Presentation to the Portfolio Committee on Labour 10 June 2009 Unemployment Insurance Fund

1. Presentation to the Portfolio Committee on Labour 10 June 2009 Unemployment Insurance Fund

2. Structure of Presentation • Mandate, Vision and mission of the Unemployment Insurance Fund • Key issues (Achievements/Challenges) • Financial performance • Operations • Stakeholders • People Management • Strategic Focus for 2009/2010 • Social Security Reforms • Build and/or support schemes to alleviate poverty (job creation and retention) • Extend claim processing capacity • Improve compliance by the employers • Improvements of benefits • Increase stakeholders awareness and support for the Fund • Conclusion • 2

3. Mandate The Unemployment Insurance Fund (UIF) was established in terms of section 4(1) of the Unemployment Insurance Act, 2001 (Act 63 of 2001) as amended. The Act empowers the UIF to register all employers and employees in South Africa. The Unemployment Contributions Act, 2002 (Act 4 of 2002) empowers the SARS Commissioner to collect monthly contributions from both employers and workers. Section 9 of the Unemployment Insurance Contributions Act, empowers the Unemployment Insurance Commissioner to collect contributions from all those employers who are not required to register as employers in terms of the fourth schedule to the Income Tax Act and who are not liable for the payment of the skills development levy in terms of the Skills Development Act, 1999 (Act 9 of 1999.) These contributions are utilised to pay benefits and any other expenditure reasonably incurred relating to the application of this Act. 3 Mandate, Vision and Mission

4. Vision The Unemployment Insurance Fund strives to contribute to the alleviation of poverty in South Africa by providing effective short-term unemployment insurance to all workers who qualify for unemployment and related benefits. Mission The Unemployment Insurance Fund sees its mission as: Rendering an effective and accessible service to all stakeholders. Being a sustainable organisation with sufficient reserves. Administering the Fund professionally. 4 Mandate, Vision and Mission

5. In 2008/09, the Fund performed remarkably and this can be supported by the following: Achieved an increase of contributions collection to the total amount of R 10,3 billion representing 12.66% increase in comparison to 2007/08. In 2007/08, R 9,1 billion was collected. Payments made to our beneficiaries totaled R 3,8 billion, a 31.67% increase as compared to 2007/08. In 2007/08 the Fund paid out benefits to the total amount of R 2.9 billion. A benefit budget of R 3,3 billion was exceeded by R 510 million and this was attributable to the economic meltdown. Surplus recorded was R 9,2 billion. This was 34.28% more than the surplus for 2007/08. The surplus recorded in 2007/08 was R 6,8 billion The efficient implementation of the investment strategies and proper controls led to the Fund ‘s investment yielding R 3,4 billion (2008: R 2,1 billion) Total value of assets amounted to R 37 billion as compared to 2007/8 where the assets worth was R 27,8 billion (22,19% increase) This increase in value is attributed to investment strategies that the Fund adopted and increased collections. One of our key indicator was to reduce overpayment (work and draw) by improving recovery of overpayments by 6% as compared to 2007/08. Achieved - R 22,2 million was recovered in 2008/09 from clients as compared to R16.4 million for 2007/08. The systems implemented are maturing with time and improvements are visible 5 2008/9 - Financial Performance

6. SUMMARY OF FINANCIAL ACHIEVEMENTSAS AT 31 MARCH 2009 6

7. Our achievements continued to show in the operations of the Fund where: As at the end of financial year under review, the Fund has registered a total of 1.2 million employers. This is a great milestone in ensuring that vulnerable workers are covered and protected. There is still a lot of work to be done in this area especially in the Taxi industry. We have experienced a slow breakthrough in the Taxi Industry in terms of employer registrations. Moving forward is our concerted effort in addressing this challenge. Our communication campaigns will be intensified including constant engagement with role players in the Taxi Industry. Registered 69 817 new employers on the database. The total of registered employers by end of March 2009 was 1.2 million. A total of 194 966 new employees were added on the database. The total of registered employees on the database by end of March 2009 was 7.6 million. In responding to the needs of our clients, the Fund received claims during the year and approved 610 738 (97 % approval rate) of those claims representing –627 244 clients. We have managed to pay benefits to 627 244 clients to the total amount of R 3.8 billion. Clearly more than 600 000 households were assisted during the hardship of unemployment. 7 2008/9 – Operations Performance

8. SUMMARY OF BENEFIT PAYMENT PER CATEGORY AS AT 31 MARCH 2009 8

9. The Fund embarked on a big Marketing and Advertising drive with the assistance of GCIS and the SABC and held 6 fully branded outdoor broadcasting campaigns in the following provinces: Western Cape (George), Mpumalanga, Limpopo (Lephalale), Gauteng (Garankuwa and Soweto), and Kwazulu Natal. The objective of these outdoor campaigns were to advertise our services at a public open place and serve clients through processing their claims and further educating them about the services offered by the Fund. Communications section constantly engage in other stakeholder relations like advocacy sessions, exhibitions, ministerial imbizos and roadshows through out the year. 9 2008/9 - Stakeholders engagement

10. The Fund values its human capital and strives to continuously develop its staff. In 2008/9, the Fund : In the spirit of human capital development, awarded new bursaries to five staff. Continue to train and develop all staff. Trained officials on more than 150 training initiatives/courses. The Workplace Skills plan was developed and implemented. 10 2008/9 - People Management

11. Strategic goal 1: Participate in social security reform and provide reports As part of the process of the Social Security reforms in the country, the Fund actively participated in the Inter Departmental Task Team Meetings (IDTT) that was formed to design and implement the Comprehensive Social Security in South Africa. The Fund will continue to explore various improvements to benefits that can assist Government in using the Fund to provide much needed poverty relief to unemployed workers. Together with the Funds Actuaries various scenarios will continue to be explored to supplement the decision making in the IDTT The Fund has clear recommendations on the improvement of benefits that will contribute significantly to government’s intention of a Comprehensive Social Security scheme. All these recommendations will require legislative amendments and we are moving ahead, subject to consultation with all stakeholders 11 Strategic goal 1

12. Strategic goal 2 : Build and support schemes to alleviate poverty (job creation and retention) The Fund plan to assist companies in distress (Job creation and retention). Work has already commenced in this area. The Fund is engaging Independent Development Cooperation (IDC) to drive the scheme through the Public Investment Commission (PIC). Training of the unemployed - The Fund is working with Department of Labour (ESDS) on a pilot project to train unemployed beneficiaries. This is piloted in Gauteng South and Gauteng North. 12 Strategic goal 2

13. Strategic goal 3 : Extend claim processing capacity The Fund will be conducting a study on the virtual office concept. The intention is to allow employers in some circumstances to pay for example “maternity benefit” and claim from the UIF. The Fund envisages to prioritize the strengthening of processing centers. In 2007/8 we managed to increase the processing centers to 57. As part of short-term intervention, we have identified at least 14 processing centers that need to be strengthened and capacitated. All other processing centers will focus on the processing of applications – “ happy day scenario/principle” The turn around time on claim applications will improve 13 Strategic goal 3

14. Strategic goal 4 : Improve compliance by the employers The Fund will concentrate on non-complying employers who are defaulting on submission of declarations and contributions. Much attention will be given to the Taxi industry. A research will be conducted to determine the reason of non-compliance and address such with the implementation of new strategy. We will tap on the capacity of Department of Labour (DoL). Payroll auditors will form the basis of enforcing compliance within the broader enforcement strategy of the Department of Labour. Amend legislation to require employers to declare on a monthly basis with annual reconciliations. Penalty will be considered for non-compliant employers 14 Strategic goal 4

15. Strategic goal 5 : Improvements in benefits and coverage The Fund intend to improve the benefits payable to the clients by extending the period from eight to twelve months. Amendment of the UI Act to allow Minister of Labour in conjunction with the Minister of Finance to make changes to the benefit schedules (IRR and credit day calculations) Inclusion of public servants Before any improvements and coverage are extended, these will be subject to positive predictions from actuarial valuation and legislative changes 15 Strategic goal 5

16. Strategic goal 6 : Increase stakeholders awareness and support for the Fund The Fund recognises that it is operating in a very dynamic environment where compliance by the employers is paramount and has to respond appropriately to the demands and expectation of the environment. A comprehensive Communications strategy will form the foundation from which all needs will be addressed. Various methods will be used to inform the public about their rights and obligations with regard to the UIF registrations and benefits 16 Strategic goal 6

17. The Fund has appreciated the tenable successes and acknowledges some of the challenges facing the organisation and we continue in our strides to address these challenges. In this year 2009/2010, we have started to address these challenges. In introducing any benefit improvements, the effect on the financial position will be analysed both in the short and the long term. Created a balance of models to cater for both good and bad economic conditions Actuarial valuations were performed and indicated that the Fund is in a sound financial position as at end of March 2009. However, the economic turmoil facing the world and the country affects the Fund in a negative way because of looming job losses. We have started to see the turnouts of clients in our Labour Centres. We are dealing with these challenges through the implementation of social security plan. 17 Conclusion

18. Thank you