SIU on investigations & findings against UIF, with Minister and Deputy Minister

Meeting report

Opening remarks by the Chairperson

The Chairperson welcomed the Members, the Minister, Deputy Minister and the Special Investigating Unit (SIU) delegation to the meeting. She apologised for the delayed start and explained that some Committee Members were facing difficulties to log into the meeting. After they successfully logged in, she stated that the core of the meeting was to discuss progress regarding investigations on the Unemployment Insurance Fund (UIF), specifically the Temporary Employer/Employee Relief Scheme (TERS) by the SIU.

She noted the apology from Mr N Hinana (DA) apology, before handing over to the Minister for a foreword.

Mr Thulas Nxesi, Minister of Employment and Labour, thanked the Chairperson and said he, together with the Deputy Minister, Ms Boitumelo Moloi, were only in attendance to listen to the findings presented by the SIU, then return to the ministry to discuss the way forward.

The Chairperson then asked the SIU to proceed with the briefing.

Briefing by the Special Investigating Unit

Adv. Andy Mothibi, Head of the SIU, greeted everyone and thanked the Committee for inviting the SIU. He introduced his delegation and proceeded to explain how the organisation functioned. He outlined the legal framework that guided its operations, its mission as well as its consequence management strategies.

Mr Johnny Le Roux, Chief Forensic Investigator, SIU, took over the presentation and recounted that in August 2020, the Minister reported irregularities in the UIF TERS payments to the SIU. The scope of investigations on this matter covered the observations made by the Auditor-General. For the SIU to attend to audit findings, it entered into a secondment agreement with the Department of Employment and Labour to secure further evidence in support of a motivation for a new proclamation. This, however, was still with the Department of Justice.

Findings from the SIU showed that a total of 13 447 006 employees linked to 1.5 million companies received TERS payments, and a total of R57.3 million was paid out by the UIF. This involved fraudulent payments to deceased people, prisoners, foreign nationals, people sharing same banking details and people with invalid ID numbers (a list of these observations and actions taken by SIU is on slide 25 to 30). This was attributed to weak internal controls.
 
Investigations by the SIU team revealed that 6 140 senior departmental officials claimed a total amount of R41 009 737.70 from the Relief Fund. This was done through 3959 bank accounts; 581 of these accounts were associated with multiple beneficiaries. Although some of these officials were identified and suspended, they continued to receive their full salaries. Adv. Mothibi informed the Committee about recovery strategies that are in place for the monies allegedly paid to the officials.

Before concluding the meeting, Adv. Mothibi said while waiting for the proclamation, the secondment agreement helped make progress in the investigations. He said the only limitation to this legal instrument was that the SIU could not subpoena bank statements or witnesses. However, he said that there were several areas on slides 25 to 30 where proclamations were recommended but secondments could also work. He then assured the Committee that although the SIU was waiting for the proclamation; the secondment agreement indicated that work had already begun.

The Chairperson thanked the SIU team for their presentation and opened the meeting for discussion.

Discussion

Mr M Bagraim (DA) greeted everyone and thanked the SIU for its presentation. He was concerned that the proclamations were very narrow and hoped that at some stage they would broaden to enable a full investigation. Even within the narrow investigations, it was quite clear that the UIF systems were “rotten to the core”. This, he alleged, had been going on for year and the rot was beginning to “stink”. The UIF had to comment on how it intended to fix these issues. Other concerns were that the fraudulent activities highlighted by the SIU suggested that they were a result of internal work. Therefore, the individuals involved in these activities had to be rooted out and presented to the law.

Mr Bagraim also expressed deep concerns about members of the top management who were suspended months ago but still received their full salaries. Were they part of fraudulent activities and why were they getting paid? Finally, were the Director-General and the Minister also to be blamed, given that these unlawful activities took place under their leadership?

Dr M Cardo (DA) asked to what extent the weak financial controls in the UIF a product of deliberate design. What evidence was available to show that top officials facilitated corrupt activities? He asked if the SIU had interviewed any of the top management officials that were placed on suspension.

Finally, of the 6 140 government workers identified to have been illegally claiming from the TERS find, how many of them were “false positives” (contract teachers), and what measures had been taken to retrieve this money? He said that it had to be easy to recover money from this group of people because they possessed personal work numbers.

Ms H Denner (FF+) greeted everyone and apologised for joining the meeting late. She requested clarity on the proposed lifestyle audits. What processes did it involve, who were the targets, and what was the timeline for this procedure?

Concerning deceased people who were receiving TERS benefits, has any information been received from the Department of Home Affairs? She asked if the SIU had liaised with the Department of Public Service and Administration (DPSA) in its drive for moral fibre in the public service. Lastly, she asked the Minister what he had planned to do to avoid the recurrence of corrupt activities.

Ms C Mkhonto (EFF) greeted everyone and agreed with the notion that the scope of the investigation had to be increased. She mentioned that while monitoring her constituency, she discovered that there were farmers who used their workers to gain TERS benefits. These workers did not receive this money and did not even qualify for TERS benefits. For these and many other reasons it was necessary to expand the investigations. She also asked if the prisoners were aware that their names were being used.

Mr M Nontsele (ANC) greeted everyone and thanked the SIU for its presentation. He said while he understood that the findings at this stage were based on “work in progress”, there was no logic in prosecuting individuals that embezzled less than R1 million yet leaving those that took about R6 million like the five service providers implicated on slide 13. Also, although the individuals involved in the five service providers were confirmed, the SIU still did not proceed with the prosecution. Why was this so?

The Chairperson asked if the people who were arrested were still in prison or out on bail. If out on bail, how much was it? She enquired if the members of the South African National Defence Force (SANDF) who agreed to pay back the money were doing this on their own will or were forced to do so.

Responses

Adv. Mothibi assured the Committee that no aspect of the on-going investigation was to be left unattended. He said the team was committed to review the Proclamation and ensure that its scope was as wide as possible before the Minister of Justice signed it. On the question about inefficiencies in the UIF, the team was to determine whether this was the case. Thereafter systemic recommendations were to be made and submitted to the Department. He assured the Committee that more investigations were going to be carried out internally to identify unlawful activities. He explained that the team was set to thoroughly examine the process of how the money was disbursed into fraudulent accounts. He also said that the team was going to interview all individuals in the top management regardless of whether they were working or under suspension.

Adv. Mothibi explained that the process of recovering the funds involved identifying the individuals that were paid illegally. Thereafter, depending on the corporation of the receiver of the funds, legal instruments like the Acknowledgement of Debt were signed and monitored until payment. Where there was a need for a full-scale legal proceeding, the team dealt accordingly.

He said that the SIU liaised with the DPSA and that it was significantly involved in the endeavour to expose these fraudulent activities. He said that the SIU followed up with the National Prosecuting Authority (NPA) and HAWKS to ensure that prosecution was done. Members of the SANDF had agreed to pay back the funds, and these payments were not done at their own free will. Legal procedures were followed that ensured that these individuals paid the money.

Mr Le Roux said that the SIU interviewed people in senior management and the team was formulating disciplinary referrals out of the evidence that was collected. The team was going to assess available evidence to provide the exact amount of false positive cases. The SIU was working closely with the Fusion Centre to carry out lifestyle audits. These investigations aimed to find out if there was any gratification from contracts awarded to suppliers. He said the SIU set meetings with top management of the UIF and the DHA and that the corporation of these entities was quite helpful.

He replied that the SIU was currently working with the Department of Correctional Services (DCS), and indicated that it had not yet gotten the opportunity to interview the prisoners themselves to find out if they knew their accounts were receiving funds.

On the question about how much bail the perpetrators paid, he responded that he was yet to contact HAWKS about this information.

The Minister responded specifically to the question that was directed to him by Mr Bagraim. He said amidst all these investigations it was important to remember that the Minister was only politically accountable to the entity’s operations and was divorced from its everyday operations. He was mainly concerned with the policies that governed it and it was impossible for him to know everything. In fact, the Public Finance Management Act (PFMA) ensured that Ministers were not involved in the financial operations of these entities. He cautioned the Committee not to make the mistake of painting everyone with the same brush. Claiming that the entire UIF was rotten was a bit harsh considering that millions of people successfully received their money.

Mr Thobile Lamati, Director-General (DG), Department of Employment and Labour, agreed with the information that had been shared by the SIU. He confirmed that when individuals were suspended, this was done pending further investigations. Other sections of the investigations were completed before the others. Therefore, if the investigation was not complete, these individuals were to remain suspended.

Closing remarks by the Chairperson

The Chairperson thanked the SIU team, Minister, Deputy Minister, and the DG for being part of the meeting. She emphasised that the SIU had to collaborate with other Departments. She expressed her disappointment in how corrupt top officials took advantage of the pandemic – a very difficult time for millions of people. She urged the Committee to support the SIU and the Department in their endeavours to fight this corruption.

The meeting was adjourned.