learning and where they fitted in, in terms of the law. He asked to be given a rand figure for the over-payments, and also asked how his had occurred, and whether it was related to staff error or people claiming amounts to which they were not entitled. Of the R112 billion investments of UIF, he also wanted to know what percentage was readily available in cash. He noted that there was a reduction, in line with the Minister of Finance's announcements of a general budget cut, expected in terms of the post-UIF Bill, and said that this had been in line with the DA's call for budget cuts in some respects. However, he wondered if this reduction meant that the UIF would experience a budget deficit every year. Following up on earlier remarks, he also suggested that the UIF must have an educational programme to educate employers who were employing domestic workers. He was concerned with foreigners having to pay UIF and not being able to claim anything back.

Ms P Mantashe (ANC) asked for an enumeration of the sectors where jobs had been saved. She asked how UIF was intending to cut administrative expenditure. She also asked how the UIF would arrange for the training of the vast numbers of young unemployed people hoping to be entrepreneurs.

Mr Seruwe replied that UIF had just introduced registration of domestic workers. The compliance was not good, and there were only 800 000 domestic workers on the database. The Minister of Labour was holding imbizos with domestic workers, to educate them about the importance of UIF. UIF also had seminar campaigns, where it tried to make domestic workers more aware of UIF. The Department of Labour (DoL) would also make its communication processes easier. 

He noted that the employer had a responsibility to pay UIF, and if the employee was registered and the employer did not pay, the UIF would follow this up with the employer. Employers who did not pay UIF were charged penalties and interest. Employees from liquidated companies could claim and be paid if they were registered. UIF had now issued amendments to legislation that formerly precluded foreigners from accessing UIF benefits. However, it was not able to pay employees with documents who had not been recognised by Departments of Home Affairs and Labour.

UIF had a performance management system, in terms of which those people who were not performing to standard were disciplined progressively. It had put in place a new system where the employee would not leave a UIF centre without being helped. It had also embarked on training of front line staff to assist them  in handling clients. Currently there 2000 U-filing users and more than 60 000 were still coming to offices physically. The core business of UIF was to pay benefits and there was a need to discuss returns, distressed companies and learners because sometimes it was pushed into a corner. It was looking forward to signing agreements with Sector Education Training Authorities (SETAs) and Technical and Vocational Education and Training (TVET) colleges, who offered vocational training for people to become entrepreneurs.  Overpayments were a continuing and worrying problem and Mr Seruwe explained that this happened when a former employee  would continue to access UIF benefits despite having been employed again, which meant that the UIF then had to try to recover money. UIF would, in the case of distressed companies, be able to subsidise salaries for a period of six months, and some of the most notable companies assisted had included BMW, where the subsidy gave it a breathing space that enabled it to hold back on retrenching people. Training lay off schemes gave skills that would enable people to start their own companies as well as training on how to compile financial statements.

Mr Seruwe explained that when UIF was notified of the reduction in budget, it had immediately written to National Treasury and was assured that the reduction was only for a year. Income or interest came from bonds and dividends. UIF wanted to give more money to former workers as current benefits were not in line with what the International Labour Organisation (ILO) Convention 140 stated. The UIF's training interventions were geared to training to become artisans, electrician, fitters and turners. Most of those trained would then find employment in Transnet and the mines, and it also offered ICT skills user training since most of those being trained had not passed maths or science. It was also embarking on a six months training scheme of builders and plasters. The training money came from the skills development levy, coupled with stipends from UIF. UIF tried in all cases to avoid avoid overpayments, but these could often not be foreseen and thus avoided. Of the R112 billion investments, 10% was in cash, 40% in government bonds, whilst other money was invested in government parastatals such as Eskom and Transnet, as well as another 20% in the stock exchange. R20 billion was held in stocks and shares. Maternity benefits were paid for four months, and the amounts were dependent on last contributions from salary. The major problem was that most of the beneficiaries would apply for benefits through agencies. Beneficiaries were mainly in Gauteng, Western Cape and KwaZulu Natal, but UIF had ring-fenced some money for rural beneficiaries. The training of learners was done in house because it was cheaper. For training lay off, a company would have to approach the Commission for Conciliation, Mediation and Arbitration (CCMA) and agree that it would not retrench before it could then qualify for distressed company funding.

Ms Lezanne Briedehan, Director: Reporting, UIF, gave further details, saying that R22.3 billion was in equities, R73.3 billion in government corporate bodies, cash amounted to R1.2 billion and for the remainder she could not give a figure now, because financial statements were not yet audited.

Mr Ollis said that UIF must find a better way of communicating with employers of domestic employees. It was too late to wait until claiming, for a person then to be told that she was not registered. He wanted to invite the UIF to come and present at his constituency in Alexandria-Sandton, as well as to Mr Bagraim's Cape Town Central /Sea Point constituency, and to Mr America’s Western Cape Rural constituency. He suggested that UIF must also devise a mechanism to notify employers should there be any error in their payments. He noted that he himself had received no acknowledgements since he had started paying UIF benefits for his domestic worker.

Mr Seruwe welcomed the opportunity to be invited to constituencies. The problem with sending letters was that most of them were simply marked "return to sender". Nevertheless, DoL officials issued a compliance order and final reminder for employers who reneged on paying UIF. UIF had not yet prosecuted any employer for not paying UIF. The R2.3 billion social responsibilities money was allocated to anticipating the worst as a result of economic meltdown in advanced economies, but although UIF must and did "anticipate the worst", this had not yet happened and when the money was not taken up it would then be available to be spread over other years. Productivity SA was paid that money because it was dealing with job preservation.

Mr Moteka asked why it became difficult for foreigners to access their benefits when UIF could receive their subscriptions.

Mr Seruwe said registering was done by the employer, and some of the foreigners were undocumented.

Productivity SA 2015/16 Annual Performance Plan
Mr Bongani Coca, Chief Executive Officer, Productivity SA, said Productivity SA was an organisation for South African businesses, industries and general public that advised, implemented programmes, monitored solutions and evaluated progress in order to promote a more competitive South Africa. Its key priority sectors were manufacturing, agriculture, mining and the public sector. Its strategic programmes were turn around solutions, productivity organisational solutions, value chain and competitiveness and productivity awareness.

He explained the difference in these concepts. Turn around solutions was an intervention which delivered turn around and contingency plans for companies that were faced with risk of financial ruin, extensive job losses and sustainability challenges. The productivity organisational solutions were an assessment and productivity training programme that gave individuals the right attitude, knowledge and skills capacity to become a more competent asset to their organisation. The value chain and competitiveness aspects would generate and provide decision makers in government business and labour with information on productivity.

The budget for the year was R127.602 million.

Ms van Schalkwyk said there was a weakness with Productivity SA because other private companies were also doing the same. She asked what baseline it was to use in rural areas since its offices were in Gauteng, Western Cape and KwaZulu Natal (KZN). She wondered how sustainable Productivity SA was given that it only raised 9.3% of its income. She asked if it was going to experience a deficit since its SWOT analyses identified the threat of being absorbed by other government departments, with the new Public Service Act and arrangements earmarked for promulgation in the near future. She also wanted to know what it was spending on consultancies. .Finally, she asked why its targets were decreasing at a time when the budget was increasing.

Mr Ollis requested that every edition of the electronic newsletters and magazines should be sent to the Committee. He asked if Productivity SA had done any modelling on the effect of the national minimum wage on productivity in South Africa.

Ms Mantashe asked if this was the first time the entity was presenting, since it had not presented any comparisons with the past financial year, nor shown anything beyond the 2016 year.

Mr America asked why the targets were not broken down into quarterly targets. Productivity in South Africa was very low and declining every year, and the position was the worst in municipalities and the public sector. He asked if Productivity SA was able to make an intervention in the public sector. Its mandate was to improve productivity, usually with less staff, which he thought was parallel to the mandate of CCMA and UIF, as it was essentially targeting a decreasing workforce. He wanted to know how it would persuade contracting partners to accept its recommendations and wondered how binding these might be.

Mr Moteka asked if Productivity SA would have to be approached by distressed companies at their dying stage or whether, together with UIF, it could take proactive steps to assist. He noted that its partners in the coming year included Telkom and Fly SA, which were about to retrench.

Mr Bagraim said Productivity SA would be able to learn some useful lessons from the Western Cape Government's Red Tape Reduction Programme, which had been successful. Unions seldom allowed productivity debates to happen, and therefore, in order for its ideas to be considered, it must have buy-in from trade unions. There were lots of suspensions in state parastatals and the public service. Therefore, he felt that Productivity SA would have to talk of productivity in the public sector before going any further. He suggested that it must establish a hotline to engage potential smaller firms in agro-processing.

Mr Coca replied that no partner did the same as Productivity SA within the public sector and therefore it did see itself as a champion of productivity in the economy. Its work evolved every day and it welcomed new role players in the economy. It would like to be visible in all provinces but it would be very expensive for it to set up infrastructure which might do nothing for a large part of the time, although it would be happy to deploy more "foot-soldiers" to go and visit the provinces. It will be doing a study on the impact of its work in rural areas. UIF had presented a five year plan and the Employment Services Act compelled the UIF to transfer money to Productivity SA. Because the Productivity SA was included in that Act, it would not be absorbed by anything else. It had embarked, for the main part, with major job losses, thereby taking the money to where it was needed most.

Speaking to its own situation, Mr Coca noted that at most times Productivity SA had a maximum of 110 employees, although the present staff complement was 102. It trained people to become ambassadors who could be used at times of need.

In relation to the figures, Mr Coca said that the figures were presented in this way because Productivity SA was given to understand that it was only to present the figures for the 2015/16 financial year.

Mr Coca noted that it was true that productivity was low in South Africa. Overall, South Africa ranked somewhere in the middle, in terms of productivity amongst other world countries, and there was a need for it to rise into the premier league of productivity in the world. Productivity SA did use some consultancy services, but it also offered consultancy. Transnet and Rand Water were paying for utilising its services. It could not guarantee that its recommendations would be adopted but it tried as much as possible to be persuasive. It intervened in distressed companies either through referrals or from self awareness initiatives. Productivity should never be talked about at wage negotiation increases. He accepted the advice on agro processing and agreed that Productivity SA would forward its magazines and newsletters to the Committee.

Ms Mudzinga Mashamba, Executive: Turnaround Solutions, Productivity SA, noted that when doing evaluation of companies in distress, Productivity SA would source expertise that it did not have internally only from and accredited expertise list, sector by sector. This was because, for instance, insurance, agriculture and textiles all required different set of expertise. This was how it would use the consultancy.

The meeting was adjourned.

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