UIF & Compensation Fund: corrective measures implementation

Public Accounts (SCOPA)

06 September 2022
Chairperson: Mr M Hlengwa (IFP)
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Meeting Summary


The Standing Committee on Public Accounts convened in a virtual meeting to receive a briefing from the Commissioners of the Unemployment Insurance Fund (UIF) and Compensation Fund (CF) on progress with the implementation of corrective measures at the two funds.

The Compensation Fund said that the Director-General had approved a clean audit action plan on 11 August to address the root causes of the various audit findings by implementing specific controls. The Fund's management has implemented this action plan over the last 12 months, with a dedicated team providing coordination and monitoring support.

A major financial consulting firm had been appointed in March for 18 months to diagnose the organisational architecture of the UIF and the CF, as well as the offices of the Compensation for Occupational Injuries and Diseases. The UIF provincial offices and labour centres focus mainly on the two funds' work.

Reporting on the forensic investigation progress report, the Compensation Fund said that the project's initial phase had been completed, and the planning and execution phases were in progress. The reporting and closing phases had not started.

The UIF told the Committee that it had paid out R61 billion over the past two years to more than 250 000 companies for about 4.7 million employees, and employed six auditing companies to confirm if the money had been transferred to the rightful recipients. R14 billion had been confirmed as correctly paid to deserving employees and, as a result of this exercise, the Fund had had R3.2 billion paid back into its accounts by the auditors. The Special Investigating Unit (SIU) had been investigating undue payments, focusing on payments made to government officials, the National Student Financial Aid Scheme (NSFAS), prisoners and the deceased. The unit had secured R42 million in terms of acknowledgements of debt, and R33 million of this amount had been paid back to the SIU.

The Committee expressed frustration at the lack of answers from the CF and UIF regarding their poor performance. The two entities were not doing enough to improve their performance to better serve vulnerable workers, as both entities were yet to present their 2020 and 2021 financial reports to Parliament. For the past decade, the CF had received disclaimer audit outcomes from the Auditor-General (AG), which meant the AG could not make head nor tail of the entity's finances. The UIF was no better, as it had continuously received disclaimed audit opinions. The organisations had both acquired the services of consulting companies to help them remedy the situation.

Meeting report

The Chairperson welcomed the Members and the delegations from the Compensation Fund (CF) and the Unemployment Insurance Fund (UIF) to the meeting. He said the Minister had extended his apology as he was presenting in the Cabinet Lekgotla. A postponement was not possible because he had back-to-back presentations as he was both a Minister and an acting Minister in two different Departments.

He reminded the Members that they would receive reports from the South African Post Office (SAPO) and Eskom on Thursday, and the Committee was going to be advised on whether the reports would be received simultaneously or individually.

Compensation Fund on implementation of corrective measures

Mr Vuyo Mafata, Commissioner: Compensation Fund, briefed the Committee on the progress of implementing corrective measures emanating from their last engagement. Some of the commitments made by the CF during their last engagement with the Committee included:

Secondment of skilled personnel to add capacity within the Office of the Chief Financial Officer to assist with the improvement of the audit outcomes;
Development and implementation of an action plan to address the audit disclaimers;
A review of the organisational architecture of the CF to address the systemic root causes of the challenges facing the Fund; and
Instituting a forensic investigation into the Compensation Fund.

On the secondment of skilled personnel, the Minister had approved the secondment of skilled resources from the private sector within the accounting and auditing profession, and a team comprising 20 skilled personnel were seconded into the Fund from FTMG Africa, with a combined 222 years of experience in the auditing and financial management environment. The team focused on implementing a clean audit action plan (particularly prior period errors and improvements in records keeping), preparing the Fund for audit, and assisting with implementing and monitoring key controls.

The Auditor-General of South Africa (AGSA) has consistently issued unfavourable audit opinions to the Fund since 2003 to the financial year 2020/2021. One of the key areas of audit concern was that the Fund was unable to provide verifiable employer information, including accurate information on employer classifications, and sufficient information to support the disclosed numbers in its financial statements. Some system records and supporting documentation could not be provided for audit to the AGSA.

The staff capacitation through secondment project was meant to achieve the following objectives:

Capacitating the CF with professionals to clean up the data from 2013 to date, and trace the necessary documentation.
Reviewing all supporting documents and preparing an appropriate audit file for the AGSA audit.
Instituting an effective internal control and compliance environment ideal for a clean audit to be monitored and reviewed continuously.
Reviewing the information communication technology (ICT) systems and processes to prevent fraud and errors in the records.
Improving finance skills to achieve a clean audit.

The Director-General approved a clean audit action plan on 11 August, which was aimed at addressing the specific root causes of the various audit findings in the Fund through implementation of specific controls. The management of the Fund, over the last 12 months, has been implementing this action plan, with a dedicated team providing coordination and monitoring support.

PricewaterhouseCoopers (PwC) was appointed on 9 March 2022 for a period of 18 months to conduct a diagnosis of the organisational architecture for the UIF and CF, including the Compensation for Occupational Injuries and Diseases Act (COIDA), and the UIF provincial offices and labour centres, mainly insofar as the work of the two entities was concerned. The scope of the project was on the strategy, structure, systems, leadership, staff, shared values and diagnostic implementation plan, and it would provide a close-up report on the entities' diagnostic findings, recommendations and implementation plans.

The purpose of the forensic investigation progress report was to conduct a forensic investigation to prove or refute allegations of fraud and corruption, maladministration, conflict of interest resulting in disclaimer audit outcomes and unethical culture in the Compensation Fund over a five-year period from 2016/17 until 2020/21. The service providers appointed to carry out the investigations included Bowman, Abacus, SNG & TSF Africa, Nexus and Stoneturn. The initiation phase of the project had been completed, and the planning and execution phases were in progress. Reporting and closing phases had not yet started.


Ms K Mkhonto (EFF) understood that a transfer of skills would be seconded to the Fund, but wanted to know how the Fund planned to retain those skills. There was a culture of non-compliance and non-accountability in the Fund, and she wanted to know how it planned to deal with such a culture, because the secondment of knowledge might be a temporary intervention and the Fund would need to ensure that it did not regress into its old patterns.

Mr A Lees (DA) wanted to know what progress had been made in ensuring that reminders for submission of annual assessments of the returns of earnings were sent to employees. He asked what the backlog on the returns of earnings that had not been submitted was, and how many years the backlog went back to. What mechanism did the Fund use to ensure that all employers were registered and submitted their returns and made payments?

He wanted to know if there was any link between the Fund and the South African Reserve Bank (SARS), and whether there were inspectors for small businesses who employed people and were very vulnerable to employment accidents which they could not claim for. He said the Fund's website was not user-friendly because it required logging in multiple times, which was frustrating.

He asked if the Fund's contact centre, or whoever dealt with emails at the Fund, was able to deal with all the phone calls or emails they received every day, and asked how much of a backlog there was in that regard. The Committee had spoken about the unlisted investments for years, but the Fund seemed not to have dealt with the issue, and he asked why the Fund had not withdrawn its investments if financial statements could not be found.

He also wanted to know how many of the investments were solvent and insolvent, what the value of investments were in each. He proposed that the Committee request the Compensation Fund to provide a report containing a full list of all unlisted investments and the status of each.

Ms H Mkhaliphi (EFF) said it seemed that the Fund neglected the people who were affected by injuries at work, and wanted to know how it planned to ensure that this would not happen in the future, because employers were reluctant to assist their injured employees. Some workers had no other means of income after losing their jobs because of injury, and when they went to the Department of Employment and Labour (DEL) to claim their funds, there was no clear coordination for assisting them. She asked where the people could get assisted, because it seemed going to the DEL was ineffective, as there appeared to be no capacity from the Department's inspectors to ensure that all employers were registered.

Compensation Fund's response

Mr Mafata said the transfer of skills team had been integrated into the operations of the Fund, and was working closely with its officials in finance and guiding and assisting them with implementing controls and other day-to-day issues. The Fund was using the iTrack tool to track and monitor the implementation of controls and recommendations from the audit findings. It would continue using the tool to ensure its officials did not regress from doing their duties once the deployment was over.

He said the returns of earnings were an automated function whereby employers would submit their returns online and the Fund would assess the employers on the system. There were a few cases of employers that still submitted their returns of earnings using manual processes, but there were several interventions that the Fund had in place to ensure that employers submitted their returns. The first one was the creation of payroll auditors within the inspection and enforcement branch in the Department, who were fully funded by the Compensation Fund. This unit helped them audit employers and work through compliance issues with employers not complying with the law.

The Fund also collaborated with the Companies and Intellectual Property Commission (CIPC) to create a portal where employers who registered companies through the CIPC could also automatically get registration for the CF and get all their registrations done in one place. That also assisted the Fund in catching employers who were registering new companies and preventing them from falling out of the net.

The Fund had also embarked on a process of simplifying its assessment processes for the reduction of assessments and industries. The Minister published a new regulation that limited the number of classes used to assess employers about two years ago, which was also one of the interventions implemented to simplify the process of registration to the CF and improve compliance.

There was only one process for registering returns, and the DEL had one entry for all employers who did business with it. If a person wanted to use its online platform, they would first need to register on the Department's website. Once that was done, they could use the same login details for registering returns. The only time they would need to do a separate registration was for claims purposes on the claims administration system.

Referring to the unlisted investments, he said it was not easy getting out of the investments without incurring or exposing the Compensation Fund to further losses because unlike listed investments, where one could find a buyer anywhere, unlisted investments were liquid investments made for the long-term. The Fund had worked with the Public Investment Corporation (PIC) to try and bring about improvements in the accountability of the companies that they invested in, and to ensure that the administrative processes in their future investments would be included in their agreements with the companies they would be investing in.

The Fund reviewed its agreement with the PIC to take into account some of the improvements, and had slowed down on its investments to allow space for the new interventions and improvements to be implemented. They would submit the list of their unlisted investments with all the additional information to the Committee.

He said finance was one of the areas that they had focused on in the secondment, because they had challenges in bringing in the relevant skills and getting their officials to handle the most complex issues. In 2017, the Minister approved a new structure for the Compensation Fund, which allowed it to attract several qualified medical personnel and claims personnel, and skills were not an issue in those areas, which was why they did not seek extra help.

The Fund had invested in creating and improving the capacity of the occupational health and safety inspectors in the Department to assist in preventing occupational injuries and diseases. The additional capacity assisted in situations where employers did not report incidents. The employees would report such issues to the inspectors, because this would be in non-compliance with the law. The inspectors would then do the necessary investigations and if necessary, they would compel the employers to compensate. If it was an old claim, they would compile the necessary documents and reports that would enable the Compensation Fund to assist the employee. 

They also wanted to ensure that employers did not face administrative impediments in registering and submitting claims, so they created an online platform to register claims. Part of the improvements they wanted to do to the system included allowing injured workers to claim for themselves, as the system allowed only the employer to claim for the employee.

Mr Julian Soupen, Chief Director, Compensation Fund, said the CF had about 11 000 employers flagged for audit. The number fluctuated monthly as new employers were flagged and old ones assessed and cleared. When employers were flagged for audits, they were issued notices outlining the list of requirements from the Compensation Fund for their audits to be cleared. The Fund would request a full set of financials from the employer to enable the audits to be cleared.

The Fund had also implemented a new development on the return on earnings (ROE) online system where once the employer submitted an ROE, the system would calculate whether the employer was flagged for audit or not and automatically issue a notice to them online, and list all the requirements they would need to submit to be cleared. The Fund also did an outbound exercise through its call centre to all the employers flagged for audits, separate from the notices and the ROEs, to request information. Most of the requested information was received by the Fund and was being processed. Some of the employers who failed to respond to the requests for information would be visited to get them to provide supporting information.

Mr Johnny Modiba, Chief Operations Officer, CF, said the Fund's call centre had received 37 515 calls at the end of August 2021, and 34 350 had been answered. They had managed to exceed their key performance indicator (KPI) target, and for the 8% of calls that could not be answered within the standard and turnaround time, they had made outbound calls to the clients. Based on their reports, they had an average handling time of seven minutes for the most difficult calls, but they were able to address most of the concerns raised by the callers.

The Fund received 7 900 emails on average per month. From April to August 2022, they had received a total of 39 580, and 3 104 emails were resolved, and 26 476 were dispatched to the back office for referral to the various business units within the CF so that they could be resolved accordingly. The other challenge they faced was that up to 70 000 of the emails they received were junk mail, so they had to remove the junk emails and then deal with the valid ones. Once they identified the valid emails, they responded to them immediately, asking for the clients' relevant information. Once the information was received, they resolved the issues according to their ability. He received weekly reports on the number of emails received, and monitored the progress of resolving the email enquiries.

Follow-up discussion

Mr S Somyo (ANC) asked Mr Mafata to sum up his assessment of what was required to settle the stability of the Compensation Fund. He also asked him to provide a list of the consultants the Fund used, their cost, and expected results and timelines. What was the expected level of skills transfer from each consultant?

He noted the Fund's acknowledgement that their problems needed to be resolved from the backlog as far back as 2013. He added that all the resolutions must be made while moving forward because their services were also needed now and would also be needed in the future. He asked how they would create a balance between what they needed to address from the past, what they needed to service in the present, and what they needed to improve for the future.

Mr Lees said it should have been easy for the Compensation Fund to communicate to clients on the additional information that was missing, when it was due, and when the next submission of information would be required. He did not want to hear about information submitted from the Post Office. The collaboration with the CIPC for people to register their companies was good for investment into the economy, and congratulated the Compensation Fund for it.

He said the collaboration with the CIPC did not capture the majority of employers who operated as sole proprietors, which were employers who did not meet the statutory requirements in terms of the UIF and CF. The sole proprietors needed to be included to protect the employees who would not be covered if they were injured at work.

He said the weekly reports and oversight over the email enquiries had not solved the problem, and there needed to be consequences and action taken. He asked Mr Mafata to provide the Committee with the value of the unlisted investments of the Fund, since the information was readily available. He was disappointed that the Fund had merely slowed down on making those investments, and felt they needed to stop them completely. He said the online platform required logins many times -- he had tried several ways to access the site.

Ms A Beukes (ANC) did not get a sense that the Compensation Fund wanted to improve their disclaimed audit opinion because, on the actions needed to address the issue, they had commented that it would be reviewed by management and that they would prepare a register for consequence management, and did not clarify how they would do that. She wanted to know if the Fund had an official dedicated to the clean audit action plan, and the measures available to enforce the action plan. She was concerned that the situation was not going to change if there was no dedicated official for the audit action plan.

Department's response

Mr Mafata said they were satisfied with their progress so far, and added that they would provide the Committee with the list of consultants and all the relevant information that Mr Somyo had asked for. One of the discussions they had with Treasury was on how far back they could go in fixing their issues because they did not want to deal with issues from before 2013 while trying to move forward.

He accepted the feedback from Mr Lees about improving their communication to clients on additional information that was missing, when it was due, and when the next submission of information would be required. He commented that it would go a long way toward improving the levels of compliance.

Mr Lees was correct in saying that the CIPC did not cover sole proprietors, but the Compensation Fund had created an online registration platform for all other forms of businesses in response to that. Mr Lees was also correct about the need for consequence management for the email enquiries, and the COO of the CF would ensure that he implemented it and ensure that new performance agreements were signed by call centre employees so that their performance could be monitored, and under-performers would be faced with suitable punishment.

When the Fund decided to review their investments, the PIC had already started processes with some of the investments and commitments made with those investments. The Fund had revised its mandates with the PIC and proposed some measures they would like them to include in the agreements. The Fund was not necessarily looking at any new investments, except those that had already started.

He said there was a corresponding official for every plan they had on the clean audit action plan, and the plan was summarised for the Committee. The implementation of action plans was included in all the performance agreements, starting from all the executives to the officials at the operational level. Everyone was assessed on those performance agreements, and that was how consequence management would be performed. Some of the dedicated resources had also been seconded to form part of the clean audit action plan to drive and manage the achievement of a clean audit.

Mr Linda Kotta, Acting Chief Director: Practical Management, Compensation Fund, said the total value of the unlisted investments as of 30 June stood at R2.162 billion, which was made up of the following investments:

Investments in equities: valued at R421 million. Originally cost R518 million and declined due to some companies (Afric Oil, Fountain Civil Engineering and Zamalwandle Logistics) underperforming.
Equity funds: valued at R1.2 billion, with an original cost of R1.2 billion.
Unlisted loans: valued at R532 million, with an original cost of R1.2 billion, and declined due to LA Crushers and Medi post not doing well.

He said they would provide the full report to the Committee after the meeting.  

The Chairperson wanted to know when the CF anticipated submitting its annual report to the Committee.

Mr Mafata said they would submit the annual report, based on the audit work they were currently doing, at the end of March 2023.

The Chairperson said it sounded as if the Compensation Fund was looking for an easy way out and something had not been sitting well with him during the entire presentation. He felt something was missing, but he could not point it out. He was sceptical because of their past interactions with the Fund, where they had a long history of disclaimed audit opinions and a lack of consequence management. He wanted to know how much the consultants would cost the Fund.

Mr Mafata said the contracted amount was around R20 million over the 12-month period, which was the cost of the salaries they paid to the secondees.

Unemployment Insurance Fund on implementation of corrective measures

Mr Teboho Maruping, UIF Commissioner, presented the progress in implementing corrective measures at the UIF. The scheme had paid out R61 billion over the past two years to more than 250 000 companies for about 4.7 million employees. It had employed six auditing companies to confirm in these companies if, indeed, the money had been transferred to the rightful recipients.

R14 billion had been confirmed as correctly paid to deserving employees and, as a result of this exercise, the Fund had R3.2 billion paid back into its accounts by the auditors. The Special Investigating Unit (SIU) had been investigating the undue payments, focusing on payments made to government officials, the National Student Financial Aid Scheme (NSFAS), prisoners and the deceased. The unit was able to secure R42 million in terms of acknowledgement of debt, and R33 million of this amount had been paid back to the SIU.

The scheme remained vulnerable, and as of 23 August, it had about R230 million exposed to potential fraud. The National Prosecuting Authority's (NPA's) Asset Forfeiture Unit (AFU) had been able to preserve R133 million, and R123 million of the R133 million had already been paid back to the UIF.

Adv Lucky Mkhonto, Director: Legal Services, UIF, said they had sought legal advice about the ten cases involving 34 accused and seven companies, and whether or not they were allowed to name and shame the seven companies. The legal opinion had been that the memorandum of agreement (MOA) signed with those companies did not provide for naming and shaming them.


Mr Somyo said slide 38 of the presentation referred to the SIU cases involving members of the supply chain management (SCM) unit, and the outcomes of the cases referred to warnings issued to them. He asked whether those individuals were still part of the supply chain unit. If they were, he wanted to know the control mechanisms in place to prevent them from committing the same misdemeanours in the future, and to avoid similar disciplinary cases with other SCM management. He found it odd that there had been uniform outcomes in finalising the disciplinary cases. He asked what standard mechanism would be affirmed to ensure sound disciplinary processes leading to valuable outcomes.

Mr Lees said when the Committee visited the UIF's offices a few years ago, one of the issues that they discovered was a mass of emails and a call centre backlog, and he asked for an update on the emails and call centre cases that they had received and how many were dealt with, as well as the backlog numbers to date. He said the question about unlisted investments probably applied more to the UIF than the Compensation Fund. He asked them to provide the Committee with the current values of the unlisted investments.

He said the country had a high unemployment rate and people needed to access their UIF funds more than ever just to survive. He wanted to know the turnaround time limit for them to receive approval from when they submitted their applications, and how they were notified. He also wanted to know how long it took for people to get their money once their UIF was approved.

Ms Mkhonto said she did not see the farming community in the vulnerable sectors listed on Slide 24 in the presentation. During the Committee's oversight in the past, it had been confirmed more than once that the farming sector had been defrauding the UIF Temporary Employer/Employee Relief Scheme (TERS), and asked for clarity in that regard. There had also been a slide that spoke about introducing new technology that would make the application process seamless. She was concerned about its accessibility to rural areas and vulnerable groups in the farming sector. She asked how accessible and how user-friendly the new technology would be.

She said the outcomes of the disciplinary cases referred to the SIU were not correlated. She wanted to know who was responsible for administration, and why people received only written warnings if companies were found to have done wrong and money was demanded back. She said if the SIU found a company guilty, surely someone must have been engaged in administering the particular claim. She wanted to know if the cases counted as part of the successfully convicted cases.

Ms Mkhaliphi said there was a problem at the UIF, where a person had applied for a claim on 17 February, and still had not received their money to date. It seemed as if there was no appetite from the UIF to address the backlog issues, because they always advised people to go to the Department of Labour centres and the queues were also putting people at a disadvantage, as some would end up going home without getting assistance. Another problem was that the UIF system was always down when people wanted to apply for their claims.

She said there must be a way to deal with the fraud cases in the UIF, as they also said there were newly emerging cases in their presentation. She had gone to the UIF offices in KZN in July to report some of the issues faced by citizens, and none of them had been resolved because the Department had no appetite for addressing them. She wanted to know how the UIF assisted people who had been waiting for their claims for a long time, how they would address the long queues at their offices, the email and call centre backlogs and their understaffing issues.

UIF's response

Mr Maruping said the final outcomes of disciplinary hearings depended on the information received by the presiding chairperson. The UIF often appointed an independent chairperson to preside on the cases; sometimes, it would be an individual from another department. They would also invite a prosecutor from a different environment and decide the outcomes of a case based on the information at their disposal. There had been three final written warning verdicts in the seven cases, which were alternate dismissals that meant individuals could not set a foot wrong for six months or else they would be permanently dismissed. There was also an individual who had received a final written warning with a month's salary suspension.

The SIU  had investigated the Bid Evaluation Committee (BEC), the Bid Specification Committee (BSC), and the Bid Adjudication Committee (BAC) who were independent staff members who had independent functions in separate areas, but had formed part of the committee that appointed service providers. They returned to their positions, and the UIF trained its staff about SCM processes and conducted a controls self-assessment as part of the control environment review.

The UIF had also brought in internal auditors to review their control environment. FTMG was assisting them in reviewing their entire control environment to ensure that their SCM was above board. They had also introduced Probity, which tested every supply chain process before any appointment and helped them ensure that their SC processes had no gaps in between.

He said the massive email backlog had been attended to and cleared in December 2021.

The UIF's unlisted investment portfolio amounted to R20.6 billion, with about 25 invested companies.

When it came to paying claims, the UIF had a fraud problem, and a problem with employers who did not declare their employees and did not pay their contributions. The other problem was that in cases where employers had declared their employees, they would skip months of payments and when the employees claimed, there would be missing months in their declarations. When processing claims, declarations were important, because they contained details of the employee's salary and the number of days they worked over a particular period, which would be used to process the employee's claim. This meant that employees could receive a small amount of money when they deserved more. The UIF did not process claims unless they received all the necessary information such as declarations, contributions and when the gaps within the declaration were closed.

The UIF also employed its own employer auditors to supplement the Departmental inspectors. They would go to companies where there were claims to inspect and clear declarations and contributions, and close the gaps in the declarations where necessary to ensure that when the UIF paid the claims to the individuals, they would receive what was due to them.

He said they had not received any fraud cases from the farming sector, but acknowledged that this did not mean fraud was not happening in the sector -- they just did not know about it because there were no cases reported to them. They were willing to receive reports so they could investigate those cases. On COVID-TERS, they had worked with the Fusion Centre, which included the HAWKS, the SIU, and the AFU of the NPA, who had helped them to speed up investigations because COVID-TERS was a priority.

He acknowledged that the new technology may not serve everyone in the country equally, as some people who live in rural areas, small towns and townships may not have access to the technology. They would introduce the UIF buses which would be used to travel to the most rural areas, and the Unstructured Supplementary Service Data (USSD) which would be used for the usually small burner phones that did not have access to the internet. People could use their phones to process their UIF claims using the USSD without the cost implications for data. They would also introduce the UIF cell phone App, and all the introductions were aimed at reducing the number of people who visited their labour centres.

He would investigate the claim of 17 February which Ms Mkhaliphi had reported, and agreed that some of the experiences that South Africans went through were unacceptable and could not be justified. They introduced queue marshals across the provinces to reduce long queues and have them speak with the people in the queues and attend to their issues while waiting.

The UIF was dealing with the issue of the system being down. The problem was their relationship with the State Information Technology Agency (SITA) and their reliance on using the SITA technology, which was unreliable. The Minister and the Director-General were working on finding a solution to the system's downtime, because it depended on the network they received through SITA.

He said they had outsourced their call centre and employed over 350 call centre agents compared to the initial 50 agents that they had. They were assisting people with their claims over the phone, and there may have been a few issues at the beginning when they took over the call centre, but the UIF anticipated that things would start to stabilise as they became accustomed to the environment.

Follow-up discussion

Mr Lees asked if the Committee would receive the full report on the unlisted investments from the UIF, as he had not heard them commit to submitting it to the Committee. Many reasons had been given for why it took a long time for employees to receive their UIF benefits, but he wanted to know how long it took them to receive the benefits when there were no complications in their applications.

Mr Somyo wanted to know whether the individuals who went through the disciplinary processes and received their verdicts based on the disciplinary committee (DC) processes were still partaking in procurement processes, considering that the UIF's framework on supply chain required several platforms and players. He asked if they still formed part of any committees within the SCM processes.

The Chairperson wanted to know what offences were committed by the individuals who had received written warnings in the seven cases that went through the DC processes.

Ms Mkhaliphi said her question about the appetite and capacity for work in provinces, especially since new fraud cases were resurfacing, had not been answered. She asked for an update on the fraud cases, because they were serious issues. Due to the recent floods in KZN, businesses had closed down and employees had suffered because of this. She wanted to know if any companies had applied for TERS on behalf of their workers and had not paid them. She also wanted to know if the UIF benefits of employees would be affected if the company paid them the TERS.

The Chairperson also wanted to know why the UIF had not submitted its 2020/21 financial report.

UIF's response

Mr Maruping said they would submit the report on the unlisted investments to the Committee.

It took 15 days for the UIF to process ordinary unemployment benefits if everything required was in place. For the death benefit, it took 20 days.

He said there had been an overhaul of the BEC and the BAC, so there were completely new people on those committees.

He said the UIF did have an appetite to do their job, and said he would take the cases that were not attended to with the KZN Provincial Chief Inspector, Mr Kambule, to find out what had happened. Four cases had been opened for fraud in KZN, but he would follow up as he was unsure about the merits of the cases.

The UIF had not introduced a new scheme to provide for the companies and employees affected by the KZN floods, but they already had a benefit called 'short-term employment'. The process was that companies would apply on behalf of their employees, and the money would be paid directly into their employees' accounts. Some companies had applied for the short-term employment benefit on behalf of their employees, and he would provide a report on the number of companies who had applied, those who were paid and the amounts that were paid in the next engagement with the Committee.

Regarding the 2020/21 financial report, their main challenge had been their unlisted investments, because almost 25% of their portfolio (R20.6 billion) had a problem because the financial year end dates of the companies they invested in were different from the Fund's. This affected the UIF's ability to fully account at the same time that other government institutions were able to account.

The other issue was the COVID-TERS process, because the UIF had to report on the R61 billion that they paid to companies as part of their financial report, and part of that required them to be able to show that the amount was paid to the right people in terms of the 'follow the money' project. So far, they have been able to recover R18 billion, and are working with the auditors to recover the remaining R40 billion. They were engaging the banks to determine if the process could go faster.

Work had been done by the SIU, the Asset Forfeiture Unit, the HAWKS and the NPA to recover money on behalf of the UIF, and the money was in possession of those institutions and needed to be accounted for in the UIF's financial report. The processes and investigations were ongoing, which made it difficult for them to present the proper financial position of the Fund.

Mr Somyo said the cardinal point of consequence management was a bit attitudinal, and did not necessarily carry a sense that any infringement had been dealt with to restore trust. When deciding on financial value, one must guarantee that the individuals involved would uphold the maximum ethical conduct. If the UIF continued using the same people who faced disciplinary action and were found guilty in its SCM procurement committees and processes, that should not be taken lightly just because the people had finished their sentences.

The Chairperson wanted to know the offences that the individuals had committed in the seven cases that went through the DC processes, and had received written warnings.

Mr Maruping said he would forward the details to the Committee.

The Chairperson said the information must have come from somewhere, because it was in their presentation, and said Mr Maruping should not play hide and seek with the Committee.

Mr Maruping said he was one of the people who was sanctioned by the SIU, and had been given a final written warning and a one month salary suspension.

Mr Lees wanted to know if the UIF had also slowed down on their unlisted investments, or if they had made no changes.

Ms Fezeka Puzi, Chief Financial Officer, UIF, said they had put a hold on further investments in unlisted investments. The Fund had decided to invest 20% of its total portfolio (R20.6 billion) in unlisted investments. Due to some of the companies' poor performance and impairment, the Fund lost some money and decided not to make further investments, and service only the ones that were performing. The Fund was looking for a strategy to exit the underperforming investments without incurring losses. They had instructed the PIC to manage the investments actively, and the PIC had established a unit that would look at turning around the companies that were in distress. The PIC would report to the UIF monthly on the progress of the companies, and would make the necessary recommendations.

Mr Somyo proposed that the UIF forward the details of the SIU's investigations to the Committee, and said they should not take the issues lightly.

The Chairperson said there was a tendency to try to escape public scrutiny and accountability with written submissions, and added that the public needed to know the information because they depended on institutions such as the UIF to survive, especially with the rate of unemployment in the country.

Mr Maruping said all the SIU cases had been because the senior officials were in contravention of the SCM process, particularly the interpretation of sole source procurement in an emergency. The basis of the investigation had been that they had procured a media company using a sole source during an emergency. The interpretation was that they had not interpreted the sole source process correctly. The full report of the SIU that they would submit to the Committee would explain further what they had done wrong.

The Chairperson wanted to know why they had not submitted their 2020/21 annual report.

Mr Maruping said the Auditor-General finished their report in March, and the final sign-off of the report had been finalised last week. It would be submitted to Parliament next Friday.

Concluding remarks

The Chairperson said the absence of the Minister caused problems for the Committee even though he had explained the reason for his unavailability in the meeting. He did not get a sense of seriousness from the UIF, but was not surprised. They would see how far the UIF would go with their hide and seek. Perhaps the Committee would have to invite the SIU to brief it on the UIF cases, because the UIF leadership were both players and referees in the consequence management issues that affected them directly.

The Committee would also look at the annual report that would be submitted by the UIF next Friday, and would match it with the information received in the presentation and the SIU information. He asked what the audit outcome for 2020/21 was.

Mr Maruping said it was a qualified audit opinion.

The Chairperson said they would look at that, and then schedule a hearing on it outside the scope of the matters discussed in the meeting. The Committee would be expecting all the other submissions within seven days. 

The meeting was adjourned.


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