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Inauguration of the Second Unemployment Insurance Board

by Zopedol — last modified 2007-10-12 13:45

Speech given by The Minister of Labour - Mr MMS Mdladlana, M.P at Inauguration of the Second Unemployment Insurance Board, Pretoria. on 04 November 2005
Chairperson of the Unemployment Insurance Board
Director- General of the Department of Labour
Acting Unemployment Insurance Commissioner
Members of the Board
Officials of the UI Fund.
 
?You can do anything if you have enthusiasm. Enthusiasm is the yeast that makes your hopes rise to the stars. Enthusiasm is the spark in your eye, the swing in your gait, the grip of your hand, the irresistible surge of your will and your energy to execute your ideas. Enthusiasts are fighters, they have fortitude, they have strong qualities. Enthusiasm is at the bottom of all progress. With it there is accomplishment. Without it there are only alibis.?
 
These words from Henry Ford best summarises the past turbulent years for the Unemployment Insurance Fund. The Fund has had mix fortunes since 2001 in terms of its financial performance.
As we inaugurate the second Unemployment Insurance Board and mark the beginning of a new era for the Unemployment Insurance Fund, we have a reason to feel proud of the Fund?s achievements over the past financial year.
 
Central to these achievements is our success with the Financial Management of the Fund over the past couple of months. The Fund has in the last two years undergone tremendous transformation, to the extent that the issues that we were dealing with in 2001 were fundamentally different to those that we dealt with in the 2003/04 financial year.
 
It is important to remember the difficult past as not to repeat the same mistakes. Need I remind you that over and above experiencing financial management capacity problems, the Fund also experienced systematic challenges that led to the Auditor-General concluding that the Fund was technically insolvent and at the time also questioned its continued ability to meet its financial and legislative obligations? In his report to Parliament in 2001 the Auditor-General cautioned then that should those trends continue the Fund?s ability to meet its obligations was becoming increasingly doubtful.  
 
Even though this made me to spend sleepless nights, never once did I despair.
 
Sir Winston Churchill once said ?A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.?
 
This was true to us as we saw an opportunity to turn things around.
 
Of significant interest since that time has been the successful implementation of the Fund?s three- year Turn-around Strategy of which the aim was to ensure that by the end of the 2004/05 financial year, the Fund was to be fully funded and no longer relying on the financial transfers from the State coffers.
 
To this end, I am happy to report that the objective has been fully achieved and the Fund?s actuaries confirmed this in their 2003/04 and in the 2004/05 financial years. In fact the Fund reached an important milestone at the end of last year (2004) when for the first time in its 89- year history became a financially viable entity by exceeding its actuarially mandated reserves of R8.4 billion.
 
This historic moment took place against the backdrop of an organisation that was less than three years ago declared technically insolvent by the Auditor?General. 
 
This remarkable achievement, which was presided over by the former Commissioner, Mr. Shakes Mkhonto and the previous Board, was the result of a number of interventions that amongst others included;
  • The new legislative programme embarked upon since April 2002 which broadened the scope of coverage, widened the definition of income in line with that, as is contained in the Income Tax Act
  • The introduction of new compliance provisions and the introduction of additional measures such as the requirement for employers to make payroll declarations with the Fund.
To date the UIF has achieved key milestones, which among others include the employer/employee database with records of over one million employers (domestic and commercial) and close to 7 million employees in both the domestic and commercial sectors.
 
The Financial Statements reflects that the reserves of the Fund are currently sitting at R10. 6 billion, which is more than the required reserve.  The reserves are invested with the Public Investment Corporation.
 
Before we get carried away with the reserves, let me hasten to add that although we are quite pleased with the figures, we believe that it is still premature to start talking of how to utilise the reserves. We believe  that the Fund still need more time to stabilise before we pass on the reserves to the beneficiaries of the UIF.
 
I also wish to report that the Fund has made a surplus of R2, 071 billion in the 2004/05 financial year. The benefits paid to claimants increased by 18 % whilst contributions collected, increased by 9% in the previous financial year.
 
The Fund will continue to mitigate the economic hardships of the unemployed, albeit temporarily. The UIF paid R2, 5 billion to more than half a million beneficiaries during the 2004/05 financial year. 
 
I am full of hope for the future that lies ahead.
 
The third actuarial valuation of the Fund in terms of the legislation was completed at the end of March 2005 and the Actuary has concluded that the Fund is in a sound financial position on a cash flow basis for the next 10 years.
 
Ladies and Gentlemen: It also gives me great pleasure to announce to you that I have approved that the UIF becomes a Government Agency with delegated powers. This means that the Fund will become an autonomous organisational component in the Public Service but still as a Statutory Body of the Department of Labour. All its activities will be ring-fenced with powers and functions being assigned to the Unemployment Insurance Commissioner, who will then become the Accounting Officer. Under the new dispensation, the Fund will manage and account for its ring-fenced budget.
 
The Minister of Labour will remain responsible for exercising direct oversight over the performance of the UIF Government Agency. This Board will continue to advise me on UIF affairs and I may take corrective action as required under the UI Act.
Although the Commissioner will have increased executive powers to take responsibility for the UIF organisation through delegation of powers, I still retain the power to appoint the Commissioner and the incumbent will have to sign a performance agreement with me.
 
I would also like to re-assure UIF staff members that they will not lose their jobs as a result of this new development. They also remain public servants subject to Public Service prescripts even though the Fund will establish separate corporate services functions in view of the size of its operations.
 
The Department of Labour staff in the provinces who are performing 60% and above of UIF activities will be absorbed into the UIF Government Agency with minimal disruption of service delivery, labour relations or pension impact.
 
One of the most important advantages that will be brought by this move is that we will start to see improved service delivery through the institution of dedicated resources and infrastructure. This, I hope, will also facilitate the effective deployment of SIYAYA across all UIF structures as a service delivery IT engine.
It will also lead to improved cost management through direct management of its budget and currently allocated costs.
 
The process of staff consultation and transition negotiations, which will commence immediately, will be led by UIF managers together with Department of Labour management. Change management and communication will be given the highest priority over the next couple of months.
 
In conclusion, I would like to thank those members who served on the previous Board and extend my appreciation to those constituencies for having made them available for that task. In particular, I recognize the contributions made by Mr. Barry Shipman, the representative from Organised Business, who I understand rendered services to the Board for over three decades.
I wish you well in your future endeavors.
 
To the new Board members, I wish you every success in the tasks that lie ahead and that during your term of membership you will fully participate in taking the Fund to even greater heights.
Enquiries: Name Mokgadi Pela
Telephone 082 808 2168
Email mokgadi.pela@labour.gov.za

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