Hope for transforming Compensation Fund and UIF

Michael Bagraim writes that there is currently a proposal by the Department of Employment and Labour to spend R15bn towards the creation of two million jobs. This would be disastrous. pic supplied

Michael Bagraim writes that there is currently a proposal by the Department of Employment and Labour to spend R15bn towards the creation of two million jobs. This would be disastrous. pic supplied

Published Mar 17, 2024


Our government has clearly done a remarkable job of eroding the capabilities of both the Compensation Fund (CF) and the Unemployment Insurance Fund (UIF). These funds are entirely funded by South African workers and their employers. Contributions are traditionally made monthly or weekly depending on the employer’s payroll.

The funds are paid with PAYE to the Receiver of Revenue’s office. In turn, the Receiver of Revenue allocates these payments to the Department of Employment and Labour, which then invests surplus funds into the Public Investment Corporation.

This investment is made specifically for and on behalf of South African workers. The monies are not government funds and are ideally placed in secure investments to ensure that South African workers are fully covered for various reasons when they are unable to earn their monthly salaries.

We saw R65 billion taken from this funding as a contribution towards the Covid-19 TERS. It would be interesting to see a full accounting of that sixty-five billion to either confirm or debunk the fact that all the monies were spent on South African workers. In addition to this R65 billion expenditure during Covid-19, the PIC still holds an excess of R16bn in investment.

There is currently a proposal by the Department of Employment and Labour to spend R15bn towards the creation of two million jobs. This would be disastrous. Unfortunately, the government at this stage still does not understand that its function is not to try and create unsustainable jobs, but rather to create an environment conducive to job creation by the business community.

The labour activation programmes outlined by the government, and in particular the Department of Employment and Labour (DEL), have indeed tried to implement several projects related to job creation. However, these projects did not yield a significant increase in employment. Despite this, UIF management requested to be able to draw R15.7bn to contribute to this initiative.

This will lead to extreme wastage and opportunities for theft. Actuaries advised the management of the UIF that they would likely remain a “going concern” but would fall short of “financial soundness”. Taking that advice into account, the UIF Exco met and made the decision to accept the actuarial recommendation of a going concern. It still requires the Minister’s approval, and hopefully, this potential disaster will be averted. Despite this and the risks identified within the project, there seems to be pressure from the Ministry to proceed.

The risks identified included “inadequate capacity to implement the project”, “potential losses when liquidating investments to raise liquidity for the project”, and finally “the inability to monitor and validate implementation of these projects”. Our current government has a history of inadequate project governance and project spending not in line with the approved budget.

Research conducted by Price Waterhouse Coopers underscores that transformation is desperately needed. Clearly, the Department of Employment and Labour has recognised that it is unable to effectively run both the UIF and the CF. South African workers have been badly let down for more than two decades. Initially, during the height of Covid-19, when the Department was in chaos, I pleaded with the Ministry to let Receiver of Revenue staff take over the disbursements.

For some reason, the Minister kept saying that the payment capabilities of both these departments were intact and that payments were being smoothly handled. To this day, there are still hundreds of individuals who have not been properly compensated. On a daily basis, old inquiries coupled with new inquiries and desperate pleas are received. It cannot be business as usual. Both these funds are broken and need an overhaul.

We need a new governance structure and new delegations of authority. The entities need to be legally separated and certainly need to be answerable to South African workers. Once these funds become independent, strong oversight mechanisms and adherence to the rules and guidance of the Auditor General must be embedded. This transformation journey needs to thoroughly explore enabling technology and needs to train consultants to serve as proper representatives of both the UIF and the CF.

We need to get back to basic service delivery. The government needs to understand, once and for all, that they are servants of the people and that the monies being dispersed to workers are not government funds but are monies invested by and for the workers of South Africa. It will take a lot of hard work to develop and regain the trust of the workers of South Africa.

* Michael Bagraim is a labour lawyer and DA MP.

** The views expressed here are not necessarily those of Independent Media.

Cape Argus

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