Department of LabourUnemployment Insurance Fund

Budget 2007/08

UIF Presentation to Portfolio Committee

14 March 2007

2

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 Purpose:Social 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

DG: Labour

DDG: LP + LMP

Office of UIC

Financial Management

Human Resources

Operations

Risk Management

Information Management

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EMPLOYMENT EQUITY PROFILE OF UIF MANAGEMENT (FEB 2007)

0 .0 0 %

5 .0 0 %

1 0 .0 0 %

1 5 .0 0 %

2 0 .0 0 %

2 5 .0 0 %

3 0 .0 0 %

3 5 .0 0 %

4 0 .0 0 %

MA

LE

FE

MA

LE

MA

LE

FE

MA

LE

MA

LE

FE

MA

LE

MA

LE

FE

MA

LE

A F R IC A N A S IA N C O L O U R E D W H IT E

T A R G E T

A C T U A L

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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)

1 0 . 5

6 . 8 8

0 . 4 0 . 4 20

5

1 0

1 5

2 0

B o n d s B a n k s S t a t eE n t i t i e s

E q u i t i e s

F u n d s

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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/information

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 2009/10Revenue 10,087 10,965 11,914Less:Benefit 3,913 4,477 5,121Administration 945 968 1,037Reserve 1,405 1,853 1,984Surplus 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 – R’000

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

R 8 0 2 , 2 3 4 , 3 3 4

R 9 4 5 , 1 5 4 , 3 4 0R 9 6 7 , 8 8 2 , 8 3 3

R 1 , 0 3 7 , 4 2 0 , 5 6 3

R 0

R 2 0 0 , 0 0 0 , 0 0 0

R 4 0 0 , 0 0 0 , 0 0 0

R 6 0 0 , 0 0 0 , 0 0 0

R 8 0 0 , 0 0 0 , 0 0 0

R 1 , 0 0 0 , 0 0 0 , 0 0 0

R 1 , 2 0 0 , 0 0 0 , 0 0 0

2 0 0 6 / 0 7 2 0 0 7 / 0 8 2 0 0 8 / 0 9 ' 2 0 0 9 / 1 0

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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 R8,661m19.6% increase based on Actuary estimates Mar 2006 report.

Other revenue: 06/07 R1,092m

07/08 R1,426m30.6% 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 R945mIncrease 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 ratio2006/07 2007/8 2008/09 2009/10 45.1% 48.3% 51.6% 51.6%Actual 2003/04: 37.5% 2004/05: 40.8% 2005/06:42.7% Employee costs/contribution ratio2006/07 2007/8 2008/09 2009/10 3.8% 4.6% 4.8% 4.8%Actual 2003/04: 4.3% 2004/05: 3.6% 2005/06:3.7% Administrative costs/contribution ratio2006/07 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