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
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
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
Sir Winston Churchill once said ?A pessimist sees the difficulty
in every opportunity; an optimist sees the opportunity in every
This was true to us as we saw an opportunity to turn things
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
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
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
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.