Fraudulent claims allegedly submitted to UIF: Department briefing with Minister
03 July 2020
Chairperson: Ms M Dunjwa (ANC)
UIF - Disbursement of Funds During Covid 19 Lockdown
The joint meeting of the Portfolio and Select Committees on Employment and Labour, being briefed on the Unemployment Insurance Fund’s (UIF’s) progress in implementing the Temporary Employer/Employee Relief Scheme (TERS) in response to the COVID19 lockdown, was told by the Minister that the projected R40 billion required for the April to June period was clearly not going to be enough. However, all outstanding claims for the period would be honoured.
The UIF said it had already spent about R27.8 billion, which left it with about R12.2 billion to pay for the rest of May and June, which meant that it may need to borrow from other parts of its investment portfolio to meet its three months’ obligation. It had supported the most vulnerable in society, which were the domestic workers, having already paid R128 million to over 35 000 domestic workers, while 171 000 foreign nationals had been paid more than R693 million. During the payment of COVID-19 benefits, the UIF had continued to pay just over R3 billion to over 508 000 South African ordinary beneficiaries during the lockdown period.
From the start, the UIF had been wide awake to the risks associated with the new COVID-19 benefit system, especially given the large sums involved. A strategy had been developed, which was to follow the money, and it had budgeted for a complete audit to account for every cent paid out. There were ongoing investigations to ensure employers were paying what was due to their employees, and there were measures in place to stop claimants from double-dipping – claiming TERS payouts while receiving other UIF benefits.
Members said they were receiving hundreds of complaints from the public over the delays or lack of response from the UIF regarding their claims for assistance. The Department was asked to respond to reports of large sums being fraudulently claimed, implicating insider involvement. They wanted details as to how benefits were calculated. They also suggested the Minister should name and shame the companies that committed fraud, so that it was public knowledge.
Disbursement of UIF funds during Covid-19 lockdown
Mr Thulas Nxesi, Minister of Employment and Labour, said that since the start of the lockdown, the Unemployment Insurance Fund (UIF) had distributed R28 billion in COVID-19 Temporary Employer Relief Scheme (TERS) benefits, covering 520 000 employers, and it had provided income support to nearly six million laid-off workers. The scale of support was unprecedented. There were challenges as the appropriate policies and directions were developed. The UIF needed to be completely repurposed to meet their new mandate, which necessitated changes to processes and systems which were not designed for the scale of the operation needed for COVID-19. With the announcement of the state of the national disaster in the face of the pandemic at the beginning of the lockdown and the call from the President to mobilise social solidarity, it required a massive integrated response from the UIF to support the laid-off workers and those whose employers had not registered their employees for the UIF benefit.
It was important to remember that no insurance company anywhere in the world paid out to non-contributing beneficiaries, but that was what the crisis required. Policies and directions that would guide the UIF and its beneficiaries to access this particular benefit had been urgently needed to be put in place. All these directives and amendments were developed through the National Economic Development and Labour Council (NEDLAC) with the social partners, and presented to the National Joint Operations and Intelligence Structure (NATJOINTS) and the Cabinet. The TERS had directly appealed to employers to apply on behalf their employees who were temporarily laid off. Following complaints from the workers, that some employers were not coming to the party, the direction had been amended to compel employers to apply on behalf of the employees.
A second amendment provided for topping up, in order to maximise the benefit. A third amendment, in response to the legal challenges for excluding certain categories of workers, required a clear and expanded definition of the framework.
The COVID benefits necessitated not only new policies and directions, but also a major system change to cope with the tenfold increase in the benefit payment. Prior to the lockdown, the UIF had paid benefits only to returned workers who had contributed to the fund. The process was typically initiated by individual walk-ins to the labour centres, which had to change. A system of online applications had been developed, in order to avoid a further spread of the virus from the masses queuing at the labour centers. The UIF was engaged with the business and labour in NETLAC to make possible bulk disbursement via the employers and the bargaining council. It was this agreement which allowed it to provide the benefit payments on a massive scale. It was a learning curve.
There were delays as the UIF was repurposed and the system augmented. Further delays had occurred in May, when there were instances of employers who had received funds from the UIF but had failed to pay their employees, which meant it had to make changes to allow direct payments to employees. The UIF did not have unlimited resources. As the funds to pay laid-off workers were repurposed, it also required that the necessary financial controls were incorporated to ensure the liquidity and the long-term sustainability of the fund itself. The UIF had not started paying out benefits before controls were in place.
There were further delays that were necessary. Although the constituencies, both employers and labourers, were impatient about how things were being dealt with, the problem was with the controls. From the start, the UIF was wide awake to the risks brought with the new COVID benefit system, especially given the large sums involved. A strategy was developed, which was to follow the money, which would be explained later. The UIF had budgeted for a complete audit to account for every cent paid out. Even if it was going to take very long, the money would have to be followed. The UIF would have to audit every cent which had gone out. This was also made very clear to employers in the UIF’s NEDLAC engagement, as well as in the directions which were handed out. The UIF had committed to support their workers, but when this was over, they would be audited. If some of the transactions needed forensic investigations, the UIF was prepared for that.
Minister Nxesi listed some of the controls implemented:
- The use of a reference and ID number put in place to implement payments.
- The verification of banking details, password protection, and checking claims against the UIF and South African Revenue Service (SARS) databases.
- The UIF was also engaging an independent external assessor to assist in carrying out data analysis on all suspicious transactions, and identify fraud with a fast turnaround time of 10 days.
- In the interim, a month ago, the UIF had agreed to conduct an audit, probing the issued directions, policies and documentation in preparation for the audit of COVID-19. This was to reflect the work of the UIF internal audit, risk, anti-corruption and integrity management unit.
- To date, 75 cases of suspicious transactions had been identified. 16 investigations had been finalized, with two criminal cases instituted, and 59 cases were still under investigation. Recent cases which featured in the media were an indication that fraud would not go undetected and that the UIF systems and controls were working.
- There was no room for complacency, and in the light of these breaches, the UIF had further strengthened the controls, including controls over changes of passwords and banking details and the capacity to trace the Internet Protocol (IP) addresses as part of the audit trail.
- The appointment of a forensic specialist to trace the fraud, the weekly meetings with the HAWKS, the COVID-19 investigation unit and discussions with the banks to establish early warning systems.
- Control measures were constantly reviewed and strengthened.
The UIF was determined that theft from the state and from laid-off workers would not go unpunished. It was the UIF’s duty to safeguard the workers’ money.
Regarding the liquidity of the fund, he assured the Committee that the UIF would honour its commitment to pay special COVID TERS benefits for three months, with June being the last of these payments. Any outstanding claims for the three months would be honoured. When the UIF dealt with those individuals who were unable to have access to computers and electronics, they had had to devise solutions. Some of their employers had not cooperated. Regarding the long-term sustainability of the fund, he received regular reports from the UIF board based on continuous monitoring by the actuaries to ensure that it was in a position to meet its obligations to the UIF contributors.
In conclusion, he provided the following lessons from the last three months:
- As government, they delivered collectively when they worked, in cooperation with their social partners -- labour and business. This was critical in the repurposing of the UIF to meet the crisis of the lockdown lay-offs. It would be important as the incidences of fraud and corruption increased.
- He was greatly encouraged by the capacity of the UIF to pick up on suspicious transactions, as well as the very prompt response and support from the law enforcement. However, there would be some leakages which the UIF might not be able to see.
- The UIF had started to address some of the challenges in respect of domestic workers and foreign nationals. It was also giving aid to unregistered employers and their employees on condition that they registered for UIF, they contributed and repaid the past debts.
He acknowledged the support from SARS, in conducting prompt verification in order for the UIF to finalise payment, as well as the Department of Home Affairs (DHA) in validating the identity documents (IDs) and status of foreign national workers, many of whom had contributed to the UIF for years, and the Harambee Unemployed Youth Accelerator for providing the UIF with call centre services which were key in responding to the queries of both the employees and the employers.
UIF: Support to employers and employees
Mr Teboho Maruping, Commissioner: UIF, said the Fund had already paid almost R1 billion to employees, of whom over 207 000 employees had been paid directly when a company applied on their behalf. The UIF had also supported the most vulnerable in society, which were the domestic workers, having already paid R128 million to over 35 000 domestic workers. 171 000 foreign nationals had been paid more than R693 million. The key driver behind paying these foreign nationals was the use of SARS and the DHA to confirm the validity of the data.
He provided a breakdown of the industries which had suffered during the COVID-19 lockdown. Personnel services had suffered the most, which included boarding houses, cafes, restaurants, laundries, beauty shops, funeral undertakers and cemetery services, and collecting agencies. Trades seriously affected included game, poultry, fish, computer installers and photographers. These were the areas that had suffered the most during COVID, and all had claimed the most from the UIF. The areas where there had been the least claims were the banking and textile sectors. The top provinces receiving aid were Gauteng, at R12.9 billion, followed by the Western Cape (R4.4 billion) and KwaZulu-Natal (just over R4 billion), followed by the Eastern Cape and Mpumalanga. The other provinces came in at just below a R1 billion. Some of the provinces did not encounter huge claims, which indicated that their head offices were either in Gauteng, the Western Cape or KwaZulu-Natal.
He assured the Committee that during the payment of COVID-19 benefits, the UIF had continued to pay just over R3 billion to over 508 000 South African ordinary beneficiaries during the lockdown period. Unemployment made up more than 80% of the benefits. It had paid about R2.5 billion just for ordinary benefits. Ordinarily, the UIF paid between R14 billion and R15 billion per annum and dealt with just under 700 000 beneficiaries in one year. During lockdown, 508 000 applications had already been processed. As the year progressed, the number of people who were going to be claiming UIF may increase substantially.
The main control was the ID confirmation system. These were the controls that had been introduced right at the beginning of the process. The aim was to avoid people claiming twice or defrauding the system. Another control was the UIF reference number, which was allowed to be used only once. The ID number allowed the UIF to check on the database to see if an individual was enjoying any other benefit. Just over R3 billion had already been paid out for other benefits. If it finds a person was already enjoying one of the UIF benefits, the UIF had developed a solution -- it sets them aside and does not process the payment. Examples would be if the person was enjoying maternity or other benefits.
In some instances, it had been found that there were people who were claiming for dead people -- about 35 cases were found in one company, where they had claimed for people who were deceased. The UIF had been able to confirm this with the DHA, and such cases were being subjected to forensic investigation to look into whether this company was trying to defraud the UIF or not.
The declaration was one key control measure that the UIF used if a company applied. It had to be tested against the database, because one of the key drivers to apply for UIF was that employees must be registered with the Fund -- they needed to have been insured. If they had not been insured at the time of application, they needed to be insured so they could be found on the database. This was to ensure the company owned the relationship between the employer and the employee. This would align with later processes, when the UIF followed the money or was following up on the contributions, the penalties and interest, when a company could confirm it had signed off on the employee.
Another control was with the UIF reference number. When a fraud was reported, it froze any activity on that UIF reference number until it knew for sure what was happening. Once it had been ascertained that something had been happening with that reference number, the UIF also put together a process where the employees not were left to suffer because there was a possible fraud involved. If no payment was made to the company, it was still processed to the employees, so they at least enjoyed the benefit of having contributed to the UIF.
The “follow the money” approach had been taken to ensure that every cent that had been spent on UIF beneficiaries ended up with the UIF beneficiaries in their accounts. Where an employer claimed for workers that were working for them but it was found the employees were not registered with the UIF, the Fund was able to raise a debt against the company for the amount they owed in contributions, penalties and interest.
Company bank statements were assessed, as they reflected the COVID-19 funds, with proof of payment from the bank indicating the details of the employees by the employer, and the payroll information. This was intended to ascertain that money did end up with the employee. The process had already begun, and 31 cases had been tested. Of these, 24 had been honourable and had followed the agreement exactly and those companies had been able to pay employees the money that was due to them, and had transferred the funds. The banks also submitted information in order for the UIF to test if the money was transferred to the employees. There were five employers who had not disbursed money due to absenting company declarations. This was one of the UIF’s greatest challenges during this COVID-19 process.
Mr Tshepiso Maphatane, Director of Risk Management: UIF, took the Committee through the fraud report, specific cases, and how the Department resolved them.
Ms Judith Kumbi, Chief Operations Officer: UIF, described the logistics of how the payment system operated and paid companies, with a special focus on the improvement in control after cases were identified.
Mr M Bagraim (DA) asked for the Minister’s input on the perspective that the UIF had failed the workers of South Africa, based on about 250 complaints per day that he had received for the past three months. He confirmed had been forwarding about 50 to 100 of those complaints per day to the Commissioner, and that the Commissioner had been getting back to him on about half of the complaints. He asked the Minister for his prediction regarding the financing of the UIF into the future. The Treasury had confirmed that there would be up to seven million more retrenchments -- would the UIF have the funds for this? He asked the Minister to name and shame the companies that committed fraud so that it was public knowledge. The ordinary benefits, such as for maternity and dismissal, seemed to have been put on hold pending the TERS outcome. He asked for the Minister to respond to his comment that independent contractors and sole proprietors would be paid, yet it seemed they were not being paid at all.
Ms H Denner (FF+) asked when bank verification had been introduced into the verification process. Only 75 cases out of 704 000 valid employer claims were being inspected for fraud, which amounted to about 0.01%. What was the timeline on the audit? She had read an article that claimed about one million workers’ payments were outstanding, which amounted to around R4.2 billion, due to a technical glitch. What was the technical glitch, and how far were they in paying those one million workers? She had been in communication with the Fund during the past few weeks and had been told that there were outstanding functionalities. How long would it take for these outstanding functionalities to be built into the system so it could function optimally? What was the progress on the June claims? How many payments were still outstanding for April and May? Had any of the UIF’s employees been identified as being part of the fraudulent activities?
Dr M Cardo (DA) said the website showed that June applications had been opened online, but it was not possible to get into the system. It had merely been a message indicating that June applications were now open. What was the reason for the delay with June applications being opened? The Minister had told the Committee that May applications had been delayed due to employers not handing over April payments to employees, yet May applications had opened only at the end of May due to a damaged underground cable that caused information technology glitches.
On the few occasions that the portal for June applications had been open, he had been immediately inundated with messages from employers sending him screenshots of the personal information of their competitors, including employees’ names, identification numbers, UIF numbers, remuneration details and banking details. This constituted a massive security breach. It was a violation of the Protection of Personal Information Act, and would presumably open the UIF up to legal action. What was the cause of the security breach? Would it be properly fixed by this weekend? Had any employers brought legal action against the UIF for a security breach yet?
How much was left for the COVID-19 TERS benefit? R40 billion had been set aside initially. The presentation had shown the UIF had disbursed R20 billion in April and R10 billion in May, but they had not finished processing May claims yet or begun with June applications, and three quarters of that money had already been disbursed. How much of that money did the UIF envisage it would have paid out in terms of the TERS benefit covering the months of April, May and June by the time COVID-19 was over?
With the fraud claims, it was reassuring that UIF officials would be investigated if there was any evidence that incriminated them. but it was concerning that it was taking so long to gather that evidence because it seemed unlikely in the particular case of money laundering of R5.7 million, where the money was disbursed in about five days into 28 different bank accounts extremely quickly, that it would have taken place without the collusion of UIF officials. It seemed to have necessitated some kind of inside knowledge.
As things stood, there were a few sectors that would not be able to open for many months yet. For example, a number of employers in the tourism sector had approached him and pleaded that the COVID-19 TERS scheme got extended for their sector. Was this something that the Minister and the UIF would be amenable to?
Ms B Mathevula (EFF, Limpopo), National Council of Provinces (NCOP), asked how the UIF was going to assist domestic workers who were not registered with the Fund? How would it reclaim the money from the people who were claiming twice, and how would they be dealt with?
Ms H Boshoff (DA, Mpumalanga), NCOP, said that the NCOP was experiencing many of the same problems, as many of her questions had been raised already. She disagreed with the Minister’s view that the scale of support from the UIF had been unprecedented, as they had been inundated with complaints where employees had not been able to access the portal. This needed to be viewed in the context that the UIF benefit was the last lifeline to survival for many of these people. She pleaded with the Minister and his Department to ensure that the portals were accessible, and that people were updated on the status of their application. People should be given acknowledgement of receipt that their application would be attended to. Another measure was to update the applicants to confirm where the UIF stood with their application, such as that it would be attended to within the next week. This was to ensure that Members of Parliament were not continually inundated with calls to try to assist people struggling with the fund. She expressed her gratitude to Mr Bagraim for the assistance he had provided to the NCOP members with the calls they had been receiving.
Mr M Tshwaku (EFF) asked the Commissioner or the Minister to describe how the COVID-19 benefits were calculated. There was a problem where companies were applying a different formula to that used for minimum wage workers who did not go to work due to COVID-19, who should be getting the maximum benefit. He suggested that if a worker worked fewer hours, the TERS benefit should be used to top up the unworked hours. Some companies did not want to use the formula, and others seemed to be using it incorrectly and should be returning the COVID-19 benefit.
The EFF had set up a labour desk where they had been receiving a large volume of queries due to problems with the UIF. Who was the individual to whom all queries could be forwarded, so that the conflict between workers and employers over the UIF claims could be resolved? Another Member of the Committee had stated that the Commissioner was the person to forward the queries to, but he had called the Commissioner, spoken to inspectors, and attempted to reach the call centres, but no one had been answering.
He reiterated that this benefit was the last lifeline for many workers. At the beginning of the presentation, the Minister and Commissioner had been speaking about the confusion around the processes and systems that needed to be changed with the COVID-19 UIF benefit situation. There were a number of people who had been paid a normal UIF benefit and not the COVID-19 UIF benefit. What was going to happen to those people now?
Mr G Hendricks (Al Jama-ah) thanked the Commissioner and the Minister, and said that their work had not gone unnoticed. He requested that the UIF set up a special email hotline for Members of Parliament to share so that they could get preferential treatment, and have the queries resolved.
Mr T Apleni (EFF, Eastern Cape) NCOP, said there had been much frustration among the workers regarding the UIF matter which had led to some workers engaging in unprotected, illegal strike action -- understandably so, because they were very frustrated. The illegal strike action had led to many workers getting expelled from work. An example was the Da Gama factory in King William’s Town, where hundreds of workers had been expelled for engaging in illegal strike action due to their frustration with the UIF. He appealed to the Minister to intervene in the matter, and to tell employers that it would not be advisable to rush to expel the workers but to rather find a solution that would not lead to the workers losing their jobs.
Mr M Nontsele (ANC) asked the Commissioner what interventions had been devised to improve performance within the UIF, specifically with the call centres it had set up to receive urgent calls and to deal with the backlogs that afflicted it. He asked the Commissioner to elaborate on the UIF’s inherent challenges that resulted in some of the challenges that were being addressed. With the fraud that had taken place, were there any other investigations taking place internally? It was of note that the efficiency that had been made in making payments was particularly directed at the domestic worker sector, amounting to R88 million, while the taxi industry amounted to R10 million. These sectors had just recently been introduced to the system, yet the UIF had not timeously paid institutions that had been in the system for quite some time. How had the UIF been able to get efficiency in paying these two highly informalised sectors timeously?
In the presentation, it had been stated that inflated numbers of employees had been submitted that did not correspond to the records and the register within the UIF. Had there been any attempt to engage or use the inspectorate so that they performed an onsite inspection to verify those members or the workers on the ground? With the fraud interventions, particularly where an employee reference was used, the internal system had been able to reflect that the employee was registered with that employer. When the employer details were loaded, why was the same process not followed so that they were able to verify both the details of the employer and the reference number?
The Chairperson commented that there had been more cases of the double payment of benefits with TERS, and asked whether the payment of normal claims had experienced the same challenge of double payments. She said there needed to be a check to see whether the fraud that may exist in the normal UIF processes. How long were claimants kept in the UIF system after having received their claims? She clarified that the question arose out of her suspicion that there was a possible additional loophole that may be exploitable. She was pleased to hear the Department was not dismissing the possibility of manipulation of the system from the inside.
Mr M Mmoiemang (ANC, Northern Cape) commented that by April, R21 billion had been distributed to compensate for what was due to the vulnerable workers. His concern was around May, where although R3.2 billion had been paid, there was a challenge around 85 000 employers who had not submitted payments for May, which deprived the millions of workers from receiving their money. What were the methods that the Commissioner and the Department were putting in place to put pressure on these companies to provide the necessary outstanding documents, so that they were able to mitigate the impact of COIVID-19 on those vulnerable workers? Much work had been done, but concerns were being raised for the employers to provide the necessary documents.
He was pleased by the follow-the-money approach that the Department had put in place to ensure that there were control mechanisms to identify the potential fraud cases. He expressed his awareness of the amount of money that had been paid compared to what was stated in the media and the number of investigations that were taking place. He said the good work being done must not be downplayed. With the audit that was being done by the independent agency, he asked whether it was going to audit the UIF’s work, or if the audit being done to ensure that the processes that were in place met the necessary standard, because it seemed as if there were two audits – the internal audit done by the Department through the service provider, and the one by the Auditor General, who would be doing an audit on those processes.
Minister Nxesi said there was always a corruptor and a corruptee. There were possibilities that those who were corrupt on the outside were in collusion with some on the inside of the Department. These were all issues that had to be investigated, and it was not advisable to resort to suspensions while investigations were ongoing. South African labour laws were strict, so people could not be suspended while the investigation was incomplete, especially if it involved a number of other agencies.
On the matter Mr Bagraim raised, where he received 250 per day, it would be proper if all those complaints were properly documented, sent to the office and those who were at the operational level dealt with those complaints one by one. The Commissioner would be able to advise the Committee on how long it would take. The people who worked in operations in the Department might need to explain what the process was when they received a complaint.
With the Treasury predicting seven million retrenchments, there were different figures. Some had quoted three million, and other said anything between three million and seven million. The exact figure was not certain, and people were working hard to provide different projections. Nevertheless, what was clear was that the Fund was going to be under pressure. It might be forced to recall all its investments. This meant that they may need to relook at excluding the package that had been given, and relook at the formula used for recalculation. It was a fact that if there was insufficient funding, providing aid would not be possible. When looking at the bailouts people would be requesting from the Treasury, it was clear that some funding would not exist. What was needed was creativity, which could mean collaboration as social partners of government, with the Department of Labour, businesses and communities. This would have to be faced head on. The UIF was not a permanent solution, but rather relief. The greater focus was on creating employment and the interventions implemented. At some stage, it would require returning to address the interventions that government was making and the discussion happening within government around facilitating the creation of jobs. It was clear there was not going to be an easy solution.
The naming and shaming of companies who committed fraud could be done only once the Department was confident it had met all the legal requirements, which would be guided by the legal team. It was inadvisable to rush with the investigations. The Department could be liable for legal action if it named and shamed the companies. A case could be compromised due to lack of witnesses or any other technical legal issues that arose from naming and shaming. If there were people working from the inside, one also needed to be able to identify them exactly.
The Commissioner could answer the question about the timelines of the audit. With the scope of the audit, if everything was to be audited, it could involve R28 billion, with over 500 000 employers. That was a massive scope, and would require a number of auditors to be employed. The Department had put money aside to do this work. Once every application had been verified and those who were processing were satisfied, then everything that was outstanding was going to be paid. Even if there was a delay of three months, if the claim was legitimate, the amount would be paid.
On the matter of the million workers who were not being paid, this had to be followed up to establish who those workers were, and in which sectors. One could not work with general statistics, but needed specifics to say which exact sectors and companies were affected, and the exact number of workers. The Department could be held to account on those exact statistics, not on a general number which was being cited as one million workers.
The question of how much money was envisaged once May and June had been covered, was for the Department’s actuaries to answer. It was known that it was far above what had been projected. For the three months, R40 billion had been projected, yet it was clearly going beyond that. The Fund was going to be forced to tamper with some of its investments if those claims were legitimate. It was important to know whether the people who claimed UIF benefits qualified for them or not. A problem the Department had encountered was that people knew the UIF had large funding, and were taking advantage of this, such as where people had been unemployed for quite a while, but were cashing in on the COVID-19 unemployment crisis.
On the matter of the EFF help desk that had been set up to assist people with complaints, he said their hotline had been disappointing and the experience had been that its efficiency ebbed and flowed, and whether it was under pressure or not, it was a poor system. It must be said, however, that as much as the Department was committed to improving the efficiency of the UIF system, it had been very difficult to repurpose the entire system for the pandemic. Much of the system would be able to be fixed only once the pandemic had passed and all the payments had been processed. He had already requested the Director General to undertake an organisational assessment which would include a review of service delivery and the current structure and systems, to consider whether they were fit for purpose. They would also need to look at best practice standards, develop a strategy on how these entities should deliver and what skills were required to meet these standards in such an entity.
Minister Nxesi said the Department shared Mr Apleni’s concerns on the matter of the striking workers. The Department had been careful when it came to intervening in legal disputes. If matters were being escalated, they had to be taken to the Commission for Conciliation, Mediation and Arbitration (CCMA). The Department appealed to all parties to resolve their problems amicably. When workers engaged in illegal strikes, the employer would expel them, and the employer would be able to claim that they had followed the law. If the workers did not follow the procedures as prescribed by the law, they were going to suffer. He appealed to workers that if they felt their issues were not being addressed, they should escalate the matter through the legal channels. The Department knew about the Da Gama situation and had asked its offices in the Eastern Cape to start dealing with the matter.
Ms Kumbi explained by way of example the principle behind the formula used to calculate the TERS benefit. There were four elements that were assessed when they determined the benefit. One of the elements was the lockdown period that the employer applied for, which was required to be indicated on the system. For example, if an employer was applying for herself for May, they would have to say they were applying for Ms Kumbi for 1 May until 31 May. It meant that she would need to be paid for the full month. If the employer said that they were applying for 1 May until 15 May, it meant that the worker would be paid for two weeks, and that would reflect in the difference in what each worker was paid, because a worker whose application requested two weeks would not be receiving the same as a worker who applied for a month of benefit.
Another element was the Income Replacement Rate (IRR), which was indicated in the first directive the Minister had signed in March. This was applied in terms of the Unemployment Insurance Act, which was between 38% and 60%.
Another element considered was the minimum wage. When the Minister considered this, he noted that people must not be earning less than R3 500, because he was looking into the impact that employees were facing and considering that there were employers that were not complying with the minimum wage.
In the directives, it had also been indicated that when determining the amount the UIF was going to pay, one also had to factor in any amount that the employer could be paying their workers during the lockdown. When the benefit was calculated, the combined amount must not be more than the salary that the worker would normally be paid. If an employer was applying for the UIF benefit for the employee, and the normal salary of the employee was R4 000, and the employer applied for the benefit for a lockdown period of a full month, say 1 May to 31 May, the employer also needed to indicate whether they were paying the employee a salary during the lockdown. If the employer said they could not afford to pay a salary during the lockdown, they would indicate zero under salary on the spreadsheet.
The last element was that of the top up. When the calculation was done, the UIF looked at the salary the employee usually earned, which was R4 000. It next looked at the period that the employer was applying for in relation to the lockdown period -- in this case, 1 May till 31 May, which was a full month. When it was calculated for 30 days, they did not need to factor in the daily rate because it was already computed into the full month. If this person was supposed to be paid for two weeks, they would need to take what this employee would be paid for a full month and multiply that by the daily rate for two weeks. They then factored in the IRR. The IRR worked so that the higher the salary the person earned, the lower the percentage of the IRR applied, and the lower the salary the person earned, the higher the percentage of the IRR applies. This meant in principle that someone who earned R2 000, where the IRR was between 38% and 60%, they could for example apply 60% to that calculation. If that person earned R10 000, the IRR that would be applicable was 38%, because their salary was higher. Going back to the R4 000 example, they would apply 60% in terms of the IRR. This meant that for a full month, they would need to pay this person R2400.
Another aspect of the directive was that no employee must receive less than the R3500 minimum wage. When the UIF did the calculation in this example, the employee was supposed to get R2400. They also had to consider whether the employer was paying the employee any salary. Did they need to apply the principle of a top up? In this instance, because the employer said they were not going to pay their employee a salary, the top up did not apply. Instead of paying R2 400 because it was less than R3 500, the employee would get R3 500, which was the minimum wage.
A simpler example was where the employee earned R4 000, but the employer said that in that period they were unable to pay the full salary, but they paid the employee R2 000. If all other factors remained the same as the previous example, 60% was applied to the R4000. This person was meant to receive R2400, but they needed to consider the R2 000 that the employer had paid. If the employee was paid the full benefit with the salary the employer had paid, the person would get R4 400, which was more than the R4 000salary they would normally get. This was where the top up would apply. The principle said that what the employer had paid and what the UIF would pay must not be more than the salary the employee would usually earn on a normal basis. The UIF benefit the employee would get in this instance was R2 000. The reasoning behind this calculation was to follow the directive that had been issued. The key matter here was that during COVID-19, employees must not receive as a benefit more than what would have been their salary under normal circumstances. This explained instances where people would be receiving the same salary, but would not be receiving the same benefit as other employees.
What had been noted as a problem during this process was that the lockdown period and salary of the employee under normal circumstances, and what the employer paid during lockdown, was provided by the employer in the application. What had happened in many instances was that after the amount had been calculated and paid, the employer returned to confirm that they had made an error by stating that they had paid a specific amount as a salary, and the employer queried what amount had been paid already. There were other instances where the employer had done their own calculations and had not applied the principle of top up and minimum wage correctly.
Commissioner Maruping contextualised the situation by stating that the pandemic had been unexpected by everyone. There was no data to help them deal with instances where they had “dropped the ball.” He acknowledged that there were some emails they had been unable to attend to. The UIF had undertaken the challenge of the COVID-19 TERS in the midst of doing their normal work, so they had not increased their capacity. With COVID-19 TERS, they had paid over 4.6 million South Africans and had over 500 000 companies applying. He acknowledged that there were some instances where they had dropped the ball, but said the nature of the pandemic also posed its own issues, such as needing to have fewer staff in the offices and more technology to execute the work. He said they had given it their best shot and that being able to pay R27 billion in eight weeks was an unthinkable feat that they had achieved in the midst of the difficult issues.
Normal benefits had not been put on hold. Every year, the UIF processes about 700 000 ordinary benefits per year and in this just quarter alone, they had processed over 500 000, which was more than 70% of their annual processing, while they had also been processing COVID-19 claims. They had already paid R3.1 billion in ordinary benefits. They had gone to the extent of relaxing some of the requirements. Ordinarily people would have to go to labour centres to sign continuation forms. For the three months during the lockdown, they had relaxed this requirement. If the payment had been approved, the person did not have to physically go to a labour centre to complete a continuation form, but instead received an sms to state that they had processed their claim.
On the matter of payment verification and when it would be implemented, they had begun with this control measure long before they had started the COVID-19 process -- they had just added validation, which was implemented immediately for all payments. Over the weekend, the validation process would be implemented as part of the solution. These two variables were not linked to each other. They had processed over 500 000 applications from companies. From the 500 000 applications they had received, they had received only 75 fraud cases that were reported. 16 of those cases had been concluded and in three cases, arrests were imminent. As an arrest happened in that one particular case, it was going to affect every other linkage that it had, whether it was within the UIF or at the company where the arrest occurred -- it would affect every single person that was connected to it. When the Minister was newly appointed to the Department, he had stated that he would not tolerate corruption. They had therefore appointed a forensic investigator independent of their risk team so that it could independently investigate the cases of fraud and hand them over to the HAWKS.
On the matter of how much money was left, the UIF had already spent about R27.8 billion, which left it with about R12.2 billion to pay for the rest of May and June. It needed to be emphasised that the Minister had made a commitment that they were committed to the R40 billion over three months. The UIF would pay for April, May and June. It may mean that it may need to borrow from other parts of its investment portfolio to meet is three months’ obligation.
The Department was in discussion about the sectors that may not revive once the economy reopened. It was discussing with NEDLAC and its other partners on what other options were available or could be explored. In the current situation with COVID-19, the UIF was in a tight corner in that it was already going to go beyond using the R40 billion. It anticipates that there would be more people who may lose jobs as a result of the pandemic, and it would be put under pressure with paying ordinary benefits and also intervening in the economy. It needed to make sure that people went back to work as quickly as possible.
About a year ago, the Portfolio Committee had approved section 5 of the Unemployment Insurance Act, which stated that the UIF would fund the retention of contributors into employment. or the re-entry of these contributors into employment. After the COVID-19 TERS payments, its focus would shift towards funding the re-entry of its contributors back into employment, because the survival of the UIF and the economy depended entirely on people going back to work and continuing to contribute.
On the matter of making the portal accessible, a big breakthrough was the zero rating of the online platform. The zero rating made available an online portal for users of the COVID funding, UIF benefits and any other UIF-related funding, for free -- it did not cost any data to visit the site, because Vodacom had entered into an agreement with the UIF. He had set up an email that the Portfolio Committee could use to forward their queries, and committed to emailing the address to the Committee secretariat after the meeting. He had also set up a team of about four people to deal with the queries.
They were expecting the normal UIF claims to increase as the economy opened, and some sectors were not able to participate in the economy. Part of their interventions, to ensure that they were able to deliver on the benefits due, was their relationship with Harambee, which had been able to assist the Department with over 500 call centre agents over three months. In the beginning they could not receive all the calls that were coming through, especially given that there were over 500 000 companies and their employees were calling through. Their capacity to manage the callers had been found wanting, and the Minister and the Department had accepted responsibility for that shortcoming. With the assistance of the Harambee call centre agents, they had been able to improve the drop rate from 40% to 1%. They had gone to the extent of receiving over one million calls during the lockdown. This relationship would continue from July till September. The Department was looking at creating a centralised call center that would be much bigger.
Mr Maruping referred to the specific sectors of domestic workers, the taxi industry and tourism, and said one of the key elements that the Minister had focused on from the beginning was strategizing on how to bring the Bargaining Council on board for each sector, to ensure the Bargaining Council took ownership of the process. The one success that they had had through the Bargaining Council was in the tourism sector, where some tourist guides had been struggling with compliance. Through using the Bargaining Council and the Ministry of Tourism, they had been able to focus on some of the programmes and ensure that the application process for the tourist guides was simplified in the tourism sector. Another intervention was where the Minister had changed the definition of a worker in the last directives that had been issued, so that those employers that were not registered and whose workers would have been compromised and not benefited, had been assisted by changing the language in the directive. This had also enabled domestic workers to be registered by their employers, or for them to register themselves.
There was an ongoing investigation into the matter of employers not paying what was due to their employees. The “follow the money” method was one of their key focus areas. They had employed a company to do an analysis of the companies that had been paid and how far they had gone in terms of payment. The purpose was to ensure that people received the benefit that was intended for them. The main focus of the Auditor General was to follow every single COIVD-19 process that was undertaken by the UIF.
On the matter of how to avoid double payments, the system was being geared in such a way that it could pick up someone who had been dismissed, or someone who had been on maternity leave. One of the control measures the UIF had introduced was to use ID numbers to check the benefit status of each applicant. If a company applied for 1 000 employees, every single ID was tested against the database. It was first checked whether the employee was declared on the database. Secondly, it was checked whether that employee was receiving any other benefits, whether they were ordinary, maternity or sickness benefits. The UIF went to the extent of checking what the variance was between what the claimant was receiving now and what they would have received against COVID. Those were some of the control measures implemented, so that the UIF was able to eliminate as far as possible people who were double claiming and receiving an ordinary benefit, while also receiving a COVID-19 TERS benefit.
Ms Denner asked when the specific verification of bank details had been introduced into the system.
Mr Bagraim commented that the Commissioner had stated that Members must write their complaints when they received them. He said that he sends about a hundred of those complaints a day on to the Commissioner, and the Commissioner could confirm that. Of those complaints, approximately one third got responded to. He acknowledged and sympathised with the UIF being understaffed and under pressure, but questioned whether it was going to be sufficient to keep sending the complaints to the Commissioner.
Dr Cardo reiterated his question on the personal information data breach that had occurred when June applications were opened, as his question had not been answered to his satisfaction. What was the UIF going to do to ensure such a breach did not happen again? Had it been approached by any employers who wanted to take legal action for the breach that had occurred?
Mr Nontsele commented that the Commissioner had not responded to any of the questions had directed to him, and asked that he respond in writing.
The Chairperson commented that there were young people who had applied for the R350 grant and had been told that they were in the UIF system receiving UIF benefits, which was not the case. She was not certain whether the UIF had been informed by the Department of Social Development about this situation. If the UIF had been informed, could they provide a response on this? If not, she asked that they follow up on the matter.
Mr Tshwaku asked that the calculations be publicised with the examples given in the meeting so that people did not become confused with the calculations. He appealed to the Commissioner to moderate his perceived arrogance, as he was seen on a public platform as not exercising patience. They were facing people who were in distress, and people were going to call in for answers. He requested that the Commissioner forward the email address for the people Members should contact, directly after the meeting.
Ms N Nkabane (ANC) commented that some of the questions that the Members raised had not been responded to, and proposed that the responses should be circulated to all the Members. Looking at the magnitude of the problems and challenges the entities were currently facing, she submitted that they should mandate the Chairperson of the Portfolio Committee to liaise with the House Chairperson to check on the possibility of perhaps conducting an oversight at the UIF so that they would be talking on issues that they were aware of, rather than just the issues that had been presented before the Committee. That would assist the Committee in coming up with possible solutions, and would enhance their oversight and the monitoring of the implementation of the possible solutions they would recommend after the oversight.
Ms N Hermans (ANC) seconded the proposal put forward by Ms Nkabane. She commented that also they needed to check the Commissioner’s statement that they did not have the full complement of staff coming in as a result of the COVID-19 measures implemented. If the Committee visited the UIF for an oversight, they may need to take certain precautions to ensure that they did not become infected with COVID-19.
Commissioner Maruping apologised for missing some of the questions the Members had asked. He committed to providing a response to all the questions by Monday, and to attaching the examples of the calculations, with the email address that had been set up for the Members to contact them directly with queries.
On the matter of the R350 grant, they had had discussions with the Department of Social Development about three times about the data they were using. In the beginning, they had requested the full population of the UIF data, which would have been problematic, because the full population of data had everyone who had claimed for UIF, whereas the population for only the active claimants in the UIF system was more reliable, which he committed to furnishing for the Committee.
The bank verification system had been introduced at the beginning of the process. The bank validation system would be introduced when they went live, which was happening over the weekend.
He acknowledged Mr Tshwaku’s comments, and apologised if he was coming across as being arrogant or dismissive to members of the public who were desperate for the services of the UIF. It was not his intention to be arrogant, and he committed to reflecting on Mr Tshwaku’s comments so that it did not happen again.
On the data breach matter, the UIF had not received any threat of legal action to be taken against the UIF. The ICT team had also assured him that no data leakage had happened as a result of the system glitch they had last week. All the channels had been closed and they were testing the system again. They were not rushing the process of going live. They would most likely go live on Sunday.
On the matter of load balancing, where they had received more people applying last week all at one time, the sessions tended to collapse because of the number of people that were accessing the system at that point in time. Two more services would be added over the weekend. People had panicked into thinking that the UIF was closing last week for April, May and June applications, which was not the case.
Responding to Mr Bagraim, he committed to improving the turnaround time. The challenge that they experienced was that each case required them to investigate, which caused the delay. He committed to responding in writing to the other questions that he had not addressed.
Minister Nxesi committed the Department to following up on all the questions that had been raised in the meeting. Their intention was clear, which was to improve their systems and service delivery. He had instructed the Director-General to do a review on the assessment of the organisational structure to determine if it was fit for purpose. There were a number of weaknesses which had been exposed by this particular period, which would be dealt with in the medium term.
Chairperson’s concluding comments
The Chairperson said the Committee appreciated the work that was being done by the Department. She acknowledged that the Minister had been one of the people who had been emphasising that unions must be strong in the instance of the pandemic because if they were not, they were going to be taken for granted by the employer.
She sympathised with the Commissioner on the comment that he may be perceived as arrogant, as the environment the UIF was working under was not easy.
She committed to following up on the Members’ questions that had not been answered at the meeting. She asked that the calculations and email address be circulated to the Committee, as they were often approached by members of the community to assist with queries. She would follow up with the House Chairperson on the possibility of performing an oversight visit, which had been proposed and seconded. She qualified the oversight visit to say that it was not about not trusting what had been put before the Committee, but rather that it would like to balance the meeting with a physical observation in the areas that the UIF had highlight at this meeting. She asked that when the Members raised queries, they did so with specific and accurate information, rather than speaking generally, considering the seriousness of the pandemic and the need to conduct their oversight role and hold the Department to account.
The meeting was adjourned.