Audit outcomes of UIF & CF and overall performance: briefings by CF & UIF Boards; with Deputy Minister

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Employment and Labour

16 October 2019
Chairperson: Mrs M Dunjwa (ANC)
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Meeting Summary

The Committee was briefed by the Boards of the Compensation Fund and the Unemployment Insurance Fund, two entities of the Department of Employment and Labour, on their audit outcomes and overall performance.

Members heard that the CF Board had recieved disclaimers as the outcome of its audit report around the areas of Revenue, Benefits, Investments, Irregular Expenditure and Fruitless and Wasteful Expenditure. The main causes of disclaimers and the slow pace of performance was around the ICT environment at the Fund, poorly configured systems and a lack of control over the management of ICT within the Fund, as well as skills gaps in financial management identified in the past.

Members expressed that they found it hard to understand why the funds got as many adverse audit  findings for a number of years despite the fact that there were all these governing structures. Members were disappointed to hear that even though there were quarterly meetings there had been no plans of action to respond to the shortcomings in operations, and there was no record of a proposed plan of action from the Board to respond to the numerous adverse findings. Eventhough the audit Committee had found that there was a lack of decisive leadership, nothing had been done about it.  Members even went so far as to say that the board was lacking in its executive duty to oversee, and  provide strategic leadership and direction.

Members asked whether this advisory board was also paid; how much was spent on Umhleko; and more importantly, why it was unable to determine Irregular expenditure for the amount of R760 million, fruitless and wasteful expenditure for the amount of R452 million, and outstanding claims for the amount of R9.4 billion and R9.6 billion. Members were disappointed to hear that the offices of the CF in the rural areas did not provide good services. On a positive note there was a lot that had been done by the entity and its honesty about its shortcomings were admirable. Members concluded that the board needed to be assisted through capacitation and continuous support from this Committee.

In the UIF Board briefing Members heard that Audit Committee (AC) had indicated that the control environment required improvement, and it identified the key areas of concern that should be addressed to improve the overall adequacy and effectiveness of the controlled environment. These areas were: quality of the annual financial statements; capacity and skills within the Finance department; investments; supply chain and contract management and irregular expenditure. The Audit Committee had urged the UIF team led by the Commissioner to focus diligently on the following in order to realise the UIF vision: improving the audit outcome by implementing the recommendations and continually striving towards enhancing governance, risk management and internal controls.

Members asked if the staff could use the GRAP system on their own; where did the majority of the candidates who were placed on the graduate labour activation programm end up; whether internship and learnership trainees would be absorbed; what the gaps were which were identified; what the UIF Board would add to  the performance indicator of non-achieved targets; if investing with the PIC was a regulatory matter; and more importantly how the board, as an advisory board, did not intervene to address the matters raised by the AG.

The Deputy Minister said that government strived to implement gender parity accross the board. She also urged that the legal interpretation of an advisory board vs an executive board needed to be unpacked. The Committee felt that it (this Committee)  needed to strategise to assist the board to come up with interventions to overcome its capacity constraints. The board was encouraged to take the engagement seriously and draw the lessons to improve.

Meeting report

Briefing on the Compensation Fund Board

Ms Jacqueline Bodibe, Deputy Chair, Compensation Fund Board, said that the Compensation Fund Board was established in terms of Section 10 of the Compensation for Occupational Injuries & Diseases Act (COIDA). It was an Advisory board to the Minister, on matters of policy arising out of, or in connection with the application of the COIDA.


The Compensation Advisory Board was appointed by the Minister from 01 January 2018, representing Organised Labour, Business, Government and the Health Professional Council of South Africa (HPCSA). The Board adopted a Board Charter which spelled out its responsibilities and the procedural matters in the board and its sub Committees


The Responsibilities of the board as expressed in the charter were as follows:

  • To advise the Minister on matters of policy arising out of, or in connection with the application of compensation in terms of the  Occupational Injuries and Diseases Act, 1993(Act no 130 of 1993) as amended;
  • To advise the Minister on the nature and extent of the benefits that shall be payable to employees or   dependents of employees, including the adjustments of existing pensions;
  • To advise the Minister on the appointment of Assessors;
  • To advise the Minister on the amendment of the Act; and
  • To advise the Director General regarding the performance of particular functions


The Compensation Fund Board (hereafter referred to as the CF) received disclaimers as the outcome of its audit report for the following reasons:


  • Revenue
    • The CF was  unable to validate the nature of business and the number  of employees in each company assessed
    • The CF  was unable to collect contributions effectively
    • The IT system was poorly configured
  • Benefits
    • The CF could not validate claims on the current Claim System  which led to inadequate records management
  • Investments
    • Introduction of Socially Responsible Investments (SRI’s) which accounts for 3% of the investment portfolio have made it difficult to perform consolidated financial statements.
    • This is due to different year ends, different accounting policies and the unavailability of financial formation in line with the CF’s reporting time frames.
  • Irregular Expenditure
    • There was insufficient evidence for irregular expenditure incurred.
  • Fruitless and Wasteful Expenditure
    • There was insufficient evidence for fruitless and wasteful expenditure.


The main causes of disclaimers and the slow pace of performance was around the ICT environment at the Fund. Poorly configured systems and a lack of control over the management of ICT within the Fund, as well as skills gaps in financial management identified in the past, took time to be addressed by management. This resulted in no clear turnaround strategy and audit action plans. The inability of the board to intervene at an executive level, as it was advisory, resulted in the inability to act on poor performance or misconduct. Weak controls as a result of poor ICT systems resulted in fraud and opportunism by third parties.


Root causes of the Challenges


  • The main causes of disclaimers and slow pace of performance is around the Information, Communication and Technology environment at the Fund. Poorly configured systems and lack of control over management of ICT within the Fund
  • Skills gaps in financial management identified in the past took time to be addressed by management resulting in no clear turnaround strategy and audit action plans.
  • Inability of the board to intervene at an executive level as they are Advisory result in the inability to act on poor performance or misconducts
  • Weak controls as a result of poor ICT Infrastructure/systems resulting in Fraud and opportunism by third parties

The Board provided oversight quarterly on the following strategies:

  • Audit Action Plan to address audit findings and the root causes of the findings.
  • CF Turnaround Strategy 2.0 to enhance the internal control environment.
  • Annual Performance Plan on quarterly targets.


The Board has observed that the current claim system (uMehluko) was a challenge and that the new e-COID system will assist the CF performance. The e-COID system was launched on the 1st of October.


Following the recommendation to address the skills gaps, a skills audit was conducted and the organisational structure was reviewed. As a result the CF has addressed the skills gaps through the appointment of technical professionals to manage finance and core business areas.


uMehluko had been decommissioned and the new COMPEASY system was being rolled out.

Performance of the CF has improved from under 40% five years ago to the current 67% with all service delivery indicators being achieved.

Investments of the CF have increased in value over the last five years and investment revenue comprises a large part of the total revenue of the CF.

An Action Plan had been developed to turn around the operations of the CF and improve audit outcomes

                                                                                (See Compensation Fund Board Report)

Discussion on the CF

The Chairperson said that both the CF and the UIF Boards were male dominated.

Mr N Hinana (DA) added to the Chairperson’s comment that the funds’ Boards were male dominated.  This Committee needed to take a stand. Society allowed males to dominate all institutions. Women had to be given the opportunity to lead. The Cpmmittee had to give the boards a deadline by which the gender balance had to be rectified. The patriarchial system  had sidelined women, labelling women as unsuitable to lead.This was a tradition and a culture which was found everywhere in society for example in church as well.  He did not want to go as far as saying the boards should be disolved, but they had to review their composition.

Mr X Ngwezi (IFP) said that the Chairperson made comments before about the majority of the board members being men. He said the men on the Board did not represent him as a man very well. When they observed Parliament, and they saw  male members of parliament misrepresenting them as men, they would make negative comments.  When one was given a task, one had to perform it well. The Board  had to be assisted, or disolved, so that other capable people could be given the tasks.

Ms Bodibe  replied that the CF Board consisted of 16 members of which 5 were women. The number of women needed to increase for the Board to be properly constituted.

Mr S Mdabe (ANC) said that the meeting was called for the Committee and the Boards to work together to make sure government performed at its optimum. The Committee had received the presentation on the audit outcomes from the managements of both the UIF and the CF. This meeting was called in relation to the questions relating to the Boards’ functionality pertaining to exercising their fiduciary duties  and oversight over the governance of the funds.

The Committee had received the Auditor’s Report (AR) as well. In the AR there was no comment from the Board on the AR. There were comments from other stakeholders, but none from the Board. There was mention of the number of meetings the Board has had during the Financial Year. There were governance structures like the Internal audit Committee, Audit Committee and the Risk Management Unit as well. What one tried to understand was why the funds got as many adverse audit  findings for a number of years despite the fact that there were all these governing structures.

Mr Mdabe quoted from paragraph 14 of the  Audit Committee Report. If the  information was wrong, he could be corrected.  The report said that the Audit Committee met on a quarterly basis. The Audit Committee would then have to meet with management to report. If, in the first quarter, a meeting report was presented to the Board, in the second meeting there had to be a report in terms of  action plans which were identified in response to the gaps in the first meeting. Until the last quarter, there had been no plans of action to respond to the shortcomings in operations. This raised a number of questions.

What raised more questions, was, when managament could not provide accurate financial and performance information, as well as annual and consolidated financial statements, there was no reaction from the Board. There was no record of a proposed plan of action from the Board to respond to these adverse findings.

Mr Mdabe reiterated that there was a lack of properly docummented processes and key controls. Part of the role of the Board was to develop policies to effect systems of control so that management had to adhere to good governance, but this action was absent in the case of this Board, according to  this report.

The report stated that there was a “…lack of accountabilityof the fund leadership.” The fund leadership included the management, the executive and the Board members. This was identified by the audit committee appointed by the Board, so that they would be in a position to perform their fidiciary duties.

Mr Mdabe went further to say that “Assurance providers, including audit and risk management committees and oversight bodies appeared to be in place for compliance purposes, given the fact that their recommendations  were not taken seriously.” – another quote from the report.

The audit committee found that there was a lack of decisive leadership. It had been raised by the Audit committee. It had been presented. If it had not been presented, why not? If it had been presented, what has been done about it?

Ms N Nkabane (ANC) referred to slide 9.  It said :”They have not yet made interventions”,  and “the Board would provide interventions on the audit outcomes” but  when one proceded with the presentation one would see that the root cause had been provided. Slide 12  shows Interventions put in place to improve performance of the entity, which was good  as well as resolutions. From her point of view, the board was lacking in its executive duty to oversee, and  provide strategic leadership and direction to the entity.

She said that she would like to see the Board aligning all these strategies and interventions that it presented before the Committee with the practice of the entity to  actually adhere to the legislative  and other mandates, and from time to time to evaluate  the performance of the entity. What was lacking with the interventions of the audit action plans was that she did not see that the interventions were smart enough for the Board  to actually,  from time to time, measure the performance or check the program as far as the audit findings were concerned. It needed to apply SMART principles, if for instance the findings said that the entity had to implement something then there had to be a specific time or date  for the finalisation of the audit queeries.

Mr Ngwezi said, referring to page 10, he liked the entity, because it was honest.  It told the Committee what the problem was. He quoted the third bullet point which read: “The inability of the Board to intervene at an executive level as they are advisory result in the inability to act on poor performance or misconduct”. Here the problem was with the driver. If this was a business and it became apparent that the problem lay with the manager, the owner had one of two options: Either to capacitate the manager or to fire the manager in order for the business to perform. The Committee had a choice: it could either capacitate the Board or fire it. The Committee had to be careful about adding responsibilities to a Board which were already struggling to fulfil their mandate.  It could make things worse. In the interventions, something had to be done about the Board. He did not know how kind and generous the Committee could afford to be, because it had been told what the problem was.


Mr Hinana said that the root cause of the  challenges was the insufficient capacity of the Board. He suggested that the board should be capacitated.

Dr  M Cardo (DA) said that the board claimed to be unable to intervene at the executive level, because it only had advisory  powers, but the Board could advise the Minister.

Ms Bodibe replied that one piece of advice the Board gave the Minister to deal with the Board’s incapacity, was to create a charter.  In terms of the charter, different committees would be created to deal with the different aspects of its responsibilities.  The Board was busy formalising the charter.  The second leg was, as she indicated earlier, that there was a COID Bill, but prior to that the Board wanted to advise the minister that this board became an executive board. Unfortunately, the conclusion of the Board’s interaction with the minister was that it was not possible. The only possibility was for the Board to strengthen itself within its current status, and that was what the Board was trying to do. This incapacity made the Board unable to deal with some aspects of its responsibilities.  

Ms N Hermans (ANC) asked, apart from the ‘advisory only’ status of the Board, which other factors hampered the Board from acting. The Board could advise the Minister to act on fraud and non-performance but nothing was done.

Ms Bodibe replied that in February the Board had a meeting with the DG and the previous Minister, where the Board indicated that some of the challenges it faced were administrative, and those were delegated to the DG in terms of the Act, which said the DG needed advice.   That advice did not necessarily come from the Board. The Commissioner would provide that advice. Hence, one of the responsibilities as indicated by the last bullet point, the parties then agreed that the Board would begin to provide administrative advice to the DG. This agreement was not in the charter, but would be put in. 

Mr Sam Tsiane, Board member, CF, said that according to the prescripts of the AG, the board was supposed to sign off on the audit report.  The challenge that the Board was sitting with at the moment, and hence it made the distinction between an advisory board and an executive board, was that almost all executive responsibility rested with the DG as the Accounting Officer. The Act stated that the DG had to present the report to the Minister  and the Minister had to present the report to Parliament. The process of establishing a charter had been painful for these reasons. The Board were told in no uncertain terms by the State law Advisors that many functions which would apply to an executive board, were not the role or function of this Advisory Board of the CF.  The Board had not seen the Audit Report. The issues reflected in the Audit report were issues that the board still had to attend to. He had been delegated to meet with the management of the fund to establish what was happening, so that the board could come up with measures of intervention.

Mr Tsiane added that when speaking about the non-capacity of the Board to intervene, there may be a language problem, but the point he was trying to make was that, if an official commited an offence in a different organisational setting, the person could be taken through a disciplinary hearing and if found guilty, dismissed.  With the CF, one had to go to the Minister, and thereafter the Minister would go through all the processes. There could have been a language issue, but the point was that there was a constraint on this board.

The Chairperson  asked how a toothless board could oversee an entity managing huge sums of money. 'Why did the board, after experiencing the same challenges for so long, only request during this 6th administration to be an executive board’?

The Chairperson asked why the board should not be dismissed. The Department of Employment and Labour (DEL) never. Since 2009 it had introduced an amendment to the law to address this situation. If it happened, she may have missed it. This was serious. It was also about the Committee’s integrity.

Mr Ngwezi said the CF spoilt the presentation. The CF wanted to blame the Minister now. All should be in agreement that there was a problem. The board needed to be assisted. This was part of the problem why it could not work efficiently. This problem existed since 1994. He asked the Board to give the the Committee confidence. It was not executive, but advisory. He asked the Board to reveal the problems in order to get assistance. 

Mr M Bagraim (DA) said the Committee was not trying to lay the blame at the Comissioner’s door. He had inherited a very fraught and destroyed system when he came in. The system was destroyed before he arrived.

The Chairperson asked whether this advisory board was also paid.

The Deputy Minister replied that the board was paid.

The Chairperson asked what the role was of the Board, if an entity had, not five years of disclaimers, but nine years. The third bullet point on page 10 said it all. Maybe Mr Ngwezi was correct in saying that the disclaimers were not elevated as a major challenge. The Board also referred some of the issues to the Commissioner to resolve, but the Commissioner reported to the board.

Ms Bodibe, replied that it pained the board that it had gone through these  disclaimers for so many years. She wanted to respond to the issue of the responsibilities of the Board and its functions including its accountability. The board noted that, even if it was advisory, it still had the fidiciary duty to make sure that things happened properly. 

Mr Ngwezi said his comments related to pages nine and 10 which dealt with audit outcomes. The  audit outcome said  that there was insufficient  evidence for irregular expenditure incurred and there was insufficient evidence for fruitless and wasteful expenditure incurred. The law was clear on procedures in instances of irregular, fruitless and wasteful expenditure. It had to be reported, investigated, and consequence management had to be put in place. But how was the law going to  be implemented when there was insufficient evidence?

Mr Bagraim referred to slide 9, which he said was worded wrongly. It said ‘Insufficient evidence’. The truth was that there were weak controls. The entire system had been destroyed.  How much did they spend on Umhleko? Now there was a new system.

Dr Cardo said that the presentation did not give accurate effect to the ‘basket’ case the CF was. According to the AG, the situation was so dire, that if he did not have the obligation to audit all state departments and entities, he would withdraw from auditing the CF. Dr Cardo said that the CF was unable to determine Irregular expenditure for the amount of R760 million, fruitless and wasteful expenditure for the amount of R452 million, outstanding claims for the amount of R9.4 billion and R9.6 billion.

Mr Ngwezi said that there was a comment about a problem with an issue of the financial unit. He was pleased with the intervention. Qualified staff had been hired. ‘How did the previous staff get hired if they were unsuitable’? ‘Who hired them’? The person who hired an unqualified person for a financial position was aware that he was creating a problem. The board acted on behalf of government. The board had to make decisions that was not going to cost government in the future.

Mr Bagraim said that the presentation stated that there was opportunism by third parties. Who was prosecuted and who went to prison?

Mr Bagraim said the Steinhof case was known, but did the CF invest in other ‘naughty’ companies.

Dr Cardo said that there was a great deal of pressure on the Public Investment Corporation (PIC) to use its funds for development.  Mr David Masondo had said that workers’ life savings would be protected. ‘What interactions did the CF board have with the PIC’?

Ms Hermans asked whether the weak controls, poor ICT, fraud, and opportunism by third parties,  were all occurring as a result of uMehluko? ‘What were the other causes and which actions were taken’. Umhleko was being phased out. The CF was silent on the other issues and actions.

Mr Bagraim stated that the system was being phased out since one year previously. ‘How long did it take to phase out the system’.

Mr Bagraim said that Slide 18 referred to the new E-COID system. ‘How long had the CF been working on it and how much did it cost’? ‘What did Compeasy cost’?

Mr Vyuo Nafata, Commissioner, CF, replied that e-COID was the modernisation project of the Compensation Fund, and one of the projects within the modernisation was the development of the claim system. The claim system was called Compeasy.

Mr Nafata replied that the difference between Compeasy and Umehluko was that, with Compeasy, the CF procured the licenses and configured those for their claims purposes, whereas with Umehluko, the system was owned by  Rand Mutual Alliance and the CF paid for the use of the system, not for its ownership.

Mr Nafata replied that over the five years that Umehluko was in use the CF paid R250 million.  The SAP system that was bought and was just configured, was owned by the CF at a cost of R120 million.

Mr Bagraim said that the CF had  failed every audit for five years . It was constantly rolling out new systems. It just sounded like more of the same to him. The CF had to tell the Committee what was different this time around.

Mr Nafata replied that the presentation mentioned the poor configuration of Umehluko which caused weaknesses in the control systems. The CF had tried to adopt the best practices that came with the system and also the internal controls built into the system, because the systems were built based on years of best practice. This was one of the things that was done differently.

Mr Nafata replied that the system has just gone live. The CF was using a phased-in approach. It started first with the claims registration process. Claims could be registered internally. This was being rolled out in the provinces internally. The system would soon be released to the external public, for employers to register their claims themselves from the 20th of October 2019. Then it would be released to medical practitioners to submit invoices directly from the 28th of October. So, the system had already gone into production and Umehluko was decommissioned on the 12th of  September 2019.

Mr Nafata replied that the CF paid claims out of the Umehluko system and because of the control weaknesses that had been identified in the system, the AG said it could not really place full reliance on the amounts that was coming out of the system. Some amounts might be fraudulent, or, because of the breaches in the controls, the CF may have paid the wrong people. This was why a disclaimer had been placed on all the figures, and when the CF used the outsanding claims reserves that was put on the balance sheet, it also came from the data that the AG did not want to place reliance on.

These were some of the  things addressed in the new claims system, to make sure that all these controls weaknesses that had previously been identified in Umehluko -  which Mr Mdabe pointed out and had been raised by the audit committee as well - would be addressed by the new system. It could not be addressed in Umehluko. From there the decision came to develop a new system.

Ms A Zuma (ANC) said that the offices of the CF in the rural areas did not provide good services. People waited long in long queues and the staff in most cases were temporary.  ‘How did the CF expect temporary staff to provide a good service’? This was further evidence that the DEL had to capacitate the board.

Mr Hinana asked whether workers from neighbouring states were also beneficiaries of this fund, even when they retired to their home countries after contracting mining-related diseases. ‘For how long were they covered’?

Mr Nafata replied that all workers including workers from foreign countries qualified for all benefits. It was paid monthly through their embassies or they had the choice to take a lump sum when they left.

Ms Nkabane said that the other issue that she had identified in the report was that there was a lot that had been done by the entity. She saw on slide 19 that on the CF’s achievements to date that it had positively implemented to actually turn the tide, but maybe the entity did not tap into the media space enough. Its  achievements had to be publicised and advertised so that rural people could be aware of what the CF and the broader Department was doing. These achievements were very good but the board needed to intensify its oversight role, as well as its advisory role.

Ms M Bronkhorst, COO, DEL,  said that the Deputy Minister would give direction regarding the future of the boards.

Ms Bodibe replied that with this crisis in the CF, the board was planning to have quarterly meetings with the new  Minister to deal with the challenges. The board planned to first have a  workshop with the Minister to iron out the turnaround strategy to come up with key strategies to deal with the disclaimers identified by the AG. The board was glad that Members wanted to help it do its work. The board explained to the Minister that it had some queeries about fraud in the fund, but because the board was employed by the fund, it did not have jurisdiction to immediately do consequence management. It still had to go through the DEL. The red tape needed to be cut.

The Chairperson said the Committee threw the cat ‘amongst the pigeons’, because the 6th Parliament was about taking responsibility and  leaving a healthy legacy and example for the next administration and the country.

Briefing on the Unemployment Insurance Fund Board

Mr Welcome Nzimande, Chairperson, UIF Board, introduced the presentation by reading from with a 3-page pre-amble, a separate document from the presentation (See document). The pre-amble in short sketched the socio-political background in the country against which this meeting was taking place. It also listed and elaborated on the main focus areas the UIF and the Committee had to collaborate on. These were service delivery progress, financial performance, audit outcomes, organisational performance and performance information, risk management, poverty alleviation and governance.

Mr B Mahlangu, board member, UIF,delivered the presentation. He said that the priorities of the Fund was as follows:

  • Increase contributions collected by at least a rate equal to the prevailing Consumer Price Index;
  • Increase the rate of processing claims in order to pay within the targeted service levels and turnaround times;  
  • Contribute in the various schemes designed to alleviate the  

harmful effects of unemployment which includes investing

           mandated funds in   Social Responsibility Investments; and

  • Maintain effective systems of internal control as required by the Public Finance Management Act


Financial performance showed that the fund had received R19.5 million in contributions in the Financial Year (FY) under review. Among the different types of benefits the fund paid out during the FY, included maternity benefits, adoption benefits and payments to dependants.

Areas of concern were senior managers who were deemed unfit to execure their mandate, capacity in the labour Activation Programme as well as in the finance  A total of 36 meetings were held.  The Labour Activation Committee had no special meetings.

 Post Audit Workshop Recommendations were as follows:

  1. Received presentations from Auditor-General and Internal Audit on the focus areas to improve audit opinion;
  2. Conducted root cause analysis for each finding;
  3. Developed overarching action plan to address other high risk areas;
  4. Developed main pillars to drive clean audit in support of the government priorities.

UIF Audit Committee’s View on 2018/19:

The Audit Committee (AC) indicated that the control environment required improvement. It has also identified that the following key areas of concern that should be addressed to improve the overall adequacy and effectiveness of the controlled environment:


• Quality of the annual financial statements;

• Capacity and skills within the Finance department;

• Investments (due diligence, disclosure, service level agreement and compliance);

• Supply chain and contract management;

• Irregular expenditure;

• Consequence management;

• Record keeping;

• ICT and cyber security;

• Implementation of the SAP system;

• Business continuity management; and

• Compliance.


The UIF held a post-audit workshop on the 19th and 20th September 2019 to discuss the findings and to develop adequate action plans. It received presentations from the AG and Internal Audit on the focus areas to improve the audit opinion, it conducted root cause analysis for each finding, it developed an overarching action plan to address other high risk areas and it developed main pillars to drive a clean audit in support of the government priorities.

The AC urged the team led by the Commissioner to focus diligently on the following in order to realise the UIF vision:


  • improving the audit outcome by implementing the recommendations
  • continually striving towards enhancing governance, risk management and internal controls

(See UIF Board Report)


Ms Nkabane referred to Slide 16. She was satisfied that the vacancy rate has dropped from 13.2% to 8.3%, but referred to point 5, the one that talked about the lack of capacity in finance where staff were struggling to learn the GRAP Standard Reporting system. She asked whether the staff, who had been taken through a programme of skills transfer by an expert, had been enabled. ‘Could they use the system on their own’?

Mr Tshefuta  agreed with honourable Nkabane about outputs and impact. Taken to its logical conclusion, it meant that if the output was  R100 to place two people in learnerships. If the two people were placed the output had been achieved. It still said nothing about the content, productivity, or productive capacity of what they were doing. The question lifted the focus above the output level, into the outcomes and impact levels. In the planning paradigm of the board, was it taken right up to the impact level. From there the issues raised by the Chairperson on page 3 of the summary of his input. The impact and the outcome consideration was such that, one asked the question: ‘Out of the candidates who were placed and went through graduate and labour activation programmes, where did the majority end up’?

Ms Nkabane asked whether internship and learnership trainees would be absorbed or might they get job opportunities at the entity at the end of their training.

Mr Mahlangu said yes. A skills audit would be done internally to know where the gaps were internally, and interns who were fit for purpose would be absorbed.

Mr Tshefuta replied that this was a strategic issue of interest to the board which had been raised to the executive management not only as far as interns were concerned. It started right from the more senior levels of management to the least in the institution. The principle was to retain as much as possible - someting that the board had raised - which to begin to institutionalise it. This  included instances where the Commissioner was involved so that rotation or the delegation of certain functions was ensured, if anything happened and the Commissioner left, any of the officials at senior management level would be able to lead with confidence.  

He could share with the Committee that there were some operational constraints which prevented the UIF from offering learnerships and internships. The UIF said it could not provide learnerships and internships in other institutions while being unable to benefit from learnerships and internships itself. Through board engagements with the Ministry of Employment and Labour, this situation had been remedied and now the UIF could do direct placement. 

Ms Nkabane referred to slide 8, bullet point 3 where it talked about access points, as well as bullet point 5, where the KPI starts with :”Collaborate with stakeholdres…” .  She was not happy here with the performance in all quarters. The entity had to look at how best they could improve.

Ms Nkabane referred to Slide 9 which listed  non-achieved targets. She was looking at KPI 6, the one referring to the number of UIF beneficiaries. Here the action taken to resolve the problem was that it was revised. It was reviewed to be more smart. She asked the UIF what the gaps were which it identified and what it would add to  this performance indicator.

Mr Tshefuta said that the UIF did its customer experience survey at the UIF call centre. It was done through an automated system which prompted the customers to rate the service. It was also done at labour centres. A yearly customer service survey was done accross all the entities of the DEL.  It also did a staff satisfaction survey, because it was a balancing act.

Mr Tshefuta said that the board was putting in place a system where staff could indicate when they were dissatisfied. Their degree of satisfaction determined how well they provided services to customers and clients.

Ms Nkabane referred to Slide 17 and said that she was not happy with the labour activations programme. In the findings of the AG, it was indicated that there was a lack of capacity in the labour activation programme. One would assume that this Committee needed to strategise to come up with interventions in order to overcome its capacity constraints, but no special meetings had been held to this effect. Other committees had special meetings but this one did not. ‘Why not’?

The Chairperson challenged the UIF to take the engagement seriously and draw the lessons to improve. That was the attitude he expected.

Mr Tshefuta replied that he could confirm that the meetings of the Labour Activation Committee had been very productive and overloaded. The board tried to minimise incurring additional cost and where possible dealt with the issues differently. It was making the concession that there was a lack of capacity on the internal unit of the labour activation programme, as an internal unit within UIF. The board had, pro-actively as the board, at the  government level, made specific proposals regarding what could be done to make up for those capacity gaps. An example was, for instance, if one implemented a program of partnering with a SETA, and contractually it was required before you made any payment, that there had to be monitoring visits to the sites where the learners were. Because there were too few people in the labour division unit internally, it could happen that there was nobody to visit those sites, but without the visits, the payment couldnt be triggered. In this case, the board made strategic proposals  to the effect that 1) The UIF had to increase the internal capacity of the labour activation unit. There was already positive feedback after 9 Deputy Directors and 18 Assistant Directors had been appointed, nationwide.  This would boost operational capacity significantly. 2) The UIF had to build additional project management capacity. These project managers could be outsourced to the implementing partners, assisting in closing capacity gaps.  

Mr Mdabe said the two boards had something in common, which they were raising, namely the status of the oversight role they were playing. It was an advisory role without executive powers.  The Committee would engage with the Ministry to identify the gaps between the two roles, advisory vs executive, so that all could be on the same page.

Mr Mahlangu replied that the board wanted to engage the Ministry and take the engagement forward on the advisory vs executive role of the board.

Mr Mdabe said the presentation stated that the UIF was only allowed to invest with the PIC. ‘Was it a regulatory matter or was it decision somewhere’? What happened’?

Mr Mahlangu replied that through regulation and by law, it was mandatory for the UIF to invest with the PIC. It was true that the UIF could not invest in Old Mutual.

Mr Mahlangu said that one of the decisions was that the PIC put stability in the UIF institution i.e. They employed the PIC CEO who was working on it. The PIC Board was an interim board  and would be in existence untill June/July 2020. The CEO would form part of the Recruitment Committee to select the rest of the staff.

Mr Mdabe said the 2nd question was on the audit findings under recurring findings. There were 57 findings in total of which eight were recurring. He was not sure whether the eight summerised were the recurring ones. The rest were not listed.

Mr Tshefuta replied that in the report only the eight recurring audit findings were highlighted to curb the length of the report. In the action plan, all the findings were detailed and responded to.

Mr Mdabe said that slide 29 stated that the fund had instituted a clean audit committee. ‘Was it made up of management or had it been instituted from outside the fund’? This would explain matters regarding its  implementation and plan of action.

Mr Tshefuta replied that the intention was to hold each other accountable.

The Chairperson  referred to the AG report on supply chain management, where the AG stated that the monitoring of contracts by the UIF was inadequate, as irregularities were reported in the findings. She was confused regarding, how the board, as an advisory board, could not intervene to address the matters raised by the AG.

Mr Tshefuta replied that the AG was not happy with the  diversion and how the board extended contracts beyond the 15% allowed by the treasury regulations, because it tampered with supply chain processes. The board was now holding managers accountable. No diversions were allowed unless it was a sole service provider. If it was a case of poor management and the procurement regulations were not adhered to, the contract was not extended. There was an early warning system in place where contract managers were sent a warning six months before the contract expired to ensure that they started with the procurement process. That process was monitored on a monthly basis.

The board also appointed supply chain champions. They were responsible for procurement in their units and contract management. They had been trained and quarterly meetings were held with them where they had to come and report on vendor performance. If one looked at irregular expenditure in the UIF, it was as a result of poor contract management.

The Chairperson said regarding fraud and the lack of consequences, there was a decrease in cases not properly investigated. The advisory board had to  communicate with the person that did not heed its advise, which was in this case the Minister.

Mr Mahlangu said there was an issue of consequence management. Action would be taken where there were serious financial mismanagement . Cases would be followed up and money would be brought back. Those were the resolutions between The UIF and the PIC Boards. There would also be committee to committee meetings to make sure there were no recurrences.The UIF audit findings, some, not all of them, were as a result of the PIC, and what was termed by the UIF as ‘an elephant in the room’.

The Chairperson asked, referring to page 3 of the document delivered by the Chairperson of the UIF as a pre-amble to the presentation, whether the UIF had a process of monitoring regularly whether the entity was still on track.

Mr Tshefuta replied that the board took a keen interest in the plans and the budgets of the UIF. The board made sure that all activities and budgets were reported to the board committees. It related to page 3 of the introduction to the presentation of the chairperson, the Labour Activation Program and The Investment Committee. These were programmes and projects which were in the plans and budgeted for, the majority of which were also on implementation. 

The new generation of projects had reached the stage where contracts had to be entered into. The board went to physically inspect the sites. The board had made a proposal to invite the Committee to its project launches and site inspections.

Mr Teboho Maruping, Commissioner, UIF replied that the board pronounced itself quite favourably on the issue of communications. The UIF had programmes which should be known out in the public by the people. The Communications department required from the executive team to deliberate and come back and give it a strategy. When people did not access the programmes and benefits got lost, it affected the board’s performance.

When the UIF did inspections, it had to publisise its activities, what was done and where. It was also an opportunity to engage with the community at large and take forward issues it had. As part of the communications strategy, about 2 weeks previously, it met with the CEO’s of the SETAs, and the chairperson to find out what issues they were experiencing and how the board could intervene to ensure that delivery happened on both sides. Some of the issues that came out was about making sure that they delivered timeously from the UIF side and also issues they were experiencing with the AG. The specific outcomes from there was that, another meeting would be convened, where the parties would have an honest conversation, as equal partners  in order to find solutions. This was part of the communications strategy the UIF was working on.

Mr Tshefuta added that the question about communication was a good question, which was not only about access to info about getting benefits. It also had to relate to the opportunities and the gains that the UIF had made, for example, the UIF had a programme where it funded the training of young people as pilots. One of those was currently gainfully employed at a commercial airline. This had never been publicised. Some agriculture students were actively, as students still in the programme, supplying some of the major retail chains with agricultural produce. That level of communication had to be taken seriously by the institution as a whole.

The question was asked:”’After 12 months of drawing from the UIF, what happened to beneficiaries’?”

Mr Mahlangu replied that the UIF was in the process of training and retraining workers. Retrenched workers were trained in skills needed in a different sectors. It dealt with two issues. It made sure the worker was re-employed and it made sure the worker continued to contribute to the fund, ensuring its sustainability.

Mr Maruping added that the UIF was in partnership with the SETAs and had to train people to be employed in other industries.The idea was that when people came to the UIF centre, they did not only come to draw their UIF money, but that they were redirected for training so that they could return to the job market. One issue that needed to be unpacked was that there was a disconnection when people came to UIF centres from accessing the data.

Mr Thulani Tshefuta, board member, UIF said the starting point was the question: ‘What happened to people after drawing benefits?’. People should not be considered a burden on the  UIF.  The more they did not contribute because they were unemployed, the more the UIF reduced. It was in the interest of the UIF to facilitate a  sustained stay in the labour markets, so that people could continue making their contributions.  When people went to make their claims, the conversation should not only be about the claim, but it should also be about the person’s living circumstances, the type of work the person did before, his/her skills set, and where the person could possibly be deployed again, keeping in mind his/her existing skill set, tweaked with a minimum skills investment.  This was the type of conversation which was supposed to happen when a worker claimed his/her UIF pay-out, before he/she reached the 12-month cutt-off date  and it would have an impact.

The question was asked: “What did the fund do to make sure workers in deep rural areas knew about its benefits and could access its services?”

Mr Maruping replied that another way of reaching the rural areas were busses to bring services closer to the people. This was already happening and 7 busses were used for this program.

Mr Mahlangu said this was one of the challenges the board discovered and it agreed that it needed to publicise and explain its achievements to the public, particularly its contributors, to make sure that employers and workers understand the benefits related to contributing to the fund in the event that the worker get retrenched or unemployed, or there was a death in the family.

Mr Mahlangu replied that there were outreach programmes and the board agreed with management that the board and SABC radio (in all languages) had to be used to reach workers in remote rural areas in SA.  Sometimes advertisements were placed in newspapers, but not all workers read newspapers, because it was expensive. Radio reached further and was more accessible. The UIF could not only put a table in a mall, because it probably would not reach its audience well.The UIF had to find a way to communicate with people where they were, in their own languages.

Mr Hinana asked whether the  poverty alleviation programme described on page three was something that already existed, or whether it was planned for the future. There were budgets allocated. If it was happening, where was it happening.  ‘Did it happen in partnership with a service providers and who were they’? ‘Was it being implemented or was it still in the planning stage’?

Ms Bronkhorst replied that the details of the UIF’s Poverty Alleviation Programme could be made available to the Committee Secretary.

The Chairperson of the UIF Board said the board members sometimes only left at 21h00 at night because of their dedication and determination to resolve matters. Sometimes it was necessary for him, who lives in Durban, to sleep over in Pretoria to attend to matters related to the boards. He had confidence in his board working together as a team.

Closing Remarks by the Deputy Minister

The Deputy Minister Boitumelo Moloi thanked the Committee Chairperson for calling her and the Boards of the CF and UIF to account, although it was not always a comfortable position to be in. The Committee was there to provide guidance and to make sure entities stayed on track.

When the Minister heard that the boards were called to the Committee, the Ministry had a meeting with each board the previous day. She stated upfront that it was the Ministry’s first engagement with the boards since the Minister and herself came into the Ministry, and that was also a shortcoming.

Both the boards of the CF and the UIF were advisory boards, but they wanted to be executive boards in order to be able to take decisions and execute them.

The previous week the Minister had expressed his dissatisfaction with the fact that a certain board consisted of 15 men. The Ministry had to deal with how these boards were formed and how the members were appointed, because that was where the problems were. These boards were set up through this organised structure called NEDLAC. In NEDLAC there were different stakeholders. There were those who represented business through BUSA who were representatives from organised labour federations like COSATU, NACTU, FEDUSA, etcetera and there were representatives from civil society in the form of NGO’s, NPO’s etcetera. The Ministry as executive authority needed to take responsibility and put the item on the agenda at NEDLAC, because NEDLAC made recommendations to the Minister. The Ministry needed to go back to NEDLAC and tell it to re-look at its nominees for appointments to boards by the Minister.  This could be changed. The Ministry could tell NEDLAC, for instance, if it had to recommend four people from organised labour, two had to be women. The Ministry appointed the boards, based on the recommendations of NEDLAC. This situation could be changed. One could be drastic and disolve the board, but it would be too extreme. One did not need to be so drastic.One could go back to NEDLAC and  raise this anomally, because it was an anomally in 2019 to have a board consisting of males only. Government strived to implement gender parity accross the board and this situation was like a drawback.

She returned to the role of the boards: executive vs advisory. In their engagements they dealt with this matter, because she thought the law was very clear when these boards were set up in an advisory capacity.  If they were given executive authority, they would become independent boards.  Within advisory roles that both were playing, they still had a clear mandate. It could not be right to say that the board was not capacitated enough as an advisory board to take certain decisions.  The board took decisions in consultation with the Minister.

Since the Ministry’s appointment, it had never met with the boards. As the Ministry, a one-day workshop would be held with each board to discuss the roles and responsibility of the boards. Surely the board was empowered to set up systems to follow through issues of discipline or action plans to respond to the AG’s recommendations. They were empowered, and they could further be empowered through the mandate and the extention of the mandate by the Minister. The workshop had to deal, amongst others, with corporate governance. The limitations of its advisory status had to be unpacked further. ‘How to go about issues of performance and consequence management’. ‘How to define the relationship between the board and the management better?’. Where necessary, expert advice would be obtained to come and advise the board. The legal interpretation of an advisory board vs an executive board needed to be unpacked.

The DEL had a new mandate of employment. Should the UIF not explore other avenues to make sure that the money worked better for the people who were the beneficiaries of these training programmes? One slide referred to six companies which received R92 million to save 2000 jobs. The question needed to be asked whether more new jobs could be generated with less. The mandate of the UIF was job preservation, but it had a new mandate of employment creation.

The Ministry had committed to a session with both boards to re-look at some of these things while considering whether to transform the boards from advisory to executive authority or not. What benefit would it come with if it was done? The transformation could not be promised. As the executive authority, there was a new mandate, that of  jobcreation. The status quo and the landscape needed to be changed regarding economic activity.

As a respresentative from the Ministry she promised a meeting soon. The Ministry would keep the Committee abreast of developments between the Ministry and the board. The ministry was at the service of the Committee and the DEL. It acknowledged the oversight role of the Committee over the boards. The boards should not take the robust interrogation  and engagement personally. The engagements would come up with solutions to the existing problems and the parties could report back to the Portfolio Ccommittee.


Closing remarks by the Chairperson

The Chairperson asked when was the last time the boards had been called to the Committee  

Mr Mahlangu replied that it must have been a long time ago that the UIF had been called to meet with the Committee.

Ms Bodibe replied that it was the first time as a board. Previously it had always been as part of a management delegation.

The Chairperson said she was asking because she could pick up the panick amongst board members as well as the bordering-on-arrogance attitude in answering some of the questions. The Committee had decided that it was going to be patient. As the Chairperson of this Committee, she was happy for the motion put forward by the Committee that the boards had to be called, because in the 10 years that she had been in Parliament she did not recall the boards ever being called to account before parliament.

The country was going through rough and difficult times. Boards had to make sure that institutions functioned. When a person went to a labour centre in a rural area, he/she had to experience the change. The majority of members of boards were trade unionists. They were seconded by their union to serve on the boards. They had to take their service on the board as part of their service to their union members and extended families. She urged them to take it seriously.

She was deliberate when she did not want them to leave without them hearing the Deputy Minister’s and her closing remarks. She wanted the boards to take this first encounter as the beginning of a journey that the parties will have to travel together. It was not going to be easy.

The Chairperson explained that the Committee had tolerated somewhat arrogant attitudes and pardoned it. It was a learning experience. She asked the boards to not take the Committee for granted.  The Minister was a former trade unionist who knew all the corners.

The  Committee would follow up on all the issues raised by the boards like the learnerships. The information had to be detailed regarding sector, gender, race and age. Members needed specifics because when they visited their constituencies, they were asked difficult questions.

Members did not contribute to the UIF. If the UIF stated that it rescued distressed companies, the specifics had to be detailed like the sector, location, number of jobs and other related details. All the parties involved were still grappling with the employment part of the mandate of the Ministry and DEL, but the parties had to be mindful of the fact that it was there. The Committee did not expect immediate answers and solutions, but through the Committee Secretary the Committee will maintain a consistent follow-up routine.  

In future the oversight of the Committee would include oversight over the boards of the entities it had jurisdiction over. The Committee would do a skills audit of the boards that it exercised oversight over in order to ascertain that people were equiped for the positions they were placed in. She appealed to COSATU, NACTU and FEDUSA to take the words of the DM seriously.

She asked the CF and UIF to inform the Committee well in advance when it was planning outreach activities, so that the Committee could send representatives to attend.

All parties present had the responsibility to improve the living conditions of people on the ground and the people on the ground were looking at their public representatives to do that. This was the first of many future engagements. The issues were noted. The legislative arm of the state had to create the framework to move the country in the right direction.

The meeting was adjourned.

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