Compensation Fund; Unemployment Insurance Fund Annual Report 2005/06

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Employment and Labour

03 November 2006
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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

3 November 2006

Ms O Kasienyane (ANC)

Documents handed out:
Unemployment Insurance Fund Presentation
Compensation Fund Presentation: Part1 & Part2
Auditor General Report on Compensation Fund 2005/06
Auditor General Report on Unemployment Insurance Fund 2005/06
Compensation Fund Annual Report 2006 (available shortly at
Unemployment Insurance Fund Annual Report 2006 (available shortly at
The Committee heard briefings from the Compensation Fund and the Unemployment Insurance Fund on their Annual Reports for 2006. The Compensation Fund had a qualified Auditor General audit report. Achievements of the Compensation Fund included the use of labour centres to process claims, improved service delivery through the use of mobile units. Challenges included the need to address the Auditor General’s recommendations, the decentralisation of work to labour centres. Members concerns included the Compensation Fund's use of casual staff for three years to clear the backlog and they wanted to know what had been causing the backlog. They felt that the Fund's communication strategy was not working properly.

The Unemployment Insurance Fund noted that contributions and the number of beneficiaries had been increasing steadily. Its finances were in a healthy position and it had received an unqualified audit report from the Auditor General. There were some matters of emphasis from the Auditor General that it was addressing. Members concerns included the need to properly inform workers about their rights and the high staff turnover.

Compensation Fund briefing
Mr Phineas Mothiba, Acting Commissioner, Compensation Fund, outlined the Fund's financial performance 2005/06. He said that the Fund had performed very well with improved compensation benefits, revenue generation and debt collections. More than 500 000 claims had been finalised. Half of these had been lodged in 2004/05 and the other half in 2003. About 198 000 claims without proper documentation had been reviewed to give them permanent claim status. The Compensation Fund had been trying to increase access to its services by opening a call centre in March 2006 and it was handling more than 10 000 calls a week. Mr Mothibo said that they encouraged claimants to use labour centres in lodging complaints. Referring to the qualified audit report, the reason for this was the Auditor General's concern about the completeness and accuracy of the revenue contributions. He said the Fund had lacked capacity and monitoring tools to verify the accuracy of information submitted by employers. Corrective action taken by the Fund included the appointment of 32 contract workers. Critical management positions were identified to be filled in the third quarter.

The Auditor General had raised some additional matters of emphasis that included the review of its information communications technology (ICT) to control weaknesses. Other matters were general computer controls and internal control weaknesses. Challenges facing the Fund included the capacity to process and finalise claims in a timely manner and the decentralisation of its functions to provincial offices and labour centres. A decentralisation pilot programme had already been started in Port Elizabeth, where claims were processed by the Labour Centre rather than at the Pretoria National Office.

The Chairperson commended the Compensation Fund for the wonderful job it had been doing on its core function, the compensation of claims.

Mr O Mogale (ANC) asked why the Fund employed workers on a contract basis. He wanted to know the reasons for the Fund's qualified Auditor General report when the Fund had an Audit Committee. He asked whether compensation was given as cash or by cheque, and when would the pilot programme that was started in Port Elizabeth be extended to other centres.

Mr G Dreyer, Department of Labour CFO, replied the Audit Committee together with the Commissioner was working very hard on interrogating the report. The qualification had focussed on the Fund's backlog. The Audit Committee was addressing the reasons for the qualification.

Mr S Mshudulu (ANC) chided the Department about the contract workers, saying it was part of Nedlac, where the use of contract labour had been debated extensively.

Mr Mothiba replied that the Fund had a service provider that had been supplying the contract workers. They were waiting for the organisational strategy to be finalised which would inform the Fund whether to make the contract workers full time or not. The Department was no longer using the service provider, but the contract workers were paid directly by the Department.

Mr Dreyer replied that the Department had sourced the contract workers from an agency for the past three years, but the workers had been moved onto the Department’s payroll. He added that when vacancies arise, the contract workers would be given first preference.

Mr E Mntshali (ANC) said it was a disgrace for the Department to make use of contract workers. He said that the retail industry was notorious for employing people as casual staff for long periods of up to ten years without benefits.

Mr Mshudulu asked about the causes of the backlog. He also asked about the role of employers and trade unions in health and safety committees in the workplace. Were there monitoring systems in place to check the compliance of employers?

Mr Mothiba replied that the backlog was mostly caused by outstanding documents that are needed to process a claim such as the doctor/accident report. About 90% of claims that were lodged with labour centres came with complete documents. Labour inspectors helped the claimants to obtain all the necessary documentation.

Dr Vanguard Mkosana, Department of Labour Director-General, explained that workplaces had health and safety representatives who had to ensure that accident reports did not disappear.

Mr L Maduma (ANC) pointed out said that Plettenberg Bay did not have labour centres until he had prompted the Department of Labour to open one. He enquired about the communication strategy of the Fund and how they inform people about the Compensation Fund when their mobile untis visited outlying areas.

Mr Mothiba replied that community radio stations and Provincial Communication Officers were used to inform different communities.

Mr Maduma suggested the use of political party constituency offices to inform people about the services of the Fund.

Mr B Mkongi (ANC) asked for the reasons that labour centres and mobile units were not evenly distributed, as most of the labour centres were in urban areas. He asked what type of documents were usually outstanding; what type of surveys had been done to measure client satisfaction and the rate of employer compliance.

Ms M Xaba, Deputy Director-General: Corporate Services, replied that studies had been done by the Human Sciences Research Council using Geographic Information Systems to look at the density of different places. The outcome of the study was used to distribute the mobile units. The mobile units would be used to measure client satisfaction so as to improve the system. The mobile units relied on route maps; each province had two mobile units, with the exception of the Northern Cape which got three due to its vastness.

Mr S Siboza (ANC) reiterated Mr Mshudulu’s question on the causes for the backlog.

Mr Mothiba replied that the backlog was mostly caused by outstanding documents.

The Chairperson asked about the constraints that were hindering the assessment of employers. She wanted to know what had been achieved by the turnaround strategy to sort out the backlog of claims. About R 55 million had been spent on IT systems, yet the Auditor General pointed out some problems with the IT systems.

Mr Mothiba replied that the turnaround strategy was meant to streamline the processes where all labour centres employees would be responsible for processing claims from start to finish instead of forwarding claims to Pretoria national office for processing.

Mr E Mtshali enquired about the steps taken to sort out the problems pointed out by the Auditor General’s report. He wanted to know the names of the people who were on the claims panel.

Ms L Rajbali (MF) asked if there was a helpdesk that assisted clients.

The Director General replied that labour centres had experts who assisted everyone.

Mr Mshudulu said that the role of the Committee was to interrogate the Annual Reports tabled by the department and its public entities. Most Department reports usually focused on what would be done in future, rather than address the problem areas that had been pointed out.

Mr Mkongi said that nothing was mentioned about the Auditor General’s report of 2004.

The Director General replied that they had already reported on the recommendations contained in the Auditor-General’s report of 2004/05. He could provide that report to Members.

Mr Mogale noted that a lot of money had been spent on the Siemens contract and he asked if Siemens had accommodated all their system requirements.

The Director General replied that the Siemens contract was the biggest mistake that they had made. The Department had signed a ten-year public private partnership contract with them but that ICT systems change on a regular basis.

Mr Mshudulu suggested that the Director General should inform the Forum for South African Directors General (FOSAD) and warn his colleagues not to fall in the same trap.

Unemployment Insurance Fund (UIF) briefing
Mr Boas Seruwe, Acting Commissioner, explained the strategic priorities of the Unemployment Insurance Fund. There had been an increased number of beneficiaries as the number of claims had gone up by 5% while the value of the claims had gone up by 18.5%. He credited the improvement of service delivery to the national roll out of a new Benefit Processing System. The number of contributors had increased significantly and financial reserves had increased by 44%. The Unemployment Insurance Fund had managed to receive an unqualified audit report this year though it needed to address the following matters of emphasis: the bank reconciliation process, benefit payment to contributors, fixed asset management and computer controls.

Mr Mkhongi asked what were the constraints facing the UIF if the administrative and legislative challenges had been sorted out. He commented that the presentation did not mention its employment of people with disabilities and the elderly. He asked about the problems of transferring money electronically to people in rural areas and whether black employers were registering their workers.

The Director General replied that people with disabilities and the elderly were filling positions at different levels of the Department. People who lived in rural areas had bank accounts because it was now possible to open an account without having a deposit. Most employers were compliant, whether African or not. Some employers complained that even though they paid contributions they did not get receipts before, now they did get them. They were targeting the taxi industry but they were still waiting for the Sectoral Determination process of the taxi industry to be completed.

Mr Mshudulu commented that most sick employees and their dependent beneficiaries did not know their rights. He asked for clarity on maternity benefits as some people were paid for six months while others were paid only for four months.

The DG replied that an advocacy campaign had been in place to inform sick and pregnant workers about their benefits.

The Chairperson asked for the reasons that people had resigned.

The DG replied that people resigned because they had found greener pastures elsewhere.

Mr Mogale asked what the R33 million single payment represented.

Mr Dreyer explained that the money was for salaries because the UIF did not have their own Persal system.

Mr Mkhongi asked why the UIF did not have its own Persal system.

The DG replied that they were constrained by policies that were being finalised by the Department of Public Service and Administration.

Mr Maduma commented that the youth were complaining that nothing was being done to create youth employment.

Due to time constraints, the Chairperson had to draw the meeting to a close. She thanked the delegation and urged them to work as a team. She said there were more questions, but their venue was needed for another meeting.

The meeting was adjourned.



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