Unbundling of Compensation Fund and UIF from the DEL; Forensic Report on Thuja Holdings agreement; with Minister

Meeting report

The Chairperson made brief introductory remarks and welcomed stakeholders and all present in the meeting. The Chairperson noted that there was a forensic report on which the Committee would be briefed.

Minister’s Remarks

The Minister of Employment and Labour, Mr Thulas Nxesi, provided a brief overview of the presentations to be discussed, and commented that Members would remember that the Committee was previously briefed on the resignation of former Director-General (DG), Mr Thobile Lamati from the Department of Employment and Labour (DEL). In this regard, he had appointed Dr Alec Moemi as the DG on a five-year contract.

Minister Nxesi referred the Members to parts of the presentations, emphasising that slide 21 of the presentation on the conceptual model of the Compensation Fund and Unemployment Insurance Fund (UIF) highlighted the DEL’s theme of elevating and strengthening its required governance and control function and its new function to be immediately responsive to customers. The compensation offered was multi-faceted. Minister Nxesi pointed out that the fundamental reform of the information and communications technology (ICT) base of the fund was the critical starting point, as addressed in slides 27-41 of the presentation. On the UIF, an organisational architect reviewed the combined implementation. The Minister commented that when the DEL embarked on this journey, it intended to transform the UIF. For that reason, the DEL had developed three stand-alone entities. Referring to slide 11, he said success was achieved by having the correct resources, skills and structure. He assured the Committee that although Ministers came and went, the programme would continue. Skills development, employment creation, and driving improved health and safety were also included.

The Minister commented that, with respect to the Thuja Holdings briefing, arguments had commenced relating to due diligence, irregularity, and illegality. It was unnecessary to have the forensic report to make the case for the setting aside of the agreement, but the details and names of people had never been requested through a court or disciplinary process. In the meantime, there was a duty to follow due process and allow privacy for employees. The DEL was advised to maintain this position until the process ran its course.

Ms Onke Mjo, Acting DG, DEL, introduced herself to the Committee and said she would emphasise the purpose and the way forward for the DEL. The spirit in which the DEL interacted with Parliament and its Committee was one of openness, transparency, and accountability. The entire document relating to the Compensation Fund, UIF, conceptualisation and full implementation approach as a whole diagnostic exercise had been submitted as complete documents as the DEL wanted the Committee to have a full view of what was done as well as the objective of the diagnostic exercise. The DEL hoped the presentations would address Members' concerns.

Presentation on the conceptual model and macrostructure of the Compensation Fund and Unemployment Insurance Fund

Ms Mjo presented the presentation to the Committee, focusing on the background and approach followed, design principles, an overview of the proposed conceptual model, and an introduction to the proposed macro structure for the Compensation and UIF.

(See attached presentation for details)

Presentation on the organisation architecture review: Compensation Fund and Unemployment Insurance Fund combined implementation plan

Ms Mjo presented the presentation to the Committee, highlighting the proposed macro structure for the Compensation and UIF, the implementation plan and its guidelines, and the DEL’s focus on change management.

(See attached presentation for details)

The Chairperson asked if the Minister had any comments to make on the presentations.

The Minister said that the DEL was engaging in data and cash-intensive exercises and transactions. Information technology (IT) was central to providing services in the long term. The DEL wanted its service delivery to be anchored within the DEL as executive authorities came and went.

Discussion

Ms S Boshoff (DA, Mpumalanga) said the Compensation Fund should also be re-structured, but currently, it is under-resourced and lacking in skills. How would this be addressed? The assistance provided by officials was appalling and they were always offline. People were sent from place to place, had to travel long distances, and paid for their own transport. She referred to the Business Continuity Programme which commenced on 1 February 2024. How would this programme be implemented, and would it be followed through with? She referred to the timelines for re-structuring the Compensation Fund and the UIF and wanted to know what this would cost as no value has been added to it. What were the immediate changes which Ms Mjo had referred to?

She commented that some of the inspectorates were under-resourced and not properly trained. She asked for an idea on how this would be addressed. Would this impact the salaries officials currently receive and what would the salary difference be? She was concerned about business indicative and things being wrong. Was there any engagement with officials to address their concerns and find out if they had any recommendations?

She referred to the Government Gazette published on 26 January 2024 on the Compensation Fund acquiring Rand Mutual Holdings as an insurance license holder. She wanted an indication of why this decision was made. No regulations were published for public comment in December 2023 or January 2024 despite the Acting Commissioner saying this would be done. Could the Members be given information regarding this?

The Chairperson asked if the inspectorate from the DEL would still be used. He noted that the Minister addressed questions relating to timeframes and said there was fear amongst employees about re-structuring. Had this been addressed? He liked the idea that office management was based in the Office of the Accounting Officer.

Responses

Ms Mjo referred to change management and said this was the primary preference in engaging staff. She wanted to get an understanding of the diagnoses that were made and what this meant for the organisation. Information and change management were important to understand related to timeframes, but it was not only about what was recommended, but also for staff to understand the processes. The immediate things that were important to understand were strategies of service delivery, responsiveness at labour offices, and the provision of services as the Chief Financial Officer (CFO) had outlined the delivery of working tools and enabling environment of providing alternative energy in labour centres. This would ensure certain levels of efficiency and that the IT systems would be improved. Office tools such as computers and printers should be in a workable condition and alternative energy should be provided.

She commented that officials should be trained in their work so that they can inform clients. There were a number of people who could dial on their cell phones to find out where they stood with the UIF, their claims and how much they would be receiving. When all officials across 129 labour centres were not trained, this would not enable the people supporting clients in the front office. For example, they could be trained to show people how to get certain services from home and avoid standing in long queues.

She advised the Committee that an automated teller machine (ATM) system had been established with different banks where clients did not have to visit labour centres, but could instead go to their banks to handle unemployment insurance claims details. This information should be spread on the DEL website, and the unstructured supplementary service data (USSD) code works on any type of phone so people from villages could use the USSD code. When people arrive at a labour centre in King Williams Town and they are in a queue, facilitation should be done by customer service officials so that customers know which documents they require as opposed to wasting time queueing for a long time and then being informed that there are missing documents once they reach the service centre. People who have travelled long distances should be placed in a particular queue and this is how queues should be separated.

She commented that the DEL also had to increase the capacity of data capturers as claims tended to be covered months after they had been received, but these were immediate things in the DEL’s control which could change the current service level to become responsive. She emphasised that change management was important. On the discussion about working with the South African Revenue Service (SARS), she noted that it was unable to run its normal business and take over payments from the UIF. The best SARS could do was share systems with the UIF and Compensation Fund. The DEL had to find better and more efficient systems that could be used to make the process of claiming more efficient.

There were companies to be employed to deal with backlogs, financial reconciliation and action plans relating to recurrent findings of both the UIF and the Compensation Fund to submit their financial statements and annual reports in the legislated timeframes. Terms of reference and contract management with the services had to be considered, because, over time, it was realised that although services were received, this is not well-managed. The DEL was currently dealing with the enforcement and inspection of the Inspection and Enforcement Service (IES) which was assisting both funds and employment and labour.

Inspectors had to reach out to many employers. The DEL was in the process of digitising the process of inspectors. It had requested the Department of Justice and Constitutional Development to have senior investigators and peace officers as the prosecution offices perhaps did not understand the extent of dealing with non-compliance. Digitising also meant using technologies that were efficient to help Inspectors in their work. Digitising could improve the work of the inspectors and their working tools for reporting and prosecuting purposes.

On organisational development, any change in appointments would be based on the organisational change process. Organisational change was a process that led to people applying for positions which could also lead to getting new people at different levels that were not currently in existence at the Compensation Fund or UIF. The DEL could not confirm whether there would be retrenchment or upward mobility and determined job profile levels. The DEL had not yet worked out how long this process would take.

On Rand Mutual Holdings and insurance, the DEL had services to support the Compensation Fund and UIF with mining and mineral companies. Extending with Rand Mutual was the logical thing to do. Rand Mutual Holdings was the company of choice in changing the Compensation Fund systems. Regulations of the Compensation for Occupational Injuries and Diseases Act (COIDA) were being put together for public comment. She stated that the DEL would continue to use the IES until it had structured the organisations optimally and changed them to have their own inspectors.

Follow up discussion

Ms Boshoff stated that she had heard the Acting DG refer to accessibility and using a USSD code with any phone. She commented that the network was bad in rural areas and asked if there was a discussion on internet connection being upgraded.

Ms Mjo stated that she would need confirmation from the UIF, but she was aware that using the USSD code was a zero-rated operation with Vodacom. She could not confirm anything for other cell phone networks and uFiling.

Mr M Mmoiemang (ANC, Northern Cape) asked about the implementation plan and issues relating to governance. He wanted to know how far the process was and what the buy-in of the DEL was on this. He acknowledged that there were three work streams for the technology and strategy process. Given the importance of this, the process of improvements to IT structures had to be expedited. He commented on the extent to which the UIF was able to be effective during COVID-19. Clearly, there were gaps in capacity building and there may have been a need to bring in more people with different skills.

Ms Mjo stated that the exercise to be embarked on concerned the entire organisation and while systems were being changed, she assured the Committee that the DEL was constantly working on increasing the efficiency of the IT systems. The DEL was making improvements to the system.

Ms Bahumi Matebesi, Deputy Director-General: Corporate Services, DEL, commented that the UIF was a schedule three entity according to the Public Finance Management Act (PFMA). The only thing was that the UIF operated as an extension of the DEL. She did not think any changes needed to be made, except to inform Treasury that they would be working independently.

Conclusion

In his closing remarks, Minister Nxesi stated that there would be resistance to some extent for various reasons when embarking on this project. It was unsettling and communication should be clear and frequent with employees and unions. The DEL had to negotiate fairly and be creative, which was why it needed change management specialists. There also had to be effective oversight over employees. This would be implemented in several short, medium and long-term stages.

Minister Nxesi further noted that the increase in expenditure was inevitable as there were IT and Cyber Security experts. Strategic business leaders did not come cheap, and the DEL would not just upgrade posts for the sake of promoting people but also to attract the correct and competent skills. The DEL had to spend money to make more money. This would be expensive at the beginning, but would be profitable in the long-term. The budget had to be prioritised while following the necessary procedures. Training and re-training was inevitable. Consequence management had to take its course. There may be areas of the legislation which must be revisited.

The Chairperson thanked the Minister and Ms Mjo for their comments and presentation, which comments would be noted in the Committee’s legacy report for the 7th Parliamentary Committee.

The Chairperson made brief closing remarks and thanked all present in the meeting.

The meeting was adjourned.