UIF & Compensation Fund 2019/20 Quarter 3 & 4 performance, with Ministry

Meeting report

Compensation Fund Quarter 3 performance
Mr Vuyo Mafata, Commissioner: Compensation Fund, said the strategic objective of providing faster, reliable and accessible Compensation for Occupational Injuries and Diseases (COID) services by 2020 was only achieved by 67%. The performance of the Fund had risen from the first quarter to the third where 80% of the approved payments were finalised. During the second quarter, the development of a new claims management system began to address the challenges of the previous system. It provided an opportunity to amend claims that had been incorrect. He highlighted that many payments had not been finalised due to outstanding documentation from the claimants.

The Compensation Fund had partnered with Business Unity South Africa to ensure efficiency in the migration of data from the Umehluko system to the CompEasy system. The migration of this data then affected the required turnaround time of the payments which ultimately resulted in the Compensation Fund not meeting their targets.

Compensation Fund Quarter 4 performance
Mr Mafata outlined that most core targets were not achieved in Quarter 4 due to delays in the turnaround time of finalizing payments as a result of the data migration from the Umehluko to the CompEasy system. Indicators were achieved by 33%.

The risk maturity level of the Fund was not achieved. The Compensation Fund’s Investment Portfolio took a huge knock that resulted in negative returns instead of the CPI+2 target that was aimed for. The downgrade of South Africa’s debt rating accounted for this as it affected stock markets and the instruments that the Compensation Fund had invested in.

The target set for active registered employers to achieve 95% compliance was unmet as there was 52% compliance in this quarter. To address this, the Department has entered into a partnership with the DEL Inspection and Enforcement Services who handle labour legislation compliance. The target to finalise medical invoices within 40 working days was only achieved by 69%. The CompEasy system was utilized fully for the first time in Quarter 4 which slowed down the achievement of targets generally.

Unemployment Insurance Fund (UIF) Quarter 3 and 4 performance
Mr Tebogo Maruping, UIF Commissioner, stated that the Quarters 3 and 4 performances had been internally audited. Internal audits found that the targets were satisfactory. Addressing audit deficiencies sooner rather than later was something that the UIF prided itself in. The Chief Risk Officer was approached to compare the UIF’s achievements against its targets. Risks found were instantly addressed.

The quarterly performance trend suggested an overall improvement from the previous financial year.

For the UIF investment portfolio, the aim was to achieve a return that was above the benchmark. This target was achieved in both the third and fourth quarters. The target to reduce the vacancy rate was achieved by the UIF in both quarters. Targets closer to the end of the financial year were less likely to be met due to the inactivity of businesses at financial year end. The UIF planned on changing its focus to training people for employment given the economic conditions in South Africa and the rising unemployment rate.

Ms Fezeka Puzi, UIF Chief Financial Officer, outlined that the UIF had underspent by 45% in Quarter 3. The reason was the cumulative nature of the budget, cost cutting measures and unfilled vacancies. This however improved in Quarter 4. Over budgeting was a possible reason the UIF had underspent in both quarters.

Discussion
Mr M Bagraim (DA) noted that the Compensation Fund was trying to improve its controls. He asked why the majority of private doctors were refusing to treat Compensation Fund patients due to not being paid by the Fund. This ultimately affected the employees who were unable to receive medical assistance from private doctors due to this. He asked why not received responses to the queries he had written to the Fund about individual employees who had not yet been paid.

He highlighted the UIF Covid-19 temporary employer/employee relief scheme (TERS) payments were temporarily suspended due to an investigation by the Auditor General due to a belief that past transgressions had occurred in the system. He asked if past transgressions had also taken place in Quarters 3 and 4 of 2019/20. If that was the case, was anyone being held accountable for this?

In the context of the UIF changing its focus to creating employment opportunities, he wanted to know why this was suddenly the case as he felt that the UIF was struggling to do its main job of finalising payments to the individuals who were in need of UIF.

Dr M Cardo (DA) asked the UIF why the TERS payments had been suspended and if there was an indication of when they would resume.

Concerning the finalisation of invoices within 40 working days, 70% medical invoices were finalised within 40 working days in Quarter 3 and the 69% in Quarter 4. The Fund explained that this was due to a delay in the full implementation of the CompEasy system in Quarter 3 and challenges experienced in processing claims by staff. This was because of incomplete staff training to enable them to use the new system. This indicated failure for the CompEasy system to him. Compsol said that the Compensation Fund owed them more than R700 million in unpaid invoices and he believed a court order stated it had to be paid or rejected with valid reasons by the Compensation Fund within 75 calendar days. Dr Cardo asked how much costs in interest and legal fees the Fund had accumulated in the disputation of these matters in court.

Ms H Denner (FF+) enquired about the number of invoices and claims that needed to be merged from Umehluko to the new system, CompEasy. She asked if technical support had been set up to assist those who had been struggling to log claims and load invoices onto the CompEasy system. She queried the duration of the AG’s suspension of UIF TERS payments. She asked what the current value of the UIF Investment Portfolio was.

Mr N Hinana (DA) highlighted the overwhelming evidence of the rising unemployment rate since 2019 from 26.55% to 30.1% to date. According to the presentation, there were 70 000 newly registered employees in South Africa per year and 600 000 newly registered employees on the Compensation Fund. He asked the Compensation Fund and the UIF for clarity on whether the number of those who had become their responsibility were as a result of the rising unemployment rate. If that was the case how was UIF planning on managing to compensate such a large group seeing that AG had suspended the payment processes.

Ms N Ntlangwini (EFF) expressed concern about the suspension of the UIF TERS payments and asked for an indication of when these payments would be made available again. She felt that the Department needed to enhance holding its entities accountable as many in South Africa were suffering due to not receiving their UIF benefits. She urged UIF to put in more work to ensure that the underspending by 34% did not occur again as this did not reflect positively on the UIF performance or the Department of Employment and Labour. She asked if there was UIF underspending in Quarters 1 and 2 or this occurred in just Quarters 3 and 4.

Ms Ntlangwini expressed great concern at the vacant positions in the UIF and asked what it was about the positions that made them difficult to fill. National Treasury would continue to take funds away if they were not being utilised.

Mr S Mdabe (ANC) requested a Compensation Fund report on the claims of injured workers and the sectors of the economy that those that had been paid belonged to. He had also requested this report last year and to date it had been outstanding. He requested a report on the internal governance structures of the Compensation Fund for their performance plans to assess the risks affecting the achievement of targets and to provide evidence of work that had been completed.

Mr Mdabe raised that the Pinetown Labour Centre that serviced close to 9000 people did not have a manager and this had been the case for the past three years. He felt that the location of the centre was not conducive to serving civilians and the conditions experienced while they waited to be assisted were unbearable. He asked that tools of trade be provided to staff members working from home as this affected productivity. He did not understand how this could have been the case while the UIF projected underspending in the quarterly reports.

Mr M Nontsele (ANC) requested a Compensation Fund report on the breakdown of those that had been assisted and the costs involved since the partnership with the Business Unity South Africa began.

Mr Nonstele suggested that Mr Bagraim submit a consolidated list of the service providers and private doctors that had approached him, and the amounts owed to them. This would ensure that issues of this nature are dealt with collectively by the entire Department.

Dr P Nkabane (ANC) asked both the UIF and the Department if there were any risk management and monitoring tools on the Funds that had been disbursed to employers to ensure that vulnerable sectors of the economy are reached.

The Chairperson said that it was about time that the Department reflected the number of workers claiming that they had not received UIF TERS payments while their employers had been paid. She requested that employers that did this be exposed. She proposed that employers who have done this should be named and shamed. Corruption in the public and the private sectors should be exposed.

Director-General response
Mr Thobile Lamati, Director-General: Department of Employment and Labour, stated that he would respond to some of the questions and the Commissioners would respond to those that required technical knowledge.

Mr Lamati replied about the Covid TERS benefit payment being suspended by the AG and stated that the statement was incorrect. The AG did not suspend the Covid TERS benefit payment. He explained that the AG conducted an audit, provided the Department with preliminary findings, engaged the Department, the UIF, the DG and Minister and made recommendations. He asserted that the AG did not stop the UIF TERS payments. Covid TERS benefit payments had been delayed due to control weaknesses in the system. Once the deficiencies had been addressed, payments were always released. Control weaknesses identified by the AG or the Department had to be addressed when they arose and only then would payments be resumed. He stated that payments had resumed upon the Commissioner’s instruction the previous day.

Mr Lamati stated that the Department was in engagement with Government Technical Advisory Centre (GTAC) to receive assistance with data analytics to improve the quality of data on the system to ensure that the correct payments were made. He was instructed by the Minister to conduct a forensic investigation and the AG suggested that further investigation needed to take place. The Minister reported the issues to the Special Investigating Unit (SIU) to ensure that any fraudulent activity is dealt with. Mr Lamati said he would ensure that the outcomes of the investigations are implemented.

Mr Lamati clarified to Ms Ntlangwini that the operating budget of the Compensation Fund and UIF was not funded by the fiscus but came from the revenue that the Funds generated. Of that, 15% to 20% of the revenue was utilized as the operating budget. National Treasury would not take this funding away as they did not provide it to them to begin with.

Compensation Fund response
Mr Vuyo Mafata, Commissioner: Compensation Fund, explained that the submission of an invoice by itself did not make the invoice payable. An invoice needed to be accompanied by a claim that had been accepted by the Compensation Fund. Depending on the type of invoice, some needed to be accompanied by a medical report from a doctor for the Fund to decide if they would accept liability for the claim or not. There needed to be a process medical report and a final medical report submitted by the medical provider. Certain procedures required pre-authorisation numbers attached to the claim. It had to be noted that for claims to be processed they needed to meet the medical requirements stipulated.

Mr Mafata replied to Mr Cardo that he had no knowledge of R700 million in unpaid invoices. He clarified that the migration of data from Umehluko to CompEasy delayed the payment process but those awaiting payment would be paid if they had not been paid already. Of the R431 million that had been made in payments, R130 million of that amount had been payments made to Compsol. From 1 April 2020 to date, a further R460 million had been paid in outstanding invoices to medical service providers. He acknowledged the new system required a timely migration process to ensure that all data was adequately processed and to ensure the payment of 1.2 million claims. He highlighted a recurring challenge that arose from utilising new systems. If the data was not migrated from the old system, the new system would be crippled as payments from the previous system would not be captured.

Mr Mafata took note of Mr Mdabe’s request for the claims report and its specifications and committed to providing the report. The quarterly reports presented to the Portfolio Committee had all been put through an audit process. This would be highlighted in the presentations in the future.

UIF response
Mr Teboho Maruping, UIF Commissioner, addressed the question of current UIF portfolio value. The portfolio was valued at R160 billion and has since 31 July decreased to R130 billion due to payments amounting to R40 billion on Covid-19 Relief Benefits. The value was likely to drop even further to R110 billion or below once relief benefit payments resume.

Mr Maruping replied to the concern about unfilled vacancies saying that moving forward a vacancy would not be left vacant for longer than two months.

About the Pinetown Labour Centre, he would personally investigate the matter of the unfilled managerial position for the past three years. He replied that tools of trade would be made available to staff working from home and explained that all shortages were due to the national shutdown that halted various functions of the suppliers.

Mr Maruping replied to Dr Nkabane about ensuring that the payments made to employers are received by the workers. Employers that had been reported for not having paid their employees were not sent the money claimed the following month. These claims were paid directly to the employees. All payments that have not been passed on from employer to employees are treated as potential fraud. He agreed with the Chairperson to name and shame employers that were committing corruption of this nature.

Mr Nontsele raised a point of order to the response by the Compensation Fund Commissioner. He had requested a detailed report on the number of cases taken on since partnering with BUSA. How many of those cases had been cleared for payment? Mr Nontsele requested the report in good faith. He did not accept the Commissioner's response as he felt that it was dismissive. He apologised for being harsh.

Mr Lamati reaffirmed that the report requested by Mr Nonstele would be provided.

Mr Lamati replied to Mr Mdabe’s enquiry about the Pinetown Labour Centre vacancy. An appointment had been made. The newly appointed regional manager, Mr Gwala, would report for duty on 1 September 2020.

Mr Bagraim agreed to send a list of service providers who had complaints and asked where he should send it. He agreed to the naming and shaming of entities that were committing corruption.

Ms Denner agreed with the naming and shaming of employers who were not paying their employee benefits due to them. Her question was unanswered on the provision of technical support to assist clients and medical practitioners unable to use the new CompEasy system.

Ms Ntlangwini supported the report request by Mr Nontsele. They had been repeatedly requesting the report. She agreed that the Department should name and shame corrupt employers. She was not satisfied with the response given to the query about underspending by the Funds by the Department. Regardless of funding source, underspending should not reoccur. She required commitment that this would not happen again.

The Chairperson requested a breakdown from the Minister of the existing vacancy rate for each province, positions vacant and which DEL entity. She asked that the information be made available next week if it could not be provided at the meeting.

The Chairperson brought to the Committee’s attention a racist attack where a domestic worker had been assaulted by her employer of 26 years. When she followed up on this, she found that the employee’s UIF contribution was last made in 2004. The employee is now out of work and is not covered. The Chairperson asked the Minister to address racism in the workplace.

Minister of Employment and Labour
Minister Thulas Nxesi assured Members that role of oversight by Parliament in upholding accountability was taken very seriously. He would ensure that the requested reports and documents are provided.

The Minister replied to concerns directed at the Compensation Fund. Whilst more than 5000 Covid related claims have been received by the Compensation Fund. There are two mutual bodies licensed to provide COIDA services in the mining, iron and steel and construction sectors amounting to R3.8 billion, this is a small part of the work of the Compensation grant. One is likely to grow as a result of the pandemic and he thought that once flooded with the claims, it is going to be the test of Compensation Fund systems. Maybe we might crack but we hope that it is going to test our systems and if weaknesses appear – we will be able to deal with them.

The Minister expressed gratitude for the relationship between the Compensation Fund and Business Unity South Africa to assist medical providers to migrate data to the CompEasy system.

The Minister addressed the UIF. He was pleased with the number of payments that had been disbursed to those who were in need as they had injected cash flow into local economies. He requested officials to invite the AG to perform interim audits to highlight preliminary observations of risks and gaps that the UIF needed to take necessary precautions on. The delay of payments by the UIF was a precaution that was taken in reaction to a risk observed by AG. The UIF Commissioner has been required to provide comprehensive reports in response to the recommendations for the risks identified. National Treasury has been deployed to employ technical resources to the UIF to comply with recommendations.

The Minister assured Members that detailed reports and further information requested will be provided to Parliament. He emphasised that individuals found to have defrauded funds provided by the state would be held accountable internally and externally by law enforcement officials.

The Minister said that he had instructed the Director General to improve the capacity and skills of workers in both the Compensation Fund and UIF. TERS payments have exposed the inefficiencies of the entities. The pandemic contributed to the unfilled vacancies as the Department remained skeptical about going forward with a virtual recruitment process.

The Chairperson commend staff at provincial and regional level for assisting certain communities. Community members had given feedback on the assistance they had received from staff members. She would appreciate receiving the requested reports as well as presentations from the AG

The Chairperson emphasised domestic workers required assistance and protection from the Committee. She urged that racism and oppression be exposed and dealt with as this would empower others to speak up on the suffering they endured.

Ms Ntlangwini expressed gratitude to the Director General for the assistance that had been received on the cases that had been sent to him.

The meeting is adjourned.