By Thapelo Molefe
In a dire warning, the chairperson of the Select Committee on Economic Development and Trade, Sonja Boshoff, has sounded the alarm on the precarious state of the Unemployment Insurance Fund (UIF) and the Compensation Fund (CF).
She said the entities’ poor performance, reckless investments and lack of accountability have brought them to the verge of collapse.
The CF’s audit outcome for 2023/24 financial year was a disclaimer with findings, primarily due to inadequate ICT controls, lack of adequate record management systems, delays in investigating potential fraudulent claims, and a lack of organisational culture promoting integrity, transparency, performance and accountability.
Specifically, the Auditor-General highlighted issues with user access and security controls, verification controls for valid claims and beneficiary banking details.
The UIF was unable to submit its financial statements to the Auditor-General by 31 May in the past two financial years as required by Public Financial Management Act. The UIF has an investment portfolio consisting of listed and unlisted investments, amongst others.
The UIF’s financial statements were submitted for auditing on 31 August and the anticipated sign off date is 30 November.
During a briefing to the committee on Wednesday, the UIF and CF revealed their struggles to recover funds invested in unlisted companies, some of which were facing liquidation or business rescue.
This startling admission has prompted Boshoff to urge Employment and Labour Minister Nomakhosazana Meth to take immediate action to salvage the entities.
“These two entities are vital to the well-being of vulnerable South Africans,” Boshoff emphasised.
“They cannot be allowed to collapse, and we will not permit further deterioration.”
The committee’s concerns about the UIF and CF are far-reaching and multifaceted.
For starters, there is the issue of questionable investments, where millions of public funds have been lost due to investments in unlisted companies .
The committee said the lack of transparency and poor decision-making has led to significant financial losses.
Furthermore, it said performance woes were hindering service delivery and causing instability within the entities.
Another significant concern Boshoff raised was the lack of accountability, stemming from the failure to adhere to the Auditor-General’s recommendations and inadequate monitoring mechanisms. This lack of oversight has allowed issues to persist, unchecked.
Also, systemic failures were exacerbating the problem, with outdated payment and application processing systems frustrating deserving South Africans.
Boshoff said these antiquated systems were in dire need of upgrading to ensure efficient and effective service delivery.
The UIF’s online services including uFiling, UIF USSD services and UIF Mobile App have regularly been offline.
These concerns collectively paint a dire picture, emphasising the need for urgent intervention to address the UIF and CF’s challenges and prevent their collapse.
Meth has pledged to personally oversee the UIF and CF.
Boshoff has welcomed this commitment, but demanded a comprehensive strategy plan with timelines to ensure tangible progress.
“The select committee will hold the minister accountable for her commitments,” Boshoff asserted.
“We cannot afford further rot; change must happen now.”
According to the Budgetary Review and Recommendation Report of the committee, the CF achieved 57% of its 21 annual planned indicators for the 2023/24 financial year, with 12 targets being met.
However, the fund exceeded its budget of R12.6 billion, spending R13.1 billion, representing a 104% expenditure.
Several key targets were missed, including allocating 13% of assets under management to black asset managers, allocating R700 million to SMMEs, and creating 2000 decent jobs through job summit initiatives. Instead, 226 jobs were lost.
Additionally, the fund failed to reduce fruitless and wasteful expenditure by 100%, achieving only a 7.317% reduction, and irregular expenditure was reduced by only 3.19%.
The investigation of 75% of cases recorded on the case register also fell short, with only 49% being finalised.
The CF provides financial compensation to workers injured on the job or suffering from occupational diseases, and the UIF offers financial assistance to unemployed individuals while they seek new employment opportunities.
Both entities play critical roles in South Africa’s social safety net.
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