Compensation Fund Action Plan; UIF Labour Activation Programmes; Committee Reports

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Labour

06 September 2017
Chairperson: Ms L Yengeni (ANC)
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Meeting Summary

The Department of Labour briefed the Portfolio Committee on developments at the Unemployment Insurance Fund, as well as the action plan of the Compensation Fund.

The Compensation Fund reported that the Department had concluded 83% of the goals set out, and had created a programme to clean out inefficiencies. It had reversed R2.4 billion in debt to employers and had addressed issues that had been highlighted by the Auditor General (AG). It was currently in correspondence with hospitals and other stakeholders to improve the rehabilitation process and programmes. Internally, it had been able to finalise two of the objectives -- eradicating issues around the claims backlog, and the adjudication of claims. It was also working on providing ethics and fraud training to deal with issues of fraud.

The Unemployment Insurance Fund (UIF) said it needed to find ways to assist those who were currently without tertiary qualifications. It had spent its time on training, rather than placement. In order to reduce the number of layoffs, its main focus had been to up-skill, as the opportunity for placement was still limited. The turnaround solutions were aimed mainly at preserving existing jobs and where possible, providing the assistance necessary to create more jobs. There was also a need to assist companies facing closure to improve productivity and help them to be more sustainable.

The Committee Members said they were impressed with the commitment and effort that the Department had applied in ensuring that the Funds were running efficiently. They asked whether the R2.4 billion incorrectly charged to employers by the Compensation Fund had been due to a human or systems error. Why had R200 million been paid out in discounts to employers? How was the Fund coping with eliminating the backlog? The UIF was asked if it was considering training unemployed citizens, and whether any of its training programmes were reaching those in need in the rural areas. There was also criticism of the duration of the training and layoff scheme.

Meeting report

Introductory Remarks

The Chairperson said the Committee would be dealing with the plan of the Compensation Fund as well as issues raised at the last meeting. She proceeded to explain why the meeting which was supposed to have happened the week before had not taken place. She had taken the decision after learning that the Director General (DG) would not be able to attend, as he had been meeting with those who were running projects around the country. The Committee had previously been unhappy about the absence of the DG, so she wanted everyone to be present in order for it to get moving with plans moving forward. It had been the Chairperson’s decision to cancel, not the DG’s.

Mr Thobile Lamati, DG: Department of Labour, said the Department had achieved 83% of what it had set out to do. The one change that the Department had made was to change their business model for the Compensation Fund. These changes included the compensation benefit, pension, medical services and disability rehabilitation. The structures needed to meet and ensure these goals were focused more on the line structure and not the administration.

Compensation Fund: Briefing

Mr Vuyo Mafata, Commissioner: Compensation Fund, briefed the Committee on the plan of the Fund. He reiterated the fact that the Department had concluded 83% of the goals set out and that they were currently working on concluding the other 17% of the objectives.

Following the financial management review prior to the National Economic Development and Labour Council (NEDLAC), as well as taking into account the socio-economic classifications, the Department was currently trying to reduce the number of classifications to six.

The Commissioner said that the Department had created a programme to clean out inefficiencies. They had reversed R2.4 billion in debt to employers and had addressed issues that had been highlighted by the Auditor General (AG). The Department had also improved its claims to beneficiaries, some being paid by December last year, and it had been able to pay all necessary beneficiaries by May.

About 653 beneficiaries no longer needed to go to a pharmacy in order to receive medication, and currently medication was being delivered to those who were suffering from chronic illnesses. The Department was currently in correspondence with hospitals and other stakeholders to improve the rehabilitation process and programmes. Internally, it had been able to finalise two of the objectives -- eradicating issues around the backlog, and the adjudication of claims.

The integration of SAP software systems and the Umehluko online claims management system had resulted in medical claims being processed successfully. The Department wanted to ensure that the right services were given to clients, and also to ensure efficiency. It would be implementing the Commission for Conciliation, Mediation and Arbitration (CCMA) case management system for hearings and objection matters. The Fund had investigated the possibility of using the SAP CRM system for the legal case management system. The project had commenced in May 2017 and would conclude in October 2017. The system was envisaged to go live on 10 October.

The Department was also working on providing ethics and fraud training to deal with issues of fraud. A body to achieve this had been set up. The staff was being trained on the gaps found in their performance. The Department had also paid around R1.4 billion in claims, and anticipated that they would surpass the R4.1 billion paid out in the last financial year.

Discussion

Mr M Bagraim (DA) wanted a further explanation on the R2.4 billion in interest and penalties incorrectly charged to employers that had been corrected. He asked if the Department had gone to the employer body to correct this error, as there were people that had been incorrectly charged. He was happy to see SAP operating and running with Umehluko, as that could ensure that the online SAP was functioning. He asked if further research could be conducted, as doctors had complained about not being compensated. He wanted to know why only 637 people on chronic medication -- less than 1% of those on chronic medication -- were being assisted, because those with chronic illnesses had to take time off to collect medication. He was impressed that there had been interaction with hospitals. How far was the Department in fulfilling its promise to eradicate the backlog by this year? How would the fraud plan, both internal and external, manage claims, as some employees claimed they suffered injuries in the workplace when this was not true, so more information was needed from companies.

Ms L Theko (ANC) asked about the participation of health contractors, and whether the process was being monitored on those who were being given medication. How was the Department monitoring the eradication of the backlog, and how would the Committee be kept informed?

Ms S van Schalkwyk (ANC) said she wanted to see that the work was really moving forward, and if a timeline existed to ensure that their expectations were being realized, especially with regard to the backlogs.

Ms F Loliwe (ANC) wanted more clarity on the focus areas. She recognised the 83% overall progress, but some areas had been only 50% concluded, so she asked what plans had been set in motion to ensure that the other areas were improved.  She applauded the people management process, but wanted to know if the Department was getting value for money.

Mr T Rawula (EFF) asked for clarity on the synergy of the actions taken, as well as the strategy plan. The action plan was temporary, so he wanted to know about the progress from 1 July until now, as well as more information about the Compensation Fund backlogs. How far back did the backlogs go, and when would they be cleared?  He sought further elaboration on the R200 million in discounts made to employers, as well as the R2.4 billion debt written off, suggesting that whoever was responsible had to account for this error. He wanted more information on the 20 policies that were being affected by the intervention plan, the personnel requirements arising from the audit, as well as the timeline and process for filling the gaps. What was being done about the lack of skills?

Department’s response

The DG said that the last slide of the presentation had shown the progress of the claims and how far the Department had come. The progress of paying over R4 billion since 2016 showed that they had overcome the inefficiencies of processing claims due to the achievement of the objectives of the Compensation Fund action plan.

He responded to Mr Rawula about concurrencies, saying that the action plan did not replace the strategic plan, but instead directed the Department on the points it had to focus on. One of their goals was to change the culture of the Department. The critical issues that were not allowing them to process claims efficiently were technological challenges, which had been their reason for going back to the SAP system to run with Umehluko. The Department was still trying to overcome these challenges, so it was renewing its licences with SAP.

The department had also categorised the backlogs into two -- incoming cases and legacy cases. The main focus, however, was on the legacy cases, as they had existed before the migration of the system. Many claims could not be processed because they were incomplete, and the Department could process only competent applications. It was sitting with around 60 000 cases that it still had to process, so it was encouraging people to come in so that they could assist in eradicating the backlog.

With regard to the extent of the skills gap, the DG said that those occupying positions in the Compensation Fund who were not competent were being removed and replaced by the current management. There were gaps in the financial area, as highlighted by the skills audit. There were people who were not medically trained or competent who were dealing with medical claims, so the Department had ensured that all those who dealt with the medical side were doctors in all the provinces.

The Chairperson said the Department had indicated it would outsource personnel to do the jobs which others had refused. Did it not have the resources to employ people itself, as it operated throughout the country?

The Commissioner said that with regard to the R2.4 billion, all affected employers would have their accounts credited, and they had been informed about these measures.

Regarding the issue of the integration of SAP and Umehluko, the process had been done internally, but other activities were being outsourced.

Many doctors had seen the improvement, whereas others were still skeptical due to past inefficiencies, so they did not see much change.

With regard to the chronic medication, those who were currently being assisted were on active scripts from their doctors. The programme was still under evaluation in order to increase the numbers assisted.

There was currently no backlog on section 91 claims. If a claimant was unhappy with the diagnosis and the conclusion of the claim, they could write to the Department where a tribunal process was available, and where resources were available to ensure that they were appropriately compensated. They were dealing with the claims on a case by case basis.

Some clients were kept in hospitals for longer than they should be so that the hospitals could generate more revenue. The Department had therefore adopted measures to ensure that they learnt and improved from this.

He emphasised that the issues highlighted by the Auditor General were being processed. Review and assessment models had been put in place to ensure that fraudulent activities were eradicated – for instance, the clients had to consult with more than one entity in order for their claims to be processed.

Mr Rawula needed more clarity on the R211 million in discounts.

The Commissioner responded that since 2012 there had been an incentive for employers to submit the relevant documents in order to ensure that they received the discounts.

He said that the People Management had provided value for money. There were indications that the interventions were showing improvement. The Commission had visited Labour departments and there were fewer complaints from staff. Instead, they were receiving more suggestions on how to improve further. He acknowledged that the requirements for service providers had been set higher than necessary, and that the Department realised that it could do some of the tasks itself. On the issue of rehabilitation, if someone was injured and their skill was still required, the Department had measures to reassign those skills.

Ms Van Schalkwyk said she needed more information on the rehabilitation process, and if the Department also assisted with placements.

Mr Bagraim wanted to find out if the Department was still interested in taking in more experts, and if they would be part of the system. He said that some people in the private sector were over-medicated and asked what had been done to ensure that the efforts of the Department were operational.

Mr Rawula asked if the R2.4 billion had been an error, or if there had been accountability for this error if it had been due to the system. He requested more information on the audit with regard to the skill gaps, as well as the gaps in the medical processes.

The Commissioner said that in respect of rehabilitation, they planned to offer social as well as vocational rehabilitation, and re-skilling would be done if necessary. The Department wanted to incentivise employers to help re-skill and rehabilitate employees, using assessments to ensure that they had labour activation within the Fund. The training of management was a priority for the Department. Previously the functions of the Fund had been limited -- for example, if a doctor wanted to see a client more than was documented, the Department had no way of contesting this. They had thus attempted to employ doctors and other personnel to ensure that the system ran smoothly.

With regard to the R2.4 billion, this had been a system error. When the programme was implemented, there had been configurations that were not present.

Unemployment Insurance Fund (UIF): Briefing

Mr Teboho Maruping, Commissioner: UIF, said that the Committee had previously requested the Department to go back and to look at all the projects in order to check their progress. He apologized for the report being not completed on time, as they had needed to ensure that they produced a concise report on all projects. The Department had completed an assessment on the types of beneficiaries. It needed to find ways to assist those who were currently without tertiary qualifications. It had spent its time on training instead of placement. In order to reduce the number of layoffs, their main focus had been to up-skill, as the opportunity for placement was still limited.

Funding for the Training of Unemployed (ToU) programme was conducted on a  50-50 split basis between the Department and the Sector Education and Training Authorities (SETAs). Some of the SETAs had been able to resolve some of their major issues only recently. Some companies which were not in distress were not always turning in their financial reports due to the benefits realised. Companies usually came for training through the layoff scheme.

The Commissioner said the UIF’s turn-around solutions included the training of unemployed, enhancing the employability of UIF beneficiaries, and completing current projects. Regarding the training of the unemployed, only 5 511 had been recruited out of a target of 6 121.

The Commissioner continued to highlight that the turnaround solutions aimed mainly to preserve existing jobs and where possible, to provide the assistance necessary to create more jobs. There was also a need to assist companies facing closure to improve productivity and help them to be more sustainable.

With regards to the training and layoff scheme, there had been successful projects. Even though there was no focus on the placement of learners after being skilled, there were six areas that had been identified where learners had been placed in companies for work exposure, and in some cases they had been absorbed within those companies. The highest percentage of trainees came from the Transport Education and Training Authority (TETA) and lowest percentage came from the Manufacturing, Engineering and Related SETA (MERSETA). The highest absorption came from Exxaro.

Discussion

Mr Rawula welcomed the report, but suggested that it seemed too good to be true. Reflecting on the labour programme, he asked about the training of unemployed citizens. Although the Department was moving in the right direction with regard to the absorption rate, he considered the Training and Layoff (TAL) scheme was a waste of money, as the duration was only six months and 100 companies could not lay off employees for that length of time. He suggested they should have a retrenchment assistance plan instead, and those who were retrenched should be trained instead.

Mr D America (DA) referred to the Labour Activation Programme, saying that this was a necessary process. However, the expenditure for it was very low considering the budget, which suggested that there was something wrong with the environment and the context of its implementation. In 2010, a lot of employment had been created due to the World Cup, but many were left unemployed after the tournament. The main concern was to save jobs, so it was important to equip people with transferable skills. The Department must look at ways to assist companies, as well as those who were retrenched. The Commission should assist companies to be more financially viable.

With regard to current projects, such as training of the unemployed, what was revealing was that there were few projects being supported. He highlighted that little was being done in the Western and Eastern Cape, while projects that were being supported by the UIF were in KwaZulu-Natal and Gauteng. He asked why the concentration was on just these two provinces. Why had the Department given almost R2 million to one company through the training layoff scheme when they had only 325 employees?

Mr Bagraim said that he was not a fan of the training layoff scheme. It was a major expense that did not meet the objective. Further training using SETA did not support the objectives, as they had not passed the audit. He asked why private companies could not do the training, as companies did not trust those who were trained through the SETAs.

Ms Theko said that she had seen the results of the intervention in the oversight visits. However, there had been no indication of how long the learners were involved in the process.

Ms Van Schalkwyk commented that expenditure trends were not improving, and asked why the UIF continued spending so much money.  The current absorption was 56%, which was not enough in relation to the high rate of unemployment.

Ms Loliwe said that colleges and universities were recognised as training institutions. What was being done about those in rural areas, where there was no access to these institutions? Was there any advocacy? She asked for information about other stakeholders that were involved, in particular Toyota Sandton.

The Chairperson questioned the number of students participating in UIF programmes.

UIF’s response

The DG agreed that there was information missing, and said that the Department would ensure the Committee would be updated with the complete figures.  

He did not agree with the sentiment expressed that the training layoff scheme was inefficient. However, it needed to be modernised to suit the current times, especially when taking into consideration the 2008 crisis, where many companies had lost their revenue and many employees had been laid off.

When some companies -- for example, a motor manufacturer such as Mercedes Benz --changed their product lines, they laid off workers, so the Department should be notified when these changes were made.

He agreed that it was a waste of money to assist someone in a programme lasting only a couple of months. Some companies did not want to expose themselves to scrutiny, but they needed to open their books so that if they were in distress, the Department could intervene. The only thing about the training layoff scheme that required attention was the packaging. However, he did not believe that the Department had wasted any money at all. The Department wanted to fund productivity in South Africa, but this could be done only on a project-by-project basis.

He said there was information on projects in the Western and Eastern Cape which were currently in progress, but there needed to be an ongoing process to ensure that the information was made available.

He responded to Ms Van Schalkwyk on expenditure trends, saying the Department had increased the number of unemployed people being trained, and that this was a learning experience. They did not have information about the dropout rate, but as they improved their system they would have that information. The Department’s efforts were aimed more at training, but there would be a focus on the placement aspect.

The Commissioner said that they had separated the Toyota situation from the rest of the report. He added that the UIF had not given much attention to rural and remote areas, but realised the need to do so.

Ms Mpumi Mnconywa, Chief Director: Labour Activation Programme, said that the Department was working with Transnet to provide training in different skills, as well as artisan training, and referred the Committee to the amount being spent on each learner. The Auditor General had identified that they had a tendency of funding government entities which were not using their funds well, so they were have to find different measures to address this. She said the training expense incurred by using the services of the SETA amounted to R150 000 per leaner.

Mr America asked for information on the R2 million paid out to one company.

The DG said that the UIF was working with municipalities, and that a session with employers would be taking place.

Mr Bagraim complimented Commissioner Mafata on the position he had taken in the Department. The UIF had been ineffective, and he commended the structure that had been put in place and the work that was being done.

Ms Van Schalkwyk felt that the Committee had come down hard on the Department, but she was impressed with the amount of detail which the DG and the Commissioners of the funds had put into the reports, and this should be commended.

The Chairperson said that when she entered the room, she knew that today was going to be a good day. She thanked the DG for his quality leadership. Great leadership accepted criticism, so the ability to work on the issues identified was commendable. The DG was on the right path, and his team understood his leadership.

Committee matters

Adoption of the minutes of the Committee’s previous meeting was proposed by Mr America, and seconded by Ms Theko. The minutes were adopted.

Ms Loliwe requested that the Committee discuss the Gauteng oversight visit, and indicated that the reports for the third and fourth quarters were fine. The Committee adopted the reports.

Ms Van Schalkwyk placed on record that she would be on study leave the following week. The Chairperson said that she too was meant to be on study leave, but she would be present due to the nature of the issues that had to be dealt with.

The meeting was adjourned. 

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