Department of Labour Unemployment Insurance Fund

1
Department of LabourUnemployment Insurance Fund

• Budget 2007/08
• UIF Presentation to Portfolio Committee
• 14 March 2007

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Objective 2007/08 Budget Report

• Index
• Programme purpose Mandate
• Functional structure EE Profile
• Key strategic Priorities
• Measurable objectives
• Recent Achievements
• Progress on Ring Fencing
• Budget Proposal
• MTEF Budget (High level)
• Budget highlights
• Statement of Performance
• Outlook
• End

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Programme PurposeSocial Insurance

• Purpose
• Provide for the administrative and other support
  services to the UIF.
• Measurable objective
• Support and ensure sound administration of the
  UIF in order to ensure efficiency and financial
  sustainability.

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MANDATE

• The Unemployment Insurance Fund was established
  in terms of Section 4(1) of the Unemployment
  Insurance Act, 2001.
• The Fund administers the unemployment insurance
  contributions collected from employers and
  employees to pay benefits and related
  administrative expenses.

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FUNCTIONAL STRUCTURE OF THE UIF
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EMPLOYMENT EQUITY PROFILE OF UIF MANAGEMENT (FEB
2007)
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KEY STRATEGIC PRIORITIES

• Financial
• Improve contribution collection from all
  employers.
• Ensure compliance with legislation. (improve
  compliance by employers)
• Reduction of losses to the Fund.
• Improve financial management and reporting.

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KEY STRATEGIC PRIORITIES

• Stakeholders
• Entrench UIF within the community as safety net
  against unemployment hardships.
• Educate stakeholders about their rights and
  obligations in terms of the Act.
• Build relationships with stakeholders to become
  partners and share responsibility for ongoing
  sustainability of the Fund.

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KEY STRATEGIC PRIORITIES

• People
• Develop a multi-skilled and competent workforce.
• Recruit and retain competent people.
• Develop and implement an efficient deployment and
  capacity building plan.

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KEY STRATEGIC PRIORITIES

• Processes
• Automate the benefit administration processes.
• Improve operational efficiency.
• Enhance Information Communication Technology
  (ICT) systems.

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MEASURABLE OBJECTIVES

• FINANCIAL STRATEGY
• Improve revenue inflows by at least CPIX compared
  to 2006/07.
• Improve submission of declarations by 5 as
  compared to 2006/07.
• Improve by 5 rand value recovery of overpayments
  as compared to 2006/07.
• Attainment of clean audit opinion.

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MEASURABLE OBJECTIVES

• STAKEHOLDER STRATEGY
• Undertake client survey and develop communication
  plan.
• Conduct four advocacy campaigns per province and
  six National campaigns.
• Attend one meeting per sector.

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MEASURABLE OBJECTIVES

• PEOPLE STRATEGY
• Research and develop a work place skills plan.
• Reduce staff turn-over by 5 compared to 2006/07.
  
• Finalise appointment of all critical personnel
  including the senior management team.

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MEASURABLE OBJECTIVES

• PROCESS STRATEGY
• Reduce registry (paper flow) function by 30.
• Finalise 90 of benefit claims within six weeks
  of receipt.
• Obtain 95 system availability and 5 second
  response times from ICT systems.

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RECENT ACHIEVEMENTS 2006/07

• Ufiling Project completed which enables non SARS
  employers declare and pay on line via the web
  launched by the Minister.
• Implementation of electronic document management
  system with implementation of document scanning
  and management facilities.
• Finalised provincial structures for service
  points and decentralised claims processing.

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RECENT ACHIEVEMENTS 2006/07

• The Fund updated operational policies and
  procedures which have been rolled out nationwide
  coupled with training and development for staff.
• Over 1100 frontline staff have been trained on
  customer care during the year. The anticipated
  benefits of the course will translate into
  enhancing the quality of service to our clients.

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CAPACITATING THE WORKFORCE - BUSARIES AWARDED
2007

• Masters in Business Administration 2
• Masters in Business Leadership 1
• Masters in Information Knowledge 1
• M Tech in Public Administration 2
• Honours in Industrial Psychology 3
• LLB 2
• B Com Informatics 1
• B Com Financial Management 1
• B degree in Public Administration 1
• B degree in Accounting Science 1
• BA Communication Science 2

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Studies at State Expense

• 11 Officials studying at State Expense in
  different fields of study ranging from
• Internal Auditing
• Office Management
• Costing
• Public Relations
• Accounting

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RECENT ACHIEVEMENTS 2006/07

• Increased stakeholder awareness and support for
  the Fund through a nationwide public awareness
  campaign in collaboration with SABC.
• These campaigns reached an estimated audience of
  20 million listeners.

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RECENT ACHIEVEMENTS 2006/07

• Decentralised access to services of the Fund by
  increasing the number of sites processing benefit
  applications from 14 to 33 sites nationwide.
• Updating of the employer database has been
  devolved to the provinces ensuring information is
  reliable.

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RECENT ACHIEVEMENTS 2006/07

• Developed a functional audit and risk management
  programme through the appointment of risk
  managers and internal auditors.
• Implemented a comprehensive set of risk
  management strategies and policies for Head
  office and the provinces.

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RECENT ACHIEVEMENTS 2006/07

• Employees covered by the unemployment insurance
  Fund has increased by 2.5 to 6.6m employees
  representing an increase of 182,000 employees.
• The total number of claims was 408,995 of which
  393,392 was approved as at Dec 2006.
• There has been a drop of less than 1 in claims
  which can be attributed to the buoyant economy.

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RECENT ACHIEVEMENTS 2006/07

• The Fund has collected R5,8bn as at December 2006
  which represents an 18 improvement compared to
  same period in the previous financial year.
• The Fund currently has assets of R18,2bn an
  increase of 27 on 2005/06 financial year end.
  R10.4bn of the asset base is a compulsory set
  aside for outstanding liabilities to
  contributors.

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FUNDS UNDER MANAGEMENT

• Funds are managed by PIC. Funds are invested in
  Government bonds, banking institutions and state
  entities. Some of the major cash based
  investments are as follows
• Bonds
• Govt Bonds R8.6bn
• Banks
• Absa R1.5bn
• 1st Rand R1.5bn
• Investec R0.5bn
• Standard R1.5bn
• Landbank R0.3bn
• State Entities
• Eskom R0.05bn

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SECTOR SPREAD OF INVESTMENTS R (bn)
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PROGRESS ON RING-FENCING

• HEAD OFFICE
• Delegations approved and implemented.
• Staff migrated and recruitment in process of
  being completed.
• REGIONAL OFFICES
• Organisation structure and job evaluations
  completed.
• Ring fencing of staff completed.
• Migration and recruitment process commenced.
• CHANGE MANAGEMENT
• Nationwide workshops and staff briefings/informati
  on exchange sessions conducted by senior
  management team.

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PROGRESS ON RING-FENCING

• Financial Management
• Operational policies and procedures approved and
  implemented.
• Financial management systems established.
• Information Communication Technology
• Agreed infrastructure strategy will involve
  continued use of Siyaya (benefit administration
  system) and Computron formerly known as AxsOne
  (financial management system)
• System functionalities decentralised to labour
  centre level on Siyaya and employer database.

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CHALLENGES

• Complete formal transfer of provincial staff and
  filling of vacant posts as per approved structure
  for the ring fenced entity. A recruitment
  campaign has been initiated to fill all vacant
  posts by April 2007.
• The quality of information on the declaration
  database is due to undergo a cleansing exercise
  in order to improve compliance by employers.
• The Fund aims to improve operational efficiency
  by finalising claims within four weeks of receipt
  through the process of electronic document
  management systems and upgrade to the call
  centre.

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BUDGET PROPOSAL

• The 2007/08 budget aims to achieve four strategic
  outputs
• Obtain a clean audit report
• Increase stakeholder awareness of the Fund
• Recruit and retain competent staff
• Enhance quality of service to our clients

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Budget Highlights for 2007/08

• These strategic priorities are addressed as
  follows
• Financial - sustainability and stability
• Growth in estimated financial reserves
  investment
• People - Good governance structure
• Increase in staff costs due to full
  implementation of ring fenced structure
• Stakeholders enhance quality of service to
  clients
• Additional investments in call centre technology,
  employer database and CRM strategy.
• Processes - additional investment in capacity by
• Improving systems and providing additional
  computers

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MTEF BUDGET 2007/08

• High level summary (R millions)
• Year 2007/08 2008/09 2009/10
• Revenue 10,087 10,965 11,914
• Less
• Benefit 3,913 4,477 5,121
• Administration 945 968 1,037
• Reserve 1,405 1,853 1,984
• Surplus 3,824 3,667 3,772
• surplus Actual 2004/05 R2,071m
• surplus Actual 2005/06 R3,868m
• surplus Budget 2006/07 R2,734m

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ECONOMIC CLASSIFICATION OPERATING COSTS R000
CLASSIFICATION 2006/07 2007/08 2008/09 2009/10
COMPENSATION OF EMPLOYEES 276,010 403,985 449,454 476,421
GOODS AND SERVICES 403,146 459,024 479,557 508,093
PROVISIONS 54,832 12,520 13,271 14,067
PAYMENTS FOR CAPITAL/PROJECTS 68,246 70,624 25,601 38,840
TOTAL 802,234 945,153 967,883 1,037,421
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MTEF BUDGET OPERATING COSTS COMPARISON
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Budget Highlights for 2007/08

• Highlight of shifts in Funds when compared to
  2006/07.
• Contributions 06/07 R7,239m
• 07/08 R8,661m
• 19.6 increase based on Actuary estimates Mar
  2006 report.
• Other revenue 06/07 R1,092m
• 07/08 R1,426m
• 30.6 increase due to a corresponding 20
  increase in the invested funds and increase in
  interest rates.

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Budget Highlights for 2007/08

• Highlight of shifts in Funds when compared to
  2006/07.
• Admin costs 06/07 R802m
• 07/08 R945m
• Increase of R143m due to increase in number of
  staff arising from ring fencing of operations.

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Statement of Performance 2005/06

• 2005/06 Budget v. Audited Statements
• surplus up R1,96bn or 103 due to
• Revenue up R615m or 8
• Benefit payments down R198m or 6
• Admin Expenditure down R235m or 29
• Required reserves down R916m or 57

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Statement of Performance

• Performance indicators
• Contribution payout ratio
• 2006/07 2007/8 2008/09 2009/10
• 45.1 48.3 51.6 51.6
• Actual 2003/04 37.5 2004/05 40.8
  2005/0642.7
• Employee costs/contribution ratio
• 2006/07 2007/8 2008/09 2009/10
• 3.8 4.6 4.8 4.8
• Actual 2003/04 4.3 2004/05 3.6 2005/063.7
• Administrative costs/contribution ratio
• 2006/07 2007/8 2008/09 2009/10
• 11.1 11.2 11.0 11.0
• Actual 2003/04 9.4 2004/05 8.8 2005/06 8.0

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OUTLOOK FOR 2007/08

• Prospects for the Fund remain positive due to
• Continuous improvement in finances Reserves
  amount to R16.4bn up 12 compared to year end
  2005/06. Most of the funds are invested in
  government bonds, top SA banks and state entities
  such as ESKOM.
• Continuous improvement of management capacity
  through the ongoing restructuring of the Fund
  through the ring fencing process and recruitment
  drive.
• Improved institutional capacity attributable
  additional investments to enhance operational and
  financial management systems such as Ufiling.

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Department of LabourUnemployment Insurance Fund

• THANK YOU