UIF & Compensation Fund 20222/23 Annual Performance Plans; with Minister

Meeting report

The Acting Chairperson opened the virtual meeting, welcoming the Members, the Minister of Employment and Labour as well as the officials from the Unemployment Insurance Fund and Compensation Fund. He handed over to the Minister for his opening remarks.

Minister’s input

Mr Thulas Nxesi, Minister of Employment and Labour, said that the Director-General was not present, as he was in Malawi for a meeting of Labour Ministers. He apologised for his absence from the Committee meetings in the past weeks, as they usually clash with Cabinet meetings. The bible talks of the difficulties of serving two masters.

He was aware of the systemic issues facing Unemployment Insurance Fund (UIF) and the Compensation Fund. Forensic auditors have been engaged to help recover fraudulent funds, with over R1 billion recovered for the UIF. This was part of the “follow the money” programme supported by the Auditor-General (AG), Special Investigative Unit (SIU) and Presidential Fusion Centre. He looked forward to receiving the forensic report and was sure that some middlemen with parasitic vested interests will be having sleepless nights. This industry has grown because of past inefficiencies of the Fund. The action plans presented were mainly based on AG’s findings and in developing the plan; the Funds worked closely with the AG, seeking its input and support. The Department also celebrated labour activation programmes that have more than 20 000 beneficiaries in KwaZulu-Natal.

2022/23 Annual Performance Plan: Compensation Fund

Mr Vuya Mafata, Commissioner, Compensation Fund, said that the Compensation Fund shall focus on the following strategies, which will further inform institutional policies over the five-year cycle:

- Improve the system of internal control and maintain financial soundness;

- Develop the capacity of the Fund to deliver according to the mandate;

- Improve operational efficiency through process engineering and technological innovation;

- Ensure appropriate benefits were delivered to intended beneficiaries, efficiently and at a reasonable cost.

- Contribute to employment and economic growth through rehabilitation and reintegration.

The Compensation Fund was responding to the three Medium-Term Strategic Framework (MTSF) Priorities to deliver on its vision and to help realise the objectives of the National Development Plan (NDP) 2030 over its five-year term. The Priorities were:

i) Priority 1: Capable, Ethical and Developmental State;

ii) Priority 2: Economic Transformation and Job Creation; and

iii) Priority 4: Consolidating the Social Wage through Reliable and Basic Services

The programmes of the Compensation Fund were administration, COID (Compensation for Occupational Injuries and Diseases) services, medical benefits and orthotic and rehabilitation services. COID-service targets were the percentage of the received return of earnings assessed annually, percentage of approved benefits paid within five working days and percentage of claims received adjudicated within 30 working days. Medical benefits were (1) a percentage of requests for pre-authorisation of Specialised Medical Interventions finalised within ten working days of receipt of accepted claims, and (2) a percentage of medical invoices finalised within 30 working days of receipt. Orthotic and rehabilitation services targets were a percentage of requests for assistive devices finalised within 15 working days; the number of learners funded annually at post-school education and training institutions; and the number of persons with disabilities funded annually for vocational rehabilitation programme. The rest of the presentation was tables showing key performance indicators, on how the various targets will be achieved.

Discussion

Mr M Bagraim (DA) said that the Minister’s opening remarks were shocking – blaming third-party administrators for the dysfunctionality of the Fund, whereas the Committee has never been told which the third-party administrators were.

Ms C Mkhonto (EFF) said that the Auditor-General has never briefed the Committee on outside parties contributing to the dysfunctionality of the Fund. A SCOPA-led investigation asked the Director-General and Commissioner to write to it stating if the parties should keep their jobs. She noted that the presentation also mentioned that the Fund created jobs, whereas Stats SA has been saying that unemployment is increasing. She was of the view that 90 days was a long time for the Fund to finish processing a claim.

Dr M Cardo (DA) also takes with concern the Minister’s scapegoat for the dysfunctionality of the Compensation Fund. What was the status of regulations on third parties? He asked if it was right for the Minister to try to achieve what was rejected in legislation through regulations.

Minister Nxesi responded that, when Parliament demands officials to write a letter to it, it means that it was starting a disciplinary process. He has personally written to SCOPA. It must be the executive, rather than officials, who write to Parliament. Labour laws must be respected. He will not retract on third parties as his interests were clients’ interests and not third-party interests.

Mr Mafata responded that the Fund aimed to finalise compensation claims within 90 days. Claims must adhere to certain specifics, if not, the Fund assists the client. In this technology era, network breakdowns and failures must be taken into account, hence putting a 90-day target. When it published regulations, it did not speak about third parties, but the worker and the employer. Regulations were put in place as part of internal control to safeguard monies to be paid to beneficiaries.

Ms H Denner (FF+) asked about the number of comments received in response to the regulations and whether they will be updated.

Mr Mafata responded that 76 comments were received, and the Fund was still reviewing them. Some were legal in nature and needed a legal opinion.

Ms Marsha Bronkhorst, Chief Operations Officer, responded that an entity might create 2 000 jobs but the economy may shed 5 000 jobs.

Unemployment Insurance Fund Strategic Plan and Annual Performance Plan 2022/23

Mr Teboho Maruping, Commissioner, Unemployment Insurance Fund, said that the strategic priorities of the Fund were to realise a functional and efficient UIF; strengthened institutional capacity of the Fund; more decent jobs created and sustained, and an inclusive and responsive social security coverage. The success of the UIF will be measured by the following:

• Number of Persons with Disabilities  funded annually for Vocational Rehabilitation Programme 
• Percentage of new companies created with a registration document
• Percentage of companies issued compliance certificates
• Percentage increase in contribution revenue
• TAT to issue a compliance certificate
• Turnaround time to process claims and payments
• Enhancing employability to enable UIF contributors to be retained at work
• Percentage of TERS (Temporary Employer-Employee Relief Scheme) processed
• Percentage return on listed investments  ≥ the benchmark

Discussion

Mr Bagraim did not believe the “damn lies” and statistics presented. People on the ground tell that the Fund never picks up its phones and never gets back to its clients. Sometimes, the calls do not even go through. He asked for the phone number that was working. People were often told feedback after ten days and sometimes never even received feedback.

Dr Cardo asked for the total amount paid as part of COVID-19 TERS, and how much of it was flagged as fraudulent by the UIF. Why did the Fund’s actuaries inform the Fund should unemployment reach 40%? Is the Fund sustainable in the face of rising unemployment?

Ms Mkhonto asked how the Fund detects repeat claimants and whether that did not affect people sharing the same surnames and initials.

Ms Denner asked if it was human error or administrative errors, where claimants were requested to submit the same document more than ten times with no feedback. She asked the number of TERS that were still outstanding.

The Acting Chairperson asked for a quarterly breakdown of targeted employment numbers.

Mr Maruping responded that the questions were progressive. The breakdown for employment numbers was provided in slides 11 and 12. The Department has moved towards a centralised call centre with 100 people employed who were currently focusing on the UIF only. The Fund was able to pick repeated claims, and it referred these cases to the SIU. Previously, the UIF was centralised at the head office, but it has decentralised to provincial and labour centres across the country, over the past six months, to speed up the claim process. The UIF has appointed chief directors for each province.

There were still outstanding TERS, mainly driven by incomplete information. About R63.7 billion was paid as COVID-19 TERS, but about R47 million has been declared fraudulent. UIF assets were at around R120 billion. In the past six months, the Fund received fewer contributions than the money that was claimed. It received an actuarial report but it was yet to deliberate on it.

Mr Bagraim asked the amount of PIC money that was stolen. The Fund has failed the South African workforce, and the Minister must consider doing the honourable thing by resigning.

Dr Cardo asked for the amount received in the past six months in contributions, versus the amount paid in claims.

Mr Maruping responded that it had a meeting with the Public Investment Corporation (PIC) in the past week, and requested a report on money that was stolen, non-performing investments and issues from the Mapati Commission that are of interest to the Fund.

Ms Fezeka Puzi, Chief Financial Officer, UIF, responded that the Fund received contributions of R15.8 billion, as compared to R18 billion claims, with a growth deficit of R3 billion in the period 01 April to 31 December 2021.

The Acting Chairperson said that the Funds must address the nefarious acts and the concerns of Members. He thanked the Members for attending, and the commissioners, their teams, Minister and Deputy Minister for their presence.

The meeting was adjourned.