UIF & Compensation Fund 2020/21 Annual Performance Plans; with Minister and Deputy Minister

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Employment and Labour

20 May 2020
Chairperson: Ms M Dunjwa(ANC)
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Meeting Summary

Video: Joint Meeting: Portfolio Committee on Employment and Labour and Select Committee on Trade and Industry

Annual Performance Plan (APP) of Government Departments & Entities 20/2021

The Unemployment Insurance Fund (UIF) and Compensation Fund (CF) presented their 2020/21 Annual Performance Plans (APPs) and strategic plans to the Portfolio Committee on Employment and Labour. Both entities stressed that their plans, budgets and targets would be reviewed in line with the Covid-19 pandemic and the anticipated increase in unemployment.

In reply to Members’ concerns about the impact of Covid-19 currently and after the lockdown, the Minister gave an assurance that the entities and the Department was working hard on strategies and interventions which took into account the short-term and long-term scenario, as well as sustainability. The UIF had consulted actuaries to provide guidance so that it could meet new and immediate demands without jeopardising its long-term commitments.

By 18 May, 2.5 million workers had received Covid-19 Temporary Employer/Employee Relief Scheme (TERS) benefits amounting to R14 billion, with an additional R2 billion distributed in ordinary UIF benefits. The CF was anticipating and preparing for an increase in claims by workers affected by Covid-19. Both entities also had plans for reducing unemployment, and were improving their claims systems’ software to reduce turnaround times for claims processing.

The UIF planned to have 10% of its assets under management set aside for funding employment creation schemes by March 2025, and to create 5 000 jobs by 2020/21 through its labour activation programme and investment activities. The CF similarly had strategies to reduce unemployment by creating 4 000 jobs through the Presidential comprehensive youth employment interventions, and 7 000 jobs through its investment priorities by 2025. The Department considered not only unemployment, but also job retention through mechanisms such as its High Impact Social Fund and the Commission for Conciliation and Arbitration (CCMA).

In response to Members’ concerns about fraud and corruption, the Minister said the Department would carefully follow up on expenditure, especially huge transactions. There would be audits -- and forensic audits if necessary. Both entities had also increased controls in their claims environments to reduce fraud in its u-filing and CompEasy platforms respectively.

Members welcomed the CF’s plan to have 20% of its assets managed through the Public Investment Corporation (PIC) by black asset managers by 2025, and the inclusion of domestic workers in the Compensation for Occupational Injuries and Diseases Act (COIDA).

They raised questions about CompEasy and its functioning, the UIF’s investment strategy, the inclusion of freelancers by the UIF, the opening of labour centres, vacancy rates, CF bursaries, the CF’s visibility and accessibility plans, as well as complaints about the non-payment of medical service providers.

Meeting report

Opening remarks

The Chairperson said the Select Committee on Trade and Industry, Economic Development, Small Business Development, Tourism, Employment and Labour was unable to attend the meeting due to a clash, therefore only the Portfolio Committee would be present.

She welcomed those present and the Minister, Deputy Minister and Director General (DG).

There would be presentations by the UIF and CF, who would both present their APPs and Strategic Plans.

The Chairperson said she hoped everybody was taking care of themselves during the Covid-19 pandemic. Despite difficulties Members were public representatives and had a responsibility to carry out their duties. People had been calling her directly with their problems, but was pleased that the Department of Employment and Labour (DEL) had been helpful to those she had referred.

Minister’s opening remarks

Mr Thulas Nxesi, Minister of Employment and Labour, said the Department was caught between the plans, budgets and data of pre Covid-19, post-Covid-19, and after the lockdown emergence. Agility, flexibility and decisive leadership would be crucial for managing the transition. For compliance and accountability, it was important that departments and entities submitted and presented their existing plans and budgets, but considering the Covid-19 situation, budgets and plans would be reviewed.

He commended the Unemployment Insurance Fund (UIF) for providing income support to companies and workers laid off or on short-time as a result of the lockdown.

At the close of business on Monday 18 May, 2.5 million workers had received Covid-19 Temporary Employer Relief Scheme (TERS) benefits amounting to R14 billion, with an additional R2 billion distributed in ordinary UIF benefits.

The UIF had coped admirably with the immediate task of getting support out to qualifying companies and individuals.

Support for workers and companies was being done in a sustainable manner, as actuaries had been consulted in the long-term interest of the fund so that it could meet new immediate demands without jeopardizing its long-term commitments to those who contributed to it.

After the lockdown ended, not all companies would survive and jobs would be lost and there would be a demand for the UIF’s ordinary benefits. These were the kind of considerations that had to be taken into account as entities reviewed their plans. New national priorities set to revive the economy and productivity also had to be considered.

For today’s meeting, the plans of the UIF and Compensation Fund (CF) had to be assessed against the existing priorities, but given that the plans would be reviewed, this would be a good time for Members to make their inputs on where improvements could be made.

Covid-19 had exposed a few gaps in the social security and UIF coverage, particularly in the informal sector and non-standard forms of work associated with the Fourth Industrial Revolution(4IR), the “gig” economy and outsourcing, to the point where non-standard was becoming the new normal. The UIF and the CF would have to reflect on how to fund the expanded coverage on a sustainable basis.

The CF was yet to reap the full whirlwind of the pandemic. A spike in claims was expected from those who were quarantined or contracted Covid-19 in the workplace. With this in mind, the CF had told the Department it had established a crisis management committee and developed a Covid-19 response plan to focus on the core Compensation for Occupational Injuries and Diseases Act (COIDA) services.

Like the UIF, the CF had also opted for online applications for the protection of the claimants and staff, as well as to streamline processing payments. It had to be remembered that even as the CF rose to cope with the effects of the pandemic, its core business remained to provide a full bouquet of COIDA services to its clients while ensuring continual financial sustainability.

He wanted to take the opportunity to flag changes in the legislative framework of COIDA that expressed the inclusion of domestic workers as employees in terms of the Act, and ending discrimination against this group of workers. He was also pleased to report an increase in Covid-19 TERS claims received by the UIF on the behalf of the domestic workers, with employers registering for the UIF in order to claim the benefits. It was a good start, but there was still a long way to go.

As he had said last week, the Department could not go back to the situation it was in before. As it planned for economic recovery, it had to be guided by the need to decisively confront the crisis of unemployment, poverty, inequality and food insecurity.

Unemployment Insurance Fund  

Mr Teboho Maruping, Commissioner: UIF, said the strategic plan was informed by the Minister’s agreement with the President, and therefore some activities had been flagged to reflect how the Minister would be supported. It was also informed by the UIF’s contribution towards the Department’s mandate, especially the renewed mandate that includes employment as well as its own mandate. The impact of Covid- 19 would not be seen, as the Minister had mentioned, but it had resulted in direction changes as the strategic plan was reviewed.

The targets of the UIF were drawn from the legislative mandate, with targets under the administration programme such the number of people registered with the UIF, declarations, contributions, claims processing, labour activation programme and investment. The labour activation programme (LAP) was the key development stemming from the Portfolio Committee’s involvement to bring up section 5d. The investment arm was informed by section 4.

In terms of government priorities, some were drawn from the Minister’s agreement on the maintenance of a capable, ethical and developmental state, economic transformation and job creation, consolidation of social wages through reliable and basic services and social cohesion, and safer communities.

Strategic Plan

Me Maruping outlined the key indicators. These included:

  • Improved audit opinion obtained from the Auditor General (AG), with a five year target of a clean audit in 2024.
  • Wasteful, fruitless and irregular expenditure reduced, with a five year target of 100% elimination of wasteful and fruitless expenditure, and a 75% reduction in irregular expenditure.
  • Improved turnaround time to pay suppliers, with a target of 100% valid invoices to be paid 30 calendar days after receipt by March 2025.
  • Improved resolution of reported incidents of corruption, with a target of 95% resolution of reported incidents of corruption in the UIF by March 2024.
  • An ethics committees to be established and terms of reference adhered to by March 2024.
  • An improved human resource capacity indicator, with a vacancy rate of less than 5%.
  • Assets under management (AUM) funds set aside for funding employment creation schemes had a target of 10% set aside by March 2025.

The targets for consolidating the social wage through reliable and quality basic services were similar to previous years, but turnaround times had been changed to improve on how quickly beneficiaries could be paid. For the Integrated Claims Management System (ICMS), it was intended to integrate Information Communication Technology (ICT) solutions. There had been challenges during Covid-19 to have an ICMS that enabled the entity to pay people in a shorter space of time, and therefore it was looking at integrating all its solutions by 2023.

On driving compliance, one of the key issues faced with Covid-19 was the number of employers that had declared their employees. The target was to have 4 895 000 new employers and employees registered by March 2024.

The UIF was also looking at improving turn-around times for new companies to register. Currently it took two working days, but it wanted to bring it down to five working hours by 2022.

It currently took ten days for completion of compliance certificates, but the UIF was looking at reducing it to 48 working hours by 2022. Currently there were three types of benefits -- unemployment, in-service and deceased -- each with different turn-around times, and it was working to reduce payment to within seven working days.

Mr Maruping said right now, as a result of Covid-19, the UIF was able to pay within 24 to 48 hours when companies were applying on the behalf of employees, so this was one of the targets that might change once solutions had been changed.

Improved representation of the designated groups across occupational levels was a new indicator, with a target of 75% of Africans in the middle and senior management level, and 2.5% of persons with disabilities between the age of 15 and 65 employed by March 2024. The 75% African target could be reviewed, given that by February it was at 87% but it was uncertain what the target would be at the end of the year.

Annual Performance Plan

A breakdown of Medium Term Expenditure Framework (MTEF) targets and indicators per programme were outlined briefly.

Programme 1: Administration

The percentage of funds budgeted for funding employment creation schemes was targeted at 1.6% for 2020/21, but due to Covid-19 spending, this target may have to be reviewed, considering the situation at the end of May/June. The target may be revised up or down

Jobs created through UIF funding and investment activities was set at a target of 5 000, but would be reviewed in line with adjustments and Covid-19 expenditure. Targets may be revised upwards due to more unemployment as a result of Covid-19, and therefore more funds would be needed.

A 95% target for fraud and corruption cases finalised within 90 working days had been set. The UIF would be establishing an ethics and transformation committee, and quarterly reports would be produced. It would continue to pay its invoices within 30 days. This financial year, the entity had missed only one invoice and had closed at 99.9%.

For return on investment, the target was set at greater or equal to the benchmark for listed investments.

The vacancy rate at the end of January was 7.1%, but it was uncertain what the percentage would be at the end of the year, but the target was less than 10%. This target may be reviewed down, given the situation at the financial year end. Disability representation was targeted at 2% for 2020/21.

This year, the entity wanted to see the SAP financial accounting system developed and tested.

Programme 2: Business operations

Mr Maruping said a change had been made to the target for the turnaround time to pay once the information form was received, bring it to within five days compared 6 days last year.

The turn-around time to pay valid claims with complete information would be within 15 days, but the percentage for achievement was being reduced to 92 % for the new year. Last year, 93% had been achieved and it was being dropped by 1%, given what had been achieved on all the turn-around targets during the Covid-19 period. With companies applying on behalf of employees, it had been able to process applications between 24 and 48 hours, and therefore the target would have to be reviewed once the system was upgraded and the application process revised.

Programme 3: Labour activation programme

The targets for labour activation programmes (LAPs) was for the UIF to put 10% of assets under management, and the Committee was shown how the funds would be spent over the next five years.

The first target was for the number of youths who would be participating in the public employment programme, which was set at 12 210.

The target for processing TERS applications was set at 90% within 15 days, but the target would be revised to 10 days, given the demands once the economy was open. The current Covid-19 TERS was part of the temporary employee relief package which still existed. Private sector partners were assisting, and one of the private sector partners was helping to develop a solution that would allow quicker processing of claims.

The target for the number of UIF contributors provided with learning opportunities was set at 40 700, but it may be revised, given the Covid-19 pandemic.

The target for the number of cooperatives supported was 30, but it may be revised and increased due to the developments in the economy. The focus might have to increase on enterprise development in order to introduce the youth and beneficiaries into business.

2020/21 budget and MTEF estimates

Programme 1: Administration

The medium term expenditure estimate was R3.1 billion. Mr Maruping said the budget items would be revised substantively, especially on business operations, given that it would have to pay more claims as more people became unemployed.

Programme 2: Business operations

A budget of R1.9 billion had been set aside, which Mr Maruping described as very small. The UIF had already written a submission to revise the line items, but this presentation had already prepared for the tabling of the APP. It would have to realigned with the current developments in the country and the economy, specifically the contribution of the UIF towards Covid-19 relief measures.

The Chairperson had audio issues, and could not continue chairing the meeting.

Dr N Nkabane (ANC) took over, and called for the next presentation while the Chairperson was getting assistance.

Compensation Fund

Mr Vuyo Mafata, Commissioner: Compensation Fund (CF), said a lot of things had happened due to the pandemic that had necessitated reviewing the APP. The budget for the revenue and claims had to be reviewed. He said that there was an error on slide 26 that would be corrected during the amendment process, but he further discuss it would when he got to that slide.

To ensure the APP and strategic plan were implemented, there were three core functions to discharge the entity’s mandate. The three core functions were COIDA services, medical benefits and rehabilitation services. These were supported by corporate support, compliance functions, an advisory board and audit committees.

Strategic Plan

The CF had six priorities identified that it wanted to pursue over the next five years. A score card had been developed which would monitor the implementation of the strategic plan. The score card was comprised of financial management, customer services, organisational capacity, internal, business process, and anti-fraud and corruption elimination. The indicators in the strategic plan were categorised according to the MTSF priorities.

The CF wanted to improve in the area of revenue generation and increase the revenue it collected, and increase the assets of the company over the five-year period by 10% increase per annum. It was also looking at improving its audit outcomes through the implementation of stringent controls and the new claims management system. The target was to achieve an unqualified audit opinion by March 2024.

It aimed to eliminate all wasteful and fruitless expenditure by 2024, and wanted to reduce irregular expenditure by 75% in the same period. It targeted 95% of all reported incidences corruptions to be finalised by March 2024. It also wanted to improve the ethical culture within the CF, and have an established ethics committee.

In the area of a sound and sustainable control environment, one of the outcomes was to have black assets managers supported. The target was to have 20% of its assets managed through the Public Investment Corporation (PIC) by black asset managers. To strengthen capacity, the vacancy rate would be no more than 5% by 2025. The performance of the mutual funds would be monitored and evaluated under the Minister of the DEL by ensuring their adherence to and implementation of the signed service agreements.

The CF wanted to contribute to more decent jobs being created and sustained for women, youth and persons with disabilities through the Presidential comprehensive youth employment interventions programme (4 000 jobs) and the jobs summit (7 000) by 2025.

It would support the initiatives of government to have an integrated claims management system implemented by 2023, and also ensure that 95% of compensation claims were adjudicated and compensation benefits paid within five days.

The CF wanted to improve its accessibility and visibility, and to increase access to medical services for beneficiaries. For rehabilitation and re-integration programmes, it had targeted 90% of severely injured workers to be enrolled in rehabilitation programmes so that they could recover and re-integrate back into employment.

Annual Performance Plan

Programme 1: Administration

It wanted at least 4% of assets under management to be allocated to black asset managers, rising to 20% in the next five years. The 2020/21 job creation target was

A target for jobs created through investment activities was 1 400 through investment activities, and 800 through the Presidential comprehensive youth employment interventions programme.  

The annual target was a 10% increase in the total assets of the Fund; a 60% reduction in matters affecting the audit outcome; all systemic deficiencies in regard to the payment and processing of claims being addressed by the new claims management system; wasteful and fruitless expenditure reduced by 25%; a 15% reduction in irregular expenditure; investigation of 60% of all fraud cases reported; and a vacancy rate of less than 10%.

Programme 2: COID Services

The targets including the assessment of 80% of active registered employers; 85% of claims adjudication within 20 days of receipt; and all benefits paid within five working days of receipt.

Programme 3: Medical Benefits

The target was for 90% of specialised medical intervention request pre-authorisations to be finalised within 10 working days. The process was automated with CompEasy, which made the process easier and quicker.

High value and complex medical cases were targeted at 60% of cases to be enrolled within a case management programme within seven working days. This was aimed at controlling the costs, and the client getting adequate care when hospitalised.

85% of accepted medical invoices had to be finalised within 30 days of receipt.

Programme 4: Orthotic and Rehabilitation Services

The target for requests for assistive devices finalised within 15 days was 85%.

Regarding the number of students enrolled in Post School Training and Education (PSET) institutions in priority qualifications, Mr Mafata said the target was to provide bursaries for children of CF beneficiaries and those studying for the specific skills set that the CF required so that they could be absorbed into the Fund. The target was set at 500 students.

The number of persons with disabilities enrolled in the vocational rehabilitation programme through PSET institutions was set at 100. This was a re-integration programme for those injured in the workplace to have a study opportunity in order to reintegrate back into employment. The number was low, because the project had been piloted in the last financial year and had low uptake numbers, but as the programme was promoted, numbers would increase over the MTEF period.

2020/21 Budget

Revenue of R14.1 billion was budgeted, which was comprised of levies collected from employers, investment and other administrative income. The figure would be revised down due to the anticipated levy reduction due to the loss of jobs in the labour market. Income from investment activities was anticipated to be revised down as well, due to stock market conditions. R4 billion was the budgeted investment income, but this would not be realised and would be revised down

R4.1 billion had been budgeted for actual benefits paid out. Provision had also been made for outstanding claims, which always amount to around R3 billion. This had been budgeted for, and would be added to the R4.1 billion.

For administration expenses, R 2.96 billion had been budgeted. This included the compensation of employees, administration of the CF, and capital expenditure as it continued to invest in the entity’s systems.

Details of the budget per programme were:

Programme 1: Administration

The allocation was R2.69 billion due to the inclusion of salaries for all employees of the CF across the four programmes as well as capital budget.

Programme 2 – COID Services:

The R1.1 billion included compensation paid for temporary and permanent disability pay-outs, as well as the short-term allocation for pensions paid out, but excluded the pension money. Pensions amounting to R1 billion annually was paid from the reserves of the CF, and was not reflected in the administration budget.

Programme 3 – Medical Benefits:

The budgeted amount was just over R3 billion. With the new system and controls, it was anticipated that the amounts paid out would be lower than usual. The CF would be able to monitor it in the current financial year, as the new improved controls made sure that waste and the abuse of medical invoices were reduced.

Programme 4 - Orthotic and Medical Rehabilitation:

As the pilot project had concluded, R220 million would be set aside for a full year programme aimed at rehabilitation and re-integration. When the budget is reviewed, it is likely the allocation would change because the CF may want to play a role in employment creation through supporting enterprises that could create jobs for some of the current CF pensioners.  

Discussion

Ms H Denner (FF+) asked the CF how many invoices from the old uMehluko system still had to be migrated to the new CompEasy system, and by when this would be finalised. Had the CF investigated the possibility of individual assistance to practices and intermediaries who struggled with system problems within CompEasy, as had been suggested and requested during the site visit?

She asked the UIF to elaborate on its investment strategy for the future, and wanted to know if there would be changes considering the immense burden on the UIF’s funds going forward.

She asked for clarity on the 10% budgeted for the LAP, as well as an example of it.

What were the plans, and how far had they progressed, to accommodate freelancers in the TERS fund?

When would the TERS applications open for May?

On declarations submitted, she said there were cases where emails had not received feedback. Was the entity aware of the issue and was it being addressed? Was there an email address people could contact when they had challenges?

Dr M Cardo (DA) said the UIF had mentioned a target of 5 000 jobs created through funding, and it aimed to double that number in 2021/22. How had it arrived at those targets and how realistic were they, considering projected job losses of three to seven million? What sectors would these jobs be created in?

The new directive from last week enabled individual employees to claim, and he feared this would place tremendous additional strain on the entity. How many individual employees did the UIF expect to apply? Would there be increase in capacity to address the individual applications? How many individual employees were on the UIF database, and what proportion would be submitting claims directly?

Addressing the CF, he said there had been a fractious stakeholder meeting in February, where complaints were made about the CompEasy system and its ease of use. People said it was very difficult to submit claims and have them processed through the new system. Had the CF had further engagement with the industry representatives between the February meeting and the beginning of the lockdown?

Mr S Mdabe (ANC) said his constituency in Pinetown had almost 6 000 UIF claims prior to Covid-19 at its labour centre. He was concerned at the fact that most positions at the office were acting, and he was raising this issue in relation to the vacancy rate reduction target of less than 5% by 2025. There was currently a challenge at the labour centre, with 6 000 in the database and the inclusion of Covid-19 claims after the lockdown, which would lead to it lacking the capacity to meet the challenges.

Because the UIF had had unqualified audit opinions for the past three to four years, the target to qualify for a clean audit had to be reduced from 2024, to 2022 or 2023.

The CF’s APPs and budget would be reviewed, as the Commissioner stated. At the last Committee meeting, where the APP for quarter 3 was presented, it had been determined that it needed to reduce the audit findings by at least 30% from the total findings in the previous audit outcome. He was raising this because the Commissioner was saying it would reduce the wasteful and fruitless expenditure by 15% and reduce irregular expenditure by 6%. He asked if the relevant audit findings were because of a weakness in the CF’s control systems, as well as the policies developed to ensure irregular and wasteful expenditure was being dealt with accordingly, or if what they had developed was equivalent to the 6% and 15% respectively. It would create a problem the nine years of disclaimers of the CF was not addressed. Drastic action was required to move from disclaimer to something else.

Addressing the Minister, Deputy Minister and DG about the interventions, he said considering there might be businesses which might not come back, or only after a year after the lockdown, he was concerned about the coordinated approach of the Department, especially when he considered Productivity SA’s presentation in relation to rural and township economic development. With the interventions listed as the priorities of the UIF and CF, it seemed as if the Department did not have a coordinated approach for its entities on what it would present to the economic cluster on economic transformation, and maybe this would require policy engagement going forward.

Mr M Bagraim (DA) commented that a lot of the information presented was irrelevant, because everything would change. Therefore, he was not sure why so much time had been spent on it when the report could have been presented on paper, and then the real issue of Covid-19 could have been debated.

On Workmen’s Compensation, he said there were many doctors complaining about not being paid. Once the claims from Covid-19 came in, there would be so many claims that those unpaid would probably never get paid. Independent doctors were no longer willing to see patients as they were not getting paid, and therefore referred patients to public hospitals, which further overburdened the public health care system. What was the CF’s explanation for this?

He asked if the UIF May claims were open, as it was the 20th of May.

When would the domestic workers be added?

On the “gig” economy and outsourcing being the new normal, as the Minister stated, maybe the legislation should be changed to include this.

When would the future impact of Covid-19 be debated, as it was more important than what had been discussed tonight?  The reality was that there was a situation where there would be anything up to seven million more unemployed people. This was a real problem, and it had to be tackled as opposed to looking backwards. The Department had to present something on the matter covering where it was now, and its planning going forward as opposed to looking backward.

The Chairperson said it had to be remembered that the Committee was dealing with the budget for February this year, and the budget vote. It was a difficult situation, but the Committee could not abandon other important matters such as the budget and focus only on Covid-19. She understood that it was tempting, due to Covid-19, but Members had to prepare for a budget vote and it was not known what the Minister of Finance would table, which could change everything. The entities had to touch on Covid-19 when presenting, as they could not pretend there was no pandemic.

Dr N Nkabane (ANC) commended the CF’s administration programme for putting in internal controls as well as turn-around strategies to improve the audit opinion. There were challenges with the Fund’s claims management system, as it was prone to manipulation, corruption and fraud. The CF was doing well by placing this in its APP, and the Committee would be monitoring its implementation. It was important that it made sure that claims that met all the requirements were paid. She emphasised that the CF was doing very well, and was doing what the Committee had requested.

Regarding the UIF’s turnaround time reduction, she was happy that it was responding to the needs of vulnerable workers, but wanted to know what monitoring tools or systems were in place to ensure these targets were achieved.

On the Minister’s projections that there would be an increase in demand post Covid-19 on the physical capacity of the entity, she asked if it would be able to meet the projected demands of the vulnerable workers. How would it fast track or deal with the millions of vulnerable workers who did not receive their claims due to challenges such as not being declared by an employer, or the employer not claiming on their behalf?

What measures were in place to mitigate fraud and corruption concerning the claims management systems of both the UIF and CF?

Ms E Ntlangwini (EFF) said that although handling the APP was important, she was tempted to ask critical questions based on constituency feedback about the labour offices right now. It was understood that there was a specific task at hand, but would appreciate it if questions concerning constituencies could be asked while the Department and entities were available.

How many offices were currently opening and dealing with applications at this stage? How many backlog cases were currently on the UIF system? In what areas were the 43 vacancies, and what were the plans to fill them?

In the business operation programme, what had encouraged it set that number of dates? Did it not think it had to look into improving the number of turnaround days for giving people feedback on whether they were approved or not, with a proper IT system?

Ms N Hermans (ANC) appreciated the legislative changes and the inclusion of domestic workers, who had previously been excluded from worker benefits.

She asked for clarity on the performance of the CF programmes involving students at post-school education, and training in priority qualifications. It had been mentioned that the students that were covered were the children of beneficiaries, as well as other students. What criteria were used to identify these students? Did they apply on their own, or were students identified through institutions of higher learning, per province, or based on applications?

She appreciated that the call centres employed young people from all the different provinces, as had been seen during the oversight visit to CF offices.

When staff were assisting clients, was the issue of language considered? How did it address language barriers to give adequate assistance to all clients -- was a choice of language offered?

She asked about the possibility of walk-in structures at labour centres in provinces and regions, such as at the national offices, as this would also address the CF’s visibility and accessibility. To strengthen the footprint of the CF, some of the activities had to be housed at regional offices where people could walk in. Was there a possibility of this?

Mr M Nontsele (ANC) congratulated the Minister on the inclusion of domestic workers in the COID Act, which allowed them to enjoy benefits like other ordinary workers.  He appreciated the foresight in the presentations of both commissioners in anticipating the impact of Covid-19 and the explanation given that the entities would still return with revised presentations that would practically factor in the impact of Covid-19. This revision would speak to the gaps, but it was understood it would be in the context of the already adopted budget which still had to be reviewed, considering the changed circumstances in country.

The UIF and CF had received large amounts of money to handle the Covid-19 challenges. What mechanisms and systems were in place to address and minimise fraud?

Regarding equal opportunities at the UIF, he said it would be helpful to explain in detail what the designated groups were, and not only referring to youth, so that all groups were covered. Youth was cross-cutting in terms of gender, but there were a number of designated groups that could be listed as well.

He appreciated the CF’s inclusion of black asset managers. He asked if the allocation in first financial year of 4% of assets in first year was not too low. Would it not be helpful to relook the overall envelope of asset management at the CF, as well as other entities within the Department, so that it responded to transformation? It was 26 years after democracy, and black people were still at the bottom end of the economy and had to be included in these areas. For the next presentation, the areas had to be looked at more practically, and there needed to be an overall assessment of assets managers and their performance under the period of review.

The Chairperson wanted to know if there was a system in place to deal with employers not declaring employees, so that employers did not run away at their expense.

UIF’s response

Mr Maruping referred to the investment strategy for the new future, and said actuaries were looking at the UIF’s financial position and investment portfolio every week as it made payments. Tomorrow, there would be a marathon series meetings involving actuaries and investment advisors to consider the approach to expenditure and possible expenditure, depending on how long the lockdown would be. Feedback on this matter could be given at the next meeting.

The decision on the 10% for LAP had been taken by the Department prior to the pandemic, when there was an economic slowdown. To implement section 5d, the UIF had to fund the retention of contributions foe employment or re-entry into employment, and it considered the best way to achieve this was by using the portfolio. That was how the 10% was arrived at, and it was not an amount as the figures changed as the portfolio figures changed with the markets.

Regarding freelance workers, the way the UIF was constructed was based on an employee and employer relationship where the employee worked for 24 hours or more every month, and if this condition was met irrespective of job title, it was the concern of the UIF and the worker qualified for any form of UIF made available.

On the May applications, he said the same approach had been used as with the March and April applications. It was simplifying its online application system to reduce the burden for those who had already applied. The system would be opening this weekend, as it had already been enhanced and would go live on Friday. The improvements to the system allowed those who had previously applied to make amendments to their list of employees in order to make it easier to adjust, based on the number of workers who returned to work. It had increased its processing capacity for paying employees directly. It was able to process over 350 000 line items per day, which would enable the UIF to pay more people going forward.

On declaration emails, all employees who were processing declarations had been recalled, and it had opened a u-filing platform where declarations could be uploaded in 24 hours to the declaration database and be processed. Everyday payments were run according to system. Laptops were also given to employees at home to process declarations. The process was expected to run even faster, as the u-filing programme was being upgraded so it could run faster and allow faster changing of passwords, which had previously been the main challenge. There was more security introduced with the u-filing platform, because it was aware of the precedence of threats.

In response to Dr Cardo on how the UIF had arrived at the figures for job targets, he said it had looked at its pipeline. Last year, a R2 billion project development partnership (PDP) with the PIC had been introduced, and according to this a pipeline of jobs that would be created was 5 000 and 10 000. To answer in which sectors these jobs would be created, he said the UIF had looked at six key sectors, given the direction of economy. These involved agriculture, aquaculture, manufacturing, mining and benefaction, tourism (but this may need to be relooked at considering the pandemic), education, health and housing, ICT, water and sanitation.

On the vacancy rate, and how it linked to the situation in KwaZulu-Natal (KZN), he said this had been an isolated incident that had been created due to Covid-19 lockdown. People had flocked to labour centres as they thought the R350 grant was linked to the UIF, but had been informed that it was an unemployment benefit given by the Department of Social Development.

The vacancy rate had dropped to 6.6% by February and had continued to drop, but due to the lockdown it had not improved, as interviews could not be held.

The UIF would consider Mr Mdabe suggestion to meet the target for combating irregular and wasteful expenditure in a reduced number of years when reviewing the strategy.

He responded to Mr Bagraim that the May applications would open this weekend. It had considered the fact that people were paid monthly. Given the fact that processing took between 24 to 48 hours, with improved technology the payments would be within 10 days.

Seven million people losing their jobs was something the Department had to consider and maybe have a separate discussion on.

On the monitoring of claims submitted, he said there was a solution designed where claimants were sent a claim number and information at each stage of the process. The delay often occurred due to declaration issues that the labour centres monitored constantly.

Regarding fraud and risk, he said there were claims not paid, but this formed part of controls introduced in the system. There were controls to deal with companies that attempted to claim for employees who had already received benefits, as well as for maternity benefits that were claimed. If a company applied for a second time in the same period, there was a control to kick out the application. There were also controls on the platform, such as bank verification for the numbers of digits, and further controls for bank verification of the owner.

On the opening of offices, he said no offices were open for public engagement, but they were functioning with workers. Applications could be dropped at the offices and were collected and processed daily. There was a discussion about opening the labour centres with the Department, which the DG could talk to.

There were a number of interventions in place for employees to attend labour centres with complaints, and the centres would then send inspectors to companies or industries based on the claims and complaints received. There were also road shows, where there was community engagement and where issues were raised by communities and therefore followed up.

The Chairperson asked what system was in place for following up on employers, or “charging” them, for not declaring all their workers or deducting UIF wrongly.

Mr Maruping responded that where it was picked up that falsified declarations had been made, a debt would be raised against the employer, with interest and penalties. The company then had to make an arrangement to pay and based on their response, inspectors would be sent, or the company would be taken to court and a different directive issued.

CF response

Responding to Ms Denner on invoice migration, Mr Mafata said only invoices that were correct and met criteria for validity and accuracy were migrated. Invoices needed to be loaded with medical reports as well. 97% of valid and accurate medical reports had been loaded from the old system. More than 80% of claim headers and line items of valid invoices had been loaded. Any other invoices that were not valid and had a lot discrepancies made up the balance of those which had not been loaded. There was engagement with providers who maintained their claims were valid, and were paid without migrating to CompEasy. The migration process had been concluded, and all valid claims had been migrated.

In response to Dr Cardo about the complaints regarding the systems, he said CF officials went beyond the call of duty to ensure functioning. Since the beginning of April, it had now paid more than R400 million to medical service providers, beneficiaries and pensioners. This was one of the signs that showed that the system was working, despite the complaints.

The CF engaged with many medical providers, some of whom were the stakeholders that attended the Parliamentary session, as well as others who had not attended. It continued to engage with many stakeholders. At the beginning of the lockdown, some meetings had had to be postponed, but had continued with those who were able to meet. These engagements had resulted in positive outcomes for some providers. A lot of medical practitioners had been enabled to submit claims themselves, and had found the process much easier. Improved functionality had been introduced to the systems since the last Parliamentary visit.

On the wasteful expenditure targets, he said there were systemic balances in the irregular and wasteful expenditure. The target had been set lower considering the outstanding cases that had been reported previously and still had to be addressed. The improved supply chain processes had led to cases reducing to almost nil. The improvements in the system had also led to less fruitless expenditure, reduced interest and a drop in litigation cases.

Regarding coordination, he said the approach to economic growth was coordinated across entities by the Department, and the DG could further comment on it.

In response to Mr Bagraim on service provider non-payment, he said there had been a significant increase in payments to providers and beneficiaries. Those who still had complaints would be engaged with, and claims and invoices would be interrogated. Efficiencies with the new system had led to new complaints, as claims that would otherwise have been paid without meeting all the criteria, were now being rejected. There had also been many compliments received on the improved system, despite complaints.

The entity appreciated Dr Nkabane’s comments, and would return to report on the implementation of the plan and turnaround interventions with regard to how the control environment was being improved.  

In response to Ms Hermans’s question on student bursaries, he said it was advertised widely for students. The priority was for the CF pensioners’ children, but others who met the criteria could apply as well. In one of the programmes, the CF worked with the South African Institute of Chartered Accountants, which worked with a group of universities who would select students accepted by those universities. The bursaries were given to students across different institutions in the country.

He said the CF did not strategically put officials in the call centres according to language, but if an agent was unable to assist client, they were transferred to another official who could assist if there was a language barrier challenge. There were a lot of improvements to be made to the call centre system to ensure it considered all languages, especially with the messaging while people waited for their calls to be answered.

On the labour centre interface, he said individuals could go to 127 labour centres if they could not be assisted by the call centre. The reason it wanted to develop an accessibility and visibility strategy was because centres were not in every district. Through visibility, it was trying to find ways to be accessible without having brick and mortar institutions that allowed clients to access the services of the CF and DEL by using technology, and even looking into mobile trucks to go into remote areas of the country. It had been commissioned by the DG to look at creating specialised functions in labour centres to deal with the CF processing, which the UIF could also do. A concept document for this was being developed in the current financial year as part of increasing accessibility and visibility.

On mechanisms for adhering to strategic plans, a lot of the mechanisms were around strengthening the control environment in the CF. The more the claims and revenue processes were tightened, some people interpreted it as inefficiency, but it would continue to tighten controls to curb opportunistic behaviour by businesses, countering the fraud and corruption that had manifested itself over the years.

The reason for the low target for black asset managers was because it was an incremental approach. When given a new allocation, asset managers would have to start from scratch, and current investments and PIC holdings would have to be liquidated so that the new asset managers could be given funds to invest. The CF also did not want to continue supporting the same bigger and established fund managers, but also to give access to start-ups and people starting out in the industry, so smaller allocations were suited to assist the up and coming and not incur large losses when liquating existing investments to enable the handover.

DG’s remarks

Mr Thobile Lamati, Director-General (DG), DEL, said the two commissioners had spoken about the social responsibility investment conducted through the PIC, but in addition to that, the COIDA amendment allowed the UIF and CF to support employment creation and job saving initiatives. He was raising this point because Mr Mdabe had asked about the interventions by the Department.

The Department was currently sharpening its instruments and tools to be able to deal with a lot of companies that would be distressed. A lot companies would most probably suffer and some would not come back. The normal TERS was there to assist companies that were in distress.

The Commission for Conciliation and Arbitration (CCMA) had opened its offices today so that it could deal with a number of issues regarding retrenchment processes. It was there to assist in saving jobs, which was part of the Department’s mandate -- not only job creation, but also job saving.

The High Impact Social Fund, which was aimed at assisting with the retention of jobs by investing in companies that were struggling, had not been mentioned. Edcon was example of a company that had benefited from the fund previously. This fund was geared towards job saving.

Productivity South Africa had made a presentation had indicated that it was hard at work and ready to handle turnaround solution programmes to assist companies in distress that had been funded by the UIF.

The Employment Schemes Framework was also being finalized, as employment schemes were very important. The LAP was one of the employment schemes it had, and it was also reviewing it so that it was able to respond to the challenges currently being faced. The Commissioner had spoken about the 2008 intervention created during the financial crisis -- the state was now in the Covid era, and the instrument had to adapt to the new situation, and these were the interventions in place.

The Department had started a campaign for clean audits, and this was being pushed vigorously for all entities to obtain clean audit outcomes, and it had the blessing of the Minister and Deputy Minister. It wanted to reduce wasteful and fruitless expenditure, and every time it reviewed its performance, audit outcomes were considered.

There were constant calls during the lockdown to have offices opened. However, the challenge was that employers were at home during the lockdown and a crucial document, the UI19, was required to be signed by employers. This could not be signed until companies were open, which halted the finalisation of claims. At alert level 3, the Minister would announce when offices would be opened so officials and clients could go into a safe environment.

Minister’s closing remarks

Mr Nxesi said the Department would continue to engage and would come back with a number of interventions on job creation strategies. These would be part of an integrated strategy coming from government as a whole, as there was a lot of debate in relation to this for the future.

In response to Dr Nkabane and Mr Nonstele, he said that like any medical insurance management programme, the funds were vulnerable to fraud. He had already requested the DG to ensure that there was due diligence on a number of these transactions which, if necessary, would be followed by audits. Where necessary, forensic audits would be conducted.

Huge payments inevitably attracted chancers, criminal syndicates and colluding companies and officials taking advantage of the situation especially when dealing with billions. It was a matter which the Department had to be very careful with when following up. He hoped audits would help to expose any malpractices.

Chairperson’s closing remarks

The Chairperson said it was now time for the Committee to go through the draft report, as this was preparation for the budget vote.

Unfortunately, the Committee was affected by Covid-19 and the lockdown. It had conducted an oversight visit, and the report still had to be tabled to the House. This would be done after handling the APP and the strategic plan. Some of the issues raised would be further clarified, and the Committee would then deliberation on them.

She thanked the Ministers, entities and the Department for all its work. She was happy that Members were conducting oversight in their constituencies. She agreed with Ms Ntlangwini that questions from constituencies could be answered by the Ministry and Department when they were present.

She said was being called personally by workers and not shop stewards, which was concerning. This indicated that there was a challenge, so as the country moved forward post Covid-19, unions had to be strengthened. People suffered when unions were weak, and this led to employers taking advantage. Workers had to be protected and unions trained. Going forward, legislation had to be amended and there much work would be needed to protect workers, as the world would not be the same.

She asked Members to continue their constituency work and connect with the Parliamentary Liaison Office (PLO), which was a link between Members and the Ministry. If no assistance was received, the office of the Chair had to be informed. Members would meet next week and receive the first draft of the report and adopt it or, if amendments were substantive, meet again.

The meeting was adjourned.

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