Presentation to the Portfolio Committee of Labour 19 March 2010 Unemployment Insurance Fund

Presentation to the Portfolio Committee of Labour

19 March 2010

Unemployment Insurance Fund

Presentation to the Portfolio Committee of Labour

19 March 2010

Unemployment Insurance Fund

2

Structure of Presentation

1. Introduction/Objectives of the Presentation

2. Key issues ( Achievements and Challenges)

2.1 Governance

2.2 Financial Performance

2.3 Operational Performance

2.4 Response to current economic meltdown

2.5 Improvements in benefits

3. Strategic objectives 2009/10 to 2012/13

4. Conclusion

3

Governance The year 2008/9 was another success in obtaining an unqualified audit

opinion/report from the Office of the Auditor General. This is the fourth time in succession from 2005/6. Attention is now accorded to improve service delivery to our broader clients.

Compliance to legislations and policies has been the cornerstone of our operations and we continue to improve.

We have worked closely with the Executive Authority and the UIF Board in addressing the strategic intent and challenges. We have also welcome the new Board in this current year and the good work continues.

Despite the economic turmoil, the Fund is able to weather the storm and pay close attention to the service delivery complaints observed.

Actuarial valuations by end of March 2009 indicate that the Fund is in a sound financial position.

4

Financial Performance Despite the economic meltdown, the Fund managed to collect R 10.3

billion compared to R 9.1 billion ( 2007/8)

Total value of assets increased from R 27.8 billion (2007/8) to R 37 billion

Investment revenue increased from R 2.1 billion (2007/8) to R 3.4 billion

Surplus increased from R 6.8 billion (2007/8) to R9.2 billion

5

Summary of financial performance

31 March 2008

(R‘000)

31 March 2009

(R‘000)

Increase/

decrease

Contributions 9,164,632 10, 324.507

Investment income 2,187,789 3, 486.976

Benefits expenditure 2,921,460 3,847.236

Net surplus 6,866,959 9,219.297

Investments 26,864,188 37,058.525

Technical reserves 9,911,180 11,053.000

Accumulated surplus 15,430,562 23,508.039

Total assets 27,823,800 37,058.525

6

Operational Performance

The Fund has 1.2 million employers ( commercial, domestic and taxi) registered on the system. Taxi sector has been slow in registering with the Fund.

Classification of employers

Commercial Domestic Taxi Total

657 859 575 985 5516 1, 239 360

7


The Fund has 7.6 million registered employees ( commercial, domestic and taxi).

Classification of employees

Commercial Domestic Taxi Total

6, 947. 158 637 987 5643 7,590.788

8


The rapid deterioration in global financial markets and an increase in unemployment in South Africa saw a growing demand for unemployment benefits. The Fund paid an amount of R 3.8 billion in benefits against the R 2.9 billion of last year

For the first nine months of 2009/10, the Fund has paid R4.4 billion (unaudited) in benefits.

The Fund received 627,244 claims which is an increase of almost 100 000 more claims than in 2008/2009. A total of 610,736 of these claims were approved during this period reflecting an approval rate of 97%.

The number of claims for the first nine months of 2009/10 is 679 115 received and 660 529 were approved. The approval rate remains 97%

9

Response to economic meltdown

Training of the unemployed The Fund is working with DoL and SETAs on a pilot project to train

unemployed beneficiaries. This pilot project is up and running in Gauteng South and Gauteng North is busy finalising its project plan. R 40 million set aside for this project

Training Layoffs

The Fund contributed R 1.2 billion to the project dealing with the training of the layoffs. A training layoff scheme is aimed at companies that are in distress due to economic situation

10

Improvements in benefits

Internal processes have started to amend the legislation ( Unemployment Insurance Act) to improve the benefits. It is envisaged that the internal process will be finalized before year end and the next financial year would be dedicated for NEDLAC and parliamentary processes.

The intention is to increase the income replacement rate and extend the benefit duration from 238 to 365 days. Actuaries are busy evaluating these options for financial viability.

11

STRATEGIC GOAL 1RE-INTEGRATE UNEMPLOYED WORKERS BACK INTO LABOUR MARKET

Division Objective Indicator Target 09/10 Target 10/11 Target 11/12 Target 12/13 Target 13/14

UIC Design and implement schemes tore-integrate the unemployed into employment.

Number of unemployed persons on the UIF database participating in the scheme

200 UIF beneficiaries in the scheme





BUDGET

(R’000)

Unemployment Training

R40 000 R200 000 R210 200 R219 869 R

Internal Audit Review the adequacy and effectiveness of internal control, risk management and governance process

Execution of the approved annual plan by the Audit Committee






Issue all final report by the end of the year






Issue progress quarterly report to the Audit Committee

BUDGET

R’000

Consulting Internal Audit

R4 000 R3 000 R3 5000 R3 000 R

12

STRATEGIC GOAL 2ASSIST IN JOB CREATION

Division Objective Indicator Target09/10 Target 10/11

Target 11/12

Target 12/13

Target 13/14

UIC Invest in job creation projects

% of total investment invested in Social Responsible Investment

90% Mandated SRI Investments invested in direct SRI

1% increase in SRI Investments

1% Increase in SRI Investments



BUDGET No direct budget

R R R R R

13

STRATEGIC GOAL 3RESTRUCTURE THE UIF BENEFITS AND COVERAGE

Division Objective Indicator Target09/10 Target 10/11 Target 11/12 Target 12/13 Target 13/14

Support Services

Amend Legislation

UI Amendment Bill

Finalize UI Amendment Bill

Bill tabled in Parliament at the end of second quarter

BUDGET

R’000

No direct budget

No direct budget

R R R R R

Improve benefits and coverage

Increase benefits and cover excluded workers

Finalize research

Increase Income Replacement Ratio

Coverage extended to public service and informal sector workers.

Extend benefits days to 365 days

BUDGET Projects Projects R1 000 R2 300 R0 R0 R0

14

STRATEGIC GOAL 3RESTRUCTURE THE UIF BENEFITS AND COVERAGE


Support Services

Improve corporate governance

Revised charters/terms of reference for Board and Committees

Revise current charters/terms of reference and implement

Monitor and evaluate implementation

Monitor and evaluate implementation

Develop and implement facilities management program

Finalize facilities management projects and upgrades

Finalize upgrade of head office

Finalize upgrade of Midrand Building

Maintain buildings

Implement maintenance program






R R R R R

15

STRATEGIC GOAL 4COMBAT THE SCOURGE OF FRAUD AND CORRUPTION


Risk management

Revise and implement fraud prevention strategy

Conduct risk assessment

Comprehensive fraud risk assessment conducted

Reduce fraud opportunities

Implementation and monitoring of management actions plans

Reduce fraud opportunities risks by at least 15%



Improve the detection of fraud

Implementation of Data analysis system

Data analysis on declarations

Data analysis on declarations and contribution

Data analysis on declarations, contribution and payments

Data analysis on industry

BUDGET Projects R1 000 R1 000 R1 051 R1 099 R

% of cases finalized

80% of cases received

82% of cases received/detected are finalized

85%of cases received/detected are finalized



Revise and implement Risk Management Strategy

Implementation of the risk strategy

Strategic risk assessment conducted and response plan implemented

16

STRATEGIC GOAL 5IMPROVE CAPACITY AND EFFICACY OF THE FUND


HRM Close skills gap

% Workplace Skills Plan implemented

75% of Workplace Skills Plan

80% 80% 80% Close skills gap

Maintenance of the establishment.

%Vacancy rate

11% vacancy rate

6% vacancy rate

5% vacancy rate

3% vacancy rate

Maintenance of the establishment

Design organizational Structures.

Approved Organizational Structure

Finalize and implement provincial structures

Finalize and implement head office structure

Implement Performance Management System.

% Compliance to performance management policy

95% Compliance

96% Compliance

96% Compliance

96% Compliance

Implement Performance Management System.


R R R R R

17

STRATEGIC GOAL 5IMPROVE CAPACITY AND EFFICACY OF THE FUND


Promote Sound Labour Relations.

% of Grievances addressed within 30 days of receipt

80% 90% 95% 95% 95%

% of Disciplinary cases addressed within 60 days of receipt

80% 80% 80% 80% 80%

CIO Build Internal ICT capacity.

ICT structure in place and implemented.

Create ICT structure and obtain approval.

Implement approved ICT structure

Understudy PPP resources.

Build Internal ICT capacity

ICT structure in place and implemented.

Manage the PPP contract

Enterprise Resources Planning (F1) implemented.

Implementation of the Financial system by end of March 2010.

Stabilization of the Financial System

Enhancement of the Financial system

Manage the PPP contract

Enterprise Resources Planning (F1) implemented.


R R R R R

18

STRATEGIC GOAL 6IMPROVE SERVICE DELIVERY


Operations Improve compliance on declarations.

% of claims finalized within 5 weeks

70% finalized within five weeks





BUDGET Projects R0.5 R1 500 R2 000 R2 500 R

Data cleansing

Finalize database analysis

Finalize analysis by end of March 2010. SAPO validate all addresses

Address short-comings.

Address short-comings.

Data cleansing

Finalize database analysis

Data cleansing


Validate addresses

Validate all employer addresses

Validate all new employer addresses

Validate all new employer addresses

Validate addresses

Validate all employer addresses

BUDGET Project Data Cleansing

19



Data management

% Increase on usage of the u-Filing system

20% Increase in employers using u-Filing


Data management

% Increase on usage of the u-Filing system


BUDGET Communications Budget

R R R R R R

Adobe Air implemented

Pilot with at least 1000 employers

Extend project to 20% manual declarers

Increase to cover at least 50% of employers declaring manually

Increase to cover at least 60% of employers declaring manually

Adobe Air implemented

BUDGET Call Centre Project

R R R R R R

20



Decentralize claims processing functions

Number of processing centres.

A total of 71 processing centres


Decentralize claims processing functions

Number of processing centres.


BUDGET Projects R0.5 R3 000 R 3 500 R3 700 R

Improve document accessibility and document management.

% of registrations and claims documents scanned.

50% of registration, declarations, claims and related documents scanned

Finalize the backlog

90% of registration and declarations documents scanned

90% of registration and declaration documents scanned

Improve document accessibility and document management.

BUDGET Projects R2 700 R2 900 R1 000 R R

21



% of registration declaration, declaration and claim documents

90% 90% 90% 90%


Increase number of registered employers

% Increase in number of registered employers

10% of Taxi sector employers increased as compared to previous year

30% increase in Taxi registrations as compared to previous year

50% increase in Taxi registrations as compared to previous year

60% as compared to previous year

70% as compared to previous year


R R R R R

UIC Extend claims processing capacity to employers

Number of employers participating in the scheme

10 employers to participate in proof of concepts.

20 employers participating

1000 employers participating.



BUDGET Call centre Projects

R10 000 R10 000 R1 000 R2 000 R

22

STRATEGIC GOAL 7IMPROVE REVENUE INFLOWS


Finance Increase revenue from UIF employers

% Increase of revenue from UIF employers

CPI% Increase as compared to previous year.

CPI% Increase as compared to previous year




BUDGET Project debt Collection and SAP

R R R R R

Increase rand value of overpayment recoveries.

% Increase of overpayment recovery.

Collect 15% of outstanding balance of overpayments.

Collect 15% of outstanding balance of overpayments




BUDGET Project debt Collection and SAP

R15 000 R15 000 R7 000 R5 000 R

23

STRATEGIC GOAL 8IMPROVE CUSTOMER AWARENESS AND SATISFACTION


Communication

Develop communication plan

Communication plan is in place

End of quarter one

BUDGET Advertising R R R R R

Advertise and market services of the Fund

Potential audience reached

5 million 15 million 20 million 21 million 22 million


Improve client awareness and satisfaction

Client awareness and satisfaction survey

Survey finalized by end of March 2010


% improvement on awareness and satisfaction

10% improvement from last survey





24

EMPLOYEE COSTS

NO OF POSTS [JUNE 2009 PERSAL]

OFFICE FILLED VACANT TOTAL

New 100% UII 100% Splits Vacant Posts Filled + Vacant

UIF HQ 421 0 19 0 19 440

DOL HQ 114 0 0 68 68 182

DOL Provinces

4243 363 44 663 1070 5313

TOTAL 4778 363 63 731 1157 5935

25

EMPLOYEE COST

Expenditure Expenditure Medium term Expenditure Estimate

Item Original Budget Revised Budget

R’ Million 2009/10 2009/10 2010/11 2011/12 2012/13

Salaries and Wages

Employer Contributions

544

134

479

119

553

164

586

174

619

184

TOTAL 678 598 717 760 803

26

INCOME AND EXPENDITURE ESTIMATES BY STANDARD ITEMS



R’ million 2009/10 2009/10 2010/11 2011/12 2012/2013

Income

Reserves

Transfer payments

Unemployment Schemes

Personnel costs

Administration costs

Decentralization G & S

Capital Assets

Consulting services

Projects

Roll -overs

-13,235

1,259

3,817

40

678

604

10

13

79

0

-

-13,381

1,360

5,619

1,240

598

632

10

30

40

29

-

-13,329

875

6,100

200

717

690

11

31

47

52

-

-14,449

1,008

6,954

210

760

725

11

12

44

32

-

-15,636

1,229

7,928

220

803

758

12

12

42

30

-

Surplus -6,737 -3,823 -4,6060 -4,693 -4,602

27

REVENUE

INCOME ESTIMATES

Income Income Medium term Income estimate


R’ million 2009/10 2009/10 2010/11 2011/12 2012/13

Contributions -10,410 -10,410 -9,768 -10,256 -10,769

28

OTHER INCOME ESTIMATES

Income Income Medium term Income Estimate

Item Original Budget

Revised Budget

R’ million 2009/10 2009/10 2010/11 2011/12 2012/2013

Rent received

Penalties Received - SARS

Interest income from banks

Interest from SARS debtors

2

53

34

30

2

60

34

47

2

60

34

48

2

60

35

48

2

60

35

49

TOTAL 119 142 144 145 147

29

INVESTMENT INCOME

Income Income Medium term Income Estimate

Item Original Budget

Revised Budget

R’ million 2009/10 2009/2010 2010/11 2011/12 2012/2013

Interest from investments

2,706 2,829 3,417 4,048 4,720

30

RESERVES

CHANGE IN OUTSTANDING CLAIMS RESERVES

Medium term Income Estimate

Item Original budget

Revised budget

R’ Million 2009/10 2009/10 2010/11 2011/12 2012/13

Change in Unearned Contribution Reserved

Change in outstanding claims reserve

964

295

1,041

319

670

205

771

236

941

288

TOTAL 1,259 1,360 875 1,008 1,229

31

BENEFIT EXPENDITURE

Expenditure Expenditure Medium term Expenditure estimate


R’ Million 2009/10 2009/10 2010/11 2011/12 2012/13

Unemployment

Illness

Maternity

Adoption

Dependants

2,678

242

563

1

333

3,943

356

828

1

490

4,281

387

899

2

532

4,880

441

1025

2

607

5,563

503

1168

2

691

Benefits Payments 3,817 5,619 6,100 6,954 7,928

32

OTHER EXPENDITUREEXPENDITURE ESTIMATES BY STANDARD ITEMS



R’ Million 2009/10 2009/10 2010/11 2011/12 2012/13

Personnel

Administrative

Decentralization: Good & Services

Capital assets

Consultant Services

Projects

678

603

10

13

79

598

632

10

30

40

29

717

690

11

31

47

52

760

725

11

12

44

32

802

758

12

13

42

30

Rollovers - - - - -

TOTAL 1,383 1,339 1,548 1,584 1,657

33

Conclusion The Fund has appreciated the tenable successes and acknowledged some

of the challenges facing the organisation and we continue in our strides to address these challenges.

The current economic recession pose a service delivery challenge to the Fund in terms of claims turnaround time. We are putting capacity to address the demand. Created a balance of models to cater for both good and bad economic conditions.

The Fund has enough reserves to fight the current storm of high retrenchments.

Documents

Presentation to the Portfolio Committee of Labour 19 March 2010 Unemployment Insurance Fund