Thulas Nxesi, Minister of Labour and Employment, wants action against his director general for UIF investment dalliances. 

• Dysfunction and corruption are crippling the UIF, say Cosatu and BUSA.

• The heads of the UIF and the Department of Labour are now on the chopping block.

• A full audit of unlisted investments has been called for.

Both business and organised labour on Wednesday called for the Unemployment Insurance Fund (UIF) to be placed under administration and its investments investigated independently as the fund sinks deeper into dysfunction, and suspicion of corruption grows. 

The UIF is an employer- and employee-funded social security fund collected through a payroll tax on all formal sector workers. While the government does not contribute to the fund, it is administered by the Department of Labour and Employment, with business and labour playing an advisory role. 

But workers, who can draw on the funds when they become unemployed or take maternity leave, are made to wait months for benefits, if these are paid at all, due to UIF systems failure. 

The UIF sits on investments of about R130 billion, managed by the Public Investment Corporation (PIC). In its annual report this week, the PIC noted that the UIF investments had slightly underperformed against the investment benchmark. 

Cosatu, which added its voice to a statement released by Business Unity SA (BUSA) earlier in the day, now wants all UIF employees subjected to lifestyle audits. BUSA had called for the UIF to be put under immediate administration due to `systemic dysfunction`, corruption, and ineptitude.

Several of its UIF`s investments in unlisted entities have gone bad and been tainted by corruption. These include its investments in Daybreak Farms, managed by a former UIF employee, in which it invested R800 million; and Bounty Brands, which lost more than R5 billion. 

The latest scheme under scrutiny is a R5 billion `job creation scheme` in which the fund provided a grant to Thuja Capital Fund to acquire stakes in companies, which would then be pressurised to take on more employees. Thuja Capital Fund is owned by Mthunzi Mdwaba, who at the time was the chair of Productivity SA, another state entity under the Department of Labour and Employment. 

`Get-rich-quick scheme`

Minister of Employment and Labour, Thulas Nxesi, who has asked UIF commissioner Teboho Maruping and Director-General of Employment and Labour Thobile Lamati why they should not be suspended over the transaction, is believed to be in favour of their dismissal. Nxesi has handed a report to President Cyril Ramaphosa, who appoints and removes directors-general, and is awaiting his decision. 

Cosatu has described the project as a `get-rich-quick scheme` and called for decisive action against all involved. 

Apart from the corruption allegations, business and labour are angry at the serious dysfunction of the UIF and the lack of action taken to fix it. BUSA`s Nedlac labour market convenor Jonny Goldberg said three letters to Nxesi and Lamati since last November had not received a reply. 

Thousands of workers are still owed Covid-19 TERS payments and payments under the Workers Affected by Unrest (WABU) scheme put in place after the July riots. 

Cosatu said: 

Workers struggle to submit their claims and receive their payments. There are perennial queues at UIF offices across the country where workers wait in vain for days on end to have their claims processed… the issues range from an IT system that is routinely offline, to understaffed offices, overstretched employees, user-unfriendly and confusing forms and applications systems, as well as delinquent employers who pickpocket workers` contributions and fail to hand them over to the UIF.

Goldberg said that due to the constant failure of the UIF systems, when the Covid-19 pandemic began, business had stepped in to develop a parallel IT system free of charge. But the Department of Labour had rejected the offer in favour of keeping their own, and it had never been used. 

The UIF has failed to produce audited financial statements for the past two years. In a letter from Nxesi to the Speaker of Parliament published on Wednesday, the minister requested an extension to provisions under the Public Finance Management Act (PFMA), which calls for annual financial statements to be tabled by the end of September. 

Nxesi said that the 2021/22 financial statements would be submitted at the end of October, while those for 2022/23 would only be ready by the end of June 2024, as the audit had not yet begun. 

The minister listed two primary reasons for the UIF`s failure. First, he said that the UIF and the companies in which it invested and had differing financial years, which made the audit difficult. 

Second, he said that the Generally Recognised Accounting Practice (GRAP) standards required by the PFMA would have `inevitably resulted in numerous audit findings and a poor audit outcome`.

This was particularly the case in auditing the unlisted entities in which the UIF has invested. His department has prepared a technical document for submission to the Treasury, proposing changes to GRAP in auditing its investments.