In a trend that may threaten the long-term future of the Unemployment Insurance Fund (UIF), which provides short-term financial support to workers who lose their jobs or cannot work, it is paying out more than it received in contributions.
While investment income ensured that the fund remained in surplus in the nine months to end-December, the trend — which has never been seen before — has raised enough concerns for its actuaries to compile a report on its long-term sustainability. The size of the surplus has dropped about a fifth in the past two years.
The performance of the fund, one of the major tools the government used to shield workers whose incomes were stopped or reduced by Covid-19 lockdowns, comes as SA’s unemployment crisis shows no sign of abating. While the number of unemployed people is rising, with the unemployment rate at 35.3%, the number of employers paying contributions to the UIF on behalf of their workers is not growing sufficiently.
The UIF now has a surplus of more than R120bn, down from R153bn at the end of March 2020, when SA went into its first and most severe national lockdown, closing virtually all businesses in the country.
While part of the surplus was eaten up by relief measures to deal with the effect of Covid-19 on workers’ incomes, it will still provide the fund with a cushion for some time.
The fund paid out R63.7bn to end-February under the Temporary Employer/Employee Relief Scheme (TERS), with R47.5m being under investigation for possible fraud.
Employment & labour minister Thulas Nxesi said in parliament on Wednesday that about R1bn in irregular payments had been returned to the UIF.
UIF CFO Fezeka Puzi told parliament’s employment & labour committee that in the nine months between April 1 and end-December 2021, about R15.8bn was collected as contributions, while benefit payments amounted to R18bn. However, income from investments and other income of about R5.2bn supplemented the contributions and created a net surplus.
UIF commissioner Teboho Maruping said the fund is in a good and stable position and is able to pay its beneficiaries, but the auditor-general had raised concern that the financial position declined substantially after the payment of the TERS benefit, and because of the trajectory of benefit payments compared with contributions, which for the first time had turned negative in the nine months to end-December. “So we are beginning to eat into the surplus,” he said.
The UIF actuaries have compiled a report — submitted on Tuesday — on the long-term sustainability of the fund, which will be discussed by the UIF executive committee.
Meanwhile, DA MPs were aghast at comments made by Nxesi in his introductory remarks to the committee meeting regarding third-party administrators, which take over the claims of medical practitioners against the Compensation Fund. Medical practitioners have found the process of dealing with the fund too onerous and time-consuming, so they cede their claims to third-party administrators.
The Compensation Fund is aiming to exclude these third-party administrators through its account verification system, which would ensure that payments are only made to the medical practitioners or beneficiaries themselves.
Aghast
Nxesi described these third-party administrators as “parasitic vested interests” who only emerged because of the past inefficiencies of the fund.
“If the fund successfully reforms itself, the reason for the existence of the middleman falls away.” There had been a “feeding frenzy” at the fund, which had been plagued by unverified and inflated claims.
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