Compensation Fund progress report; Convention for Prevention of Marine Pollution from Ships

Meeting report

The Compensation Fund of the Department of Labour briefed the Committee on its performance in the 2013/2014 financial year; progress on the commitments it made to the Committee in 2013-14; its action plan to address its disclaimer audit opinion; the comparison of claims registered, accepted and repudiated for 2011-2014; the provincial decentralisation statistical report; challenges; priorities; the new claims management system and a financial management report. 
 

Its new Umehluko Claims Management Systems went live on 4 August 2014. It noted that the Turnaround Strategy has been moved to the Commissioner’s Office to accelerate implementation.  A hotline to anonymously report fraudulent and corrupt activities has been established. It discussed in detail its action plan to avoid receiving yet another disclaimer. The Commissioner noted that the Compensation Fund achieved 47% out of 100% of their targets. The areas with poor achievement of targets were: Medical Services; Legal Services; Finances; Organizational effectiveness; Internal auditing; Compensation.

The number of claims registered has increased and the reasons for these may be improvement in the claims system since its launch in 2011, the backlog elimination projects embarked upon and also partly the positive impact of decentralisation:
 

Period	Claims Registered	Claims Accepted	Claims Repudiated	Not Accepted, Outstanding Information
1-Apr-2011 To 31-Mar-2012	141 437	110 180	129	31 128
1 April 2012 To 31 March 2013	196 509	129 405	356	63 226
1 April 2013 To 31 March 2014	310 710	260 253	88	50 369

 

The Compensation Fund plans to table amendments to the Compensation for Occupational Injuries and Diseases Act, 130 of 1993 (COIDA) in Cabinet in late September 2014 and then take the Bill to NEDLAC as part of a public consultation process. The purpose of amending COIDA is to provide anew for the administration of the  Act; to provide for rehabilitation, re-integration and early return to work of occupationally injured and diseased workers; to regulate the use of health care services; and to regulate dispute resolution, monitoring and enforcement.

Challenges identified were:
▪ Inefficient IT Systems.
▪ Turnaround times in processing of compensation claims.
▪ Backlog in processing claims and payments.
▪ Delay and/or non-reporting of accidents.
▪ Human capacity constraints.
▪ Document management.
▪ Records management system.
▪ Engagement with trade unions and the delays in the implementation of the structure.
▪ Centralised IT and post EOH contract.
▪ Non-compliance by stakeholders as a result of incomplete information by employers; delays in the submission of banking details by beneficiaries and employers that fail to submit their annual returns
▪ Fraudulent activities are still negatively affecting the finalisation of employer assessments and the debt book continues to increase. This is due to the fraudulent letters of good standing which were issued, in most cases not in accordance with the Compensation Fund policy.

One problem is that doctors keep resending the same invoices and the claims get re-registered which causes a backlog. The department is working closer with temporarily disabled workers in order to get back them back into workplace as fast as possible. In the past, people hired agents to perform the compensation claim and deal with the  Compensation Fund and the doctors.  The new system will put these people out of their jobs. Regardless of this, the Compensation Fund wants to proceed. The majority of the money that was irregular was in the supply chain management portion of the expenditure.

The Compensation Fund has consulted Auditor-General South Africa (AGSA) and created an action plan to fix the problems that caused the audit disclaimer. The Compensation Fund reports to the Auditor-General before reporting to the Audit Committee and other structures within the Fund. Monthly monitoring will occur. An Audit Board, Program Manager, and Responsibility Manager have all been created to ensure better auditing. 

Before starting the next presentation, Mr W Faber (DA) made reference to the “Acting" Director-General of Transport  who always represented the DOT.  He would like to know what is happening with the Direct-General position.

The Chairperson responded that the Acting-Director General (ADG) is acting until a new Director-General can be appointed, and he is good at his job. There has been an effort to get a new Director-General.

Acting Director-General, Mr Mawethu, explained that he has been acting for almost a year.

Discussion
Mr Faber asked why supply management has short, medium, and long term options. There should be no long or medium term. He asked why auditing reports is a priority 2014-2015, if disclaimers have been going on for so long. He referred to slide 26 and pointed to the changes payments in the last three years for temporary and permanent disability. Temporary disability payments went from 94 to 64 million, but permanent disability payments increased from 59 to 87 million. Temporary disability has declined, but permanent disability has risen. This does not make sense.  To him a reasonable explanation for this phenomenon of declining temporary disability payments was merely due to a change in the status of the type of disability.

Mr S Mthimunye (ANC, Mpumalanga) remarked that there are more challenges than success stories. The challenges can be better understood if it was clear where the Department is coming from and where it is going, preferably before the Medium Term Expenditure Framework budget.

Dr Y Vawda (EFF, Mpumalanga) stated that some follow-up and monitoring of the progress for all the commitments for 2015 should be done and asked what the value of the financial misconduct against the budget is. Amending the Act is an excellent approach and should be commended. He noted that budget allocation in the Eastern Cape is extremely high. The issue of Information Technology (IT) is the most important challenge. Does the Department have a directorate in information technology? If they do not, their mission should be made it a priority in their work study. It should link with the Department of Home Affairs and the Department of Health to facilitate progress. It would create smart work instead of hard work. The challenge of dynamic changes can be better managed with technology. There are many concerns, but these are the most pressing.

The Chairperson agreed that these are important concerns.

Mr L Mokoena (EFF, Free State) referred to the problem of independent contractors. There work is independent and they are not covered the same as normal employees. Yet, these practitioners are told how to work, where to work, and what tools to work with; therefore, they are not independent. They fall within the bracket of employees.  It is being raised now because of the TV “Generations" saga. It is an industry. Within the Compensation Fund specifically, these practitioners are not covered. The Department of Labor has been left out of this discussion for far too long.  Secondly, the Compensation Fund and the Road Accident Fund seem to have duplicate duties and there could be a sharing of resources, like IT. Medical practitioners could also share information. How the two can help each other should be explored.

The Chairperson asked the members for specific and direct questions.

Mr B Nthebe (ANC, North West) pointed to the history of disclaimers and matters of emphasis and stated that the outcome has not changed and the consequences are not addressed. It must be appreciated that the presentation addresses the real issues and does not paint a “rosy” picture. However, the consequences of these failures are not spoken about. The presentation does not include employees that work overtime and human capital constraints.

Ms E van Lingen (DA, Eastern Cape) asked if the beneficiaries and employee databases are both fully updated and functional. On the 2013-2014 performance, only 20% of the legal case targets were achieved. The reason for the 80% outstanding is not clear.  It is difficult to discuss the Auditor-General report without the document in front of the Committee. As this is a new Portfolio Committee a full report should have been provided. She noted there are 240 000 unregistered claims and asked where they are being addressed in the process. On slide 25, the figures in the Not Accepted, Outstanding Information column are concerning and this affects the turnaround time for claims. She asks how the Department communicates with clients to shorten the turnaround time because for this specific market, unemployed and injured persons may not have a phone. It is a difficult position to be in when one is disabled. She added that, for businesses, the department is very efficient in asking if someone is compliant. The bad disclaimer is disappointing. She remarked, “A disclaimer is a disclaimer is a disclaimer”. It has been here for a number of years.  It must be addressed, if not, this entity must be placed under administration. If you cannot work, that is the way to go. The Compensation Fund is responsive in making sure businesses are compliant, but the other side that provides compensation to workers does not respond. She said the questions could be responded to written or orally.

The Chairperson believes it is not understood that the NCOP provides direct interaction with the nine provinces. As a result, Department reports should have a breakdown by province because it is not like the National Assembly, due to its direct interaction with each province. The words in the presentation must be “smarter” and have more hard facts. The clean audit priority needs to be observed. The Public Finance Management Act (PFMA) is a reminder of the responsibility of the accounting officer for what is happening. Although there was an attempt to explain it, there is a disclaimer.  Regarding consequences, there is silence. He does have a lot of questions but there are time constraints. It is a positive step in the right direction, after meeting with the Standing Committee on Public Accounts (SCOPA). It is a lot of work for one person. A disclaimer has a serious meaning, year after year. He would not want this repeated again. They must sort out the financial misconduct. This discussion must stop there. Other questions may be submitted and responded to in writing due to time constraints. There will be more to discuss at a later date.

Mr Sam Morotoba, Acting Director-General, Department of Labour, suggested that the Commissioner speak.

Mr Shadrack Mkonto, Commissioner, Compensation Fund, Department of Labor, responded that the board consists of officials in the organisation but it is chaired by an independent person who is a member of the Audit Committee. So that it is independent. That board reviews each case of misconduct in the supply chain or management. It makes suggestions and reports to the Commissioner and the Audit Committee for implementation. Hopefully this will correct the irregular expenditure. The challenge with the claims is due to the manual system it is operating on. The employer will not report the claim properly. They take a worker to a doctor and then send the bill to the Commission with an invoice. This causes delays and problems. The doctors can report an accident at any time, so it is paid according to when the invoice comes. We have a new a system in place, but it needs time to kick in. The turnaround plan will be made available. The Compensation Fund overlaps can be looked into. The disclaimers were for three years. The department is now linked with the Home Affairs database; however, a new process for integration is being researched. The CFO can address the questions on the negative outcomes, supply chain, and consequences. The financial misconduct committee would help with "consequences" management.

The Chairperson asked if it was correct that it this is a board, not a committee.

Mr Morotoba responded yes.

Mr Johnny Modiba, Chief Finance Officer: Compensation Fund, said that with regard to financial misconduct, the Financial Misconduct register stands at about R650 million. It dates back about four or five years. R32 million applies to the supply chain management out of a total of R518 million. Overall, of the R518 million, R84 million has been recovered already. There are efforts to recover the rest. Those found responsible are forced to recover it. The steps taken with this process have already been made available to the Committee. The board is investigating the rest. Out of 71 cases, 20 have been investigated already and decided. The rest will be tabled and a report will be made available. Supply Chain management is the reason the presentation includes long-term, because the structure does not have separated functions such as facilities management, security management, etc. The audit findings are not about supply chain matters only. The rest affect the other elements within the supply chain. The department is trying to separate the functions now so that the supply chain can provide better service. That way supply chain can be the focus, and the rest can be managed elsewhere, even it is in the CFO’s programme. In the recent months, there has been a report to really focus on and address the audit outcomes. In October 2013, he was appointed to ensure that the department develops a different strategy. This includes developing programme managers and responsibility managers to address accountability and consequence problems. A core plan was approved with the Auditor-General of South Africa (AGSA) before reporting to the Audit Committee and other structures within the Fund. Monitoring on a monthly basis will occur, to ensure reporting periodically occurs. The agreement with the ASGA will eventually assist in overcoming the negative audit outcomes that the department has experienced for years.

The Chairperson refers to the CFO, saying that the CFO gives the Committee the impression that the CFO is overworked based on the way he responds. There is a team behind him. It is the CFO’s responsibility to deal with these matters.

The CFO clarified that he meant that the department needs a new director for supply chain management and another director to handle the other functions, although they are included under finance.

The Chairperson thanked the CFO. 

Mr Morotoba spoke about the social security integrated approach, there is a process at government level where government officials are finalizing a draft discussion document that will to go to Cabinet before it is released for public engagement. This is in regards to uncovered workers, this speaks to a bigger discussion on labour broking. There is a range of workers who are out there not enjoying benefits since the legislation was introduced in 1994. The Department of Labour has established an internal Information and Communication Technology (ICT) unit that also provides for the Funds. The IT in the past 11 years has made the Department suffer.

The Chairperson had to stop the meeting there as the Department of Transport is waiting. Written questions can be submitted.

A Compensation Fund board member was asked to comment and he assured the Committee that board members are cracking the whip on oversight. The correct questions are being asked. Some investigative work was done by the sub-committees of the board itself. He wants members to take comfort in the structure itself. It is part of the board’s responsibility to do its best. The board is working toward an effective and efficient Compensation Fund. Everyone wants the same thing.

The Chairperson said the Committee would not go into the fraud and the disclaimer in detail. That will be discussed at a later date.   

Annexes IV & VI of International Convention for Prevention of Marine Pollution from Ships (MARPOL)
Mr Mawethu Vilana, Acting Director-General, Department of Transport, said the purpose of the Prevention of Marine Pollution from Ships (MARPOL) Annex IV and VI is to help establish regulations to deal with some serious challenges: Annex IV regulates the sewage from ships and how it is discharged. Annex VI regulates air pollution. It is important that South Africa participates in eco-friendliness because it engages in so much trade and travel. Climate change affects how both how people do business and live. Emissions must be regulated and reduced. It is important to support the green movement, but not disadvantage the goods and services providers. South Africa can go “green” by reducing sulfur oxide and nitrogen oxide, greenhouse gas emissions. The engine emissions can be lessened if the fuel used to power the engine meets the codes. Human waste should be treated on the ship and disposed 3 to 12 nautical miles from the shoreline or at the port itself, where the port will have the facilities to treat it.  Administration will ensure that the ships emit according to this convention and SAMSA has surveyors to enforce visiting ship compliance. National legislation covers emissions but it does not cover Annex IV and VI. Financially, SAMSA surveyors currently inspect ships to comply with other provisions of MARPOL, and when the Annexes are approved their functions will be extended to include Annex IV and VI.

Discussion
The Chairperson understands that the DOT, with SAMSA, wants to align with national standards. The request is to approve the Annexes so that they are on par and up to date because MARPOL was introduced in1984. The department also seeks that these annexes be enforced because there is no obligation. This is why South African agents are needed for ships that visit the shore and excrete sewage.

Mr Vilana agreed. There are only two outstanding annexes. The Department and the South African Maritime Safety Authority (SAMSA) are trying to bring enforcement to national standards. The department lacks a domestic instrument, only Parliament can approve one. It is here because this Committee must approve it. The bill and amendments are necessary to make this a reality.

The Chairperson responded that it should be enforced domestically.

Mr Mokoena agreed, saying he sees the need for the annexes. The Committee should not be afraid to be strong and say that ships need storage and that ports need sanitation in place. The number of nautical miles should not matter because it affects the bay. It should not be accepted. Everyone should have sewage storage in their ships and dispose of it on shore.

The Chairperson thanks Mr Mokoena. This point is well taken.

Dr Vawda asked what happens if a ship in her majesty service was found violating these policies in the port. He also questioned if these rules apply to warships too or only for passenger ships.

Mr Makue registered his unqualified support for the recommendation.

Mr Vilana remarked that the ship is obliged to provide their own facilities under the international convention. The department has the ability to charge any ship. Any ship violating will be in violation of South African law.

Mr Sipho Mbatha, SAMSA: Head of Maritime Legislation, added that any ship not compliant with local or international legislation is deemed unseaworthy by SAMSA and can be detained. Sewage is not toxic to the ecosystem in small quantities, if treated, and within a certain radius of the coastline.

Mr Mbatha answered that some ships are excluded, including government ships. However, those ships used for commission purposes are subject to the law. Warships do not fall under that category.

The Committee approved the two Annexes.

It also approved Committee minutes.

Meeting adjourned.