The “massive” process of unbundling the Compensation Fund and Unemployment Insurance Fund (UIF) and their modernisation and restructuring will require an increase in expenditure and in the department’s budget, employment and labour minister Thulas Nxesi told MPs this week.
The restructuring of the two funds, based on based on a PwC report published in September last year, envisages upgrading the IT systems, organisational restructuring, employing suitably skilled staff, retraining, improving service delivery, and a change in the work culture.
The proposal calls for the two funds, which are bedevilled by inefficiencies and the source of much frustration for business and customers, to be independent of the department and its bureaucracy.
PwC was commissioned to undertake an overview of the funds and make recommendations in April 2022.
Nxesi was commenting after a briefing by his department’s newly appointed acting director-general, Onke Mjo, to the select committee on trade and industry, economic development, small business development, tourism and employment and labour on the plans.
He said the implementation of the plan would inevitably mean an increase in expenditure and the department’s budget, requiring the services of experts in IT, cybersecurity, chartered accountants, actuaries, and business leaders.
''Of course we will have to reprioritise the budget. We must spend more money to bring in more money. It will be expensive in the beginning but in the long term it will be profitable in having the proper data on who is paying, who is not paying and in improving revenue and service delivery,” Nxesi said.
Mjo briefed MPs on the contents of the PwC report, which notes that the recommended changes require legislative and governance changes for the funds to function as stand-alone entities. Their present dependence on the shared human resources, systems and processes with the department limited their autonomy and revenue generation, it adds.
For example, many employers aren’t registered with the UIF, which is funded by levies paid by employers and employees. Also, there is no data verification with third parties such as Sars, the department of home affairs, the Companies and Intellectual Property Commission and the CCMA.
“The majority of the entities’ processes are currently very manual, old and not agile enough to deal with the funds’ changing circumstances, customer needs and environment,” the PwC report says. The ICT infrastructure of the two funds was inadequate and dependent on the department of employment and labour and the State Information Technology Agency.
The report recommends the automation of processes and the implementation of integrated claims management systems. It also highlighted the lack of skills for the funds to effectively do their jobs.
Nxesi said he anticipated some pushback to the envisaged changes. “Definitely there will be resistance from some quarters for different reasons when we embark on this massive project. For some it is because they are profiting from the chaos, but for the majority of workers it might be as a result of the fear of the unknown because any major change is unsettling. They will need to be assured. We must communicate clearly and frequently,” he said.
Accountability would have to be imposed on those who refused to go along with the changes, he added.
The minister said change management specialists and experts in the various areas of the implementation plan would be required. Strict monitoring of the implementation plan would be necessary with clear milestones.
“The understanding is that this is going to be implemented in several stages, short term, medium term and long term,” he added.
Correction: February 7 2024
The first paragrapsh of this story has been changed to read that the unbundling of the Unemployment Insurance Fund and the Compensation Fund will be a “massive” exercise, and not that the exercise will require “massive” expenditure and funding
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