Department of LabourDepartment of LabourUnemployment Insurance Unemployment Insurance

FundFundBudget 2006/07Budget 2006/07

UIF Presentation to Portfolio CommitteeUIF Presentation to Portfolio Committee13 March 200613 March 2006

22

Objective: 2006/07 Budget ReportObjective: 2006/07 Budget Report

ContentContent Programme purpose, Mandate & Key objectivesProgramme purpose, Mandate & Key objectives Achievements 2004/5Achievements 2004/5 Budget ProposalBudget Proposal Strategic overviewStrategic overview Budget processBudget process Budget Methodology Budget Methodology Key Expenditure projects (UIF Priorities)Key Expenditure projects (UIF Priorities) MTEF Budget (High level)MTEF Budget (High level) Budget HighlightsBudget Highlights Financial performance indicatorsFinancial performance indicators EndEnd

33

Programme Purpose:Programme Purpose:Programme 5: Social InsuranceProgramme 5: Social Insurance

Purpose: Provide for the administrative and Purpose: Provide for the administrative and other support services to the UIF.other support services to the UIF.

Measurable objective: Support and ensure Measurable objective: Support and ensure sound administration of the UIF in order to sound administration of the UIF in order to ensure efficiency and financial sustainability.ensure efficiency and financial sustainability.

44

MANDATEMANDATE

The Unemployment Insurance Fund was The Unemployment Insurance Fund was established in terms of Section 4(1) of the established in terms of Section 4(1) of the Unemployment Insurance Act, 2001.Unemployment Insurance Act, 2001.

The Fund administers the unemployment The Fund administers the unemployment insurance contributions collected from insurance contributions collected from employers and employees to pay benefits and employers and employees to pay benefits and related administrative expenses.related administrative expenses.

55

KEY OBJECTIVES OF THE FUNDKEY OBJECTIVES OF THE FUND

OBJECTIVES:OBJECTIVES: Broaden coverage of BeneficiariesBroaden coverage of Beneficiaries Improve Service deliveryImprove Service delivery Strengthen Compliance and EnforcementStrengthen Compliance and Enforcement Sustain an affordable benefit regimeSustain an affordable benefit regime Resolve legislative and administrative challenges. Resolve legislative and administrative challenges.

66

Achievements – 2004/05Achievements – 2004/05

Improving the Coverage of the Social Security NetImproving the Coverage of the Social Security Net Number of employees covered by the insurance fund increased by Number of employees covered by the insurance fund increased by

9% an increase of 742,780 employees. From 6,231 930 in 9% an increase of 742,780 employees. From 6,231 930 in 2003/2004 to 6,974,710.2003/2004 to 6,974,710.

The Fund received R6,152 billion in revenue and paid out R2,475 The Fund received R6,152 billion in revenue and paid out R2,475 billion in benefit payments up 9% and 18% respectively on billion in benefit payments up 9% and 18% respectively on 2003/04.2003/04.

Sustaining an affordable Benefit RegimeSustaining an affordable Benefit Regime Investments with PIC increased by 81%Investments with PIC increased by 81% Investments with PIC valued at R9, 759 billion compared to prior Investments with PIC valued at R9, 759 billion compared to prior

year value of R5, 389 billion.year value of R5, 389 billion.

77

Achievements – 2004/05 continuedAchievements – 2004/05 continued

Improving service deliveryImproving service delivery Over half a million beneficiary claims paid – up Over half a million beneficiary claims paid – up

13%13%

2,475, 504563Total

20%217,8469%25Dependents

9%289,53414%72Maternity/Adoption

24%135,77530%26Illness

19%1,832,34912%440Unemployment

% up on year

Amount (R)000

% up year

Claims‘000Benefit type

2,475, 504563Total

20%217,8469%25Dependents

9%289,53414%72Maternity/Adoption

24%135,77530%26Illness

19%1,832,34912%440Unemployment

% up on year

Amount (R)000

% up year

Claims‘000Benefit type

88

Achievements – 2004/05 continuedAchievements – 2004/05 continued

Improving compliance by employersImproving compliance by employers

2004/05 2003/04Commercial Registrations

Employers 474,514 427,938Employees 6,475,545 5,742,942

- Up 11% by employers.

Domestic RegistrationsEmployers 628,390 596,368Employees 499,165 488,988

- Up 6% by employers.

99

Achievements – 2004/05 continuedAchievements – 2004/05 continued

Resolving Administrative challengesResolving Administrative challenges Completed the recruitment of key personnel:Completed the recruitment of key personnel:

Chief Financial Officer.Chief Financial Officer. Four Executive Managers.Four Executive Managers.

Update:Update:

Two additional Executive Managers appointed for Two additional Executive Managers appointed for Risk Management and Revenue Collection in the Risk Management and Revenue Collection in the current year.current year.

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Improving Institutional Improving Institutional Infrastructure and CapacityInfrastructure and Capacity

Key projects finalised are;Key projects finalised are; Improved operational system (Siyaya – benefit Improved operational system (Siyaya – benefit

administration system) finalised and rolled out for administration system) finalised and rolled out for national pilot in April 2005.national pilot in April 2005.

Integrated Financial Information system (Axsone) Integrated Financial Information system (Axsone) finalised and implemented in April 2005/06.finalised and implemented in April 2005/06.

Independent review of the corporate form of the UI Independent review of the corporate form of the UI Fund completed and approved by Minister for Fund completed and approved by Minister for implementation 1implementation 1stst of April 2006. of April 2006.

1111

Improving Accountability: Improving Accountability: Improved Audit Report for 2004/05Improved Audit Report for 2004/05

The Auditor General’s qualified Report is a positive The Auditor General’s qualified Report is a positive departure from the previous three years of disclaimer.departure from the previous three years of disclaimer.

Substantially reduced number of qualifications and Substantially reduced number of qualifications and matters of emphasis reflects improved systems of matters of emphasis reflects improved systems of internal control. internal control. Number of qualifications down (75%) to 2 from 8 and Number of qualifications down (75%) to 2 from 8 and

matters of non compliance down (68%) to 5 from 16 when matters of non compliance down (68%) to 5 from 16 when compared to prior year.compared to prior year.

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Improving AccountabilityImproving Accountability

Auditor General’s report when compared to previous Auditor General’s report when compared to previous years indicate substantial improvements in areas of years indicate substantial improvements in areas of management relating to:management relating to: Internal control environmentInternal control environment Revenue ManagementRevenue Management Accounting processesAccounting processes Services rendered by the Department of LabourServices rendered by the Department of Labour Fixed AssetsFixed Assets General computer controlsGeneral computer controls

1313

Financial Highlights for 2004/05Financial Highlights for 2004/05

50%up6,55610,461Total Assets

50%up6,37410,197Reserves

81%up5,3899,759Investments

10%up3,4773,824Net Income before reserving

2%up524532Other Expenditure

18%up2,0942,475Benefit Expenditure

900%up110Other Revenue

49%up448668Investments income

9%up5,6466,152Contributions income

2003/042004/05 Percentage change

R Million R Million

50%up6,55610,461Total Assets

50%up6,37410,197Reserves

81%up5,3899,759Investments

10%up3,4773,824Net Income before reserving

2%up524532Other Expenditure

18%up2,0942,475Benefit Expenditure

900%up110Other Revenue

49%up448668Investments income

9%up5,6466,152Contributions income

2003/042004/05 Percentage change

R Million R Million

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Update on achievementsUpdate on achievements

Improving Service delivery : Improving Service delivery : Operational system Siyaya signed off.Operational system Siyaya signed off. All new claimants paid via EFT since Jan 2006All new claimants paid via EFT since Jan 2006 Call centre facilities installed.Call centre facilities installed.

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Update on achievements Update on achievements continuedcontinued

Sustaining an affordable benefit regimeSustaining an affordable benefit regime The Funds investments at 31 January 2006 is The Funds investments at 31 January 2006 is

valued at R13.8bn an increase of 41.7% when valued at R13.8bn an increase of 41.7% when compared to year end March 2005.compared to year end March 2005.

Resolving administrative challengesResolving administrative challenges Service partnerships are being forged with other Service partnerships are being forged with other

Agencies such as SARS on Ufiling project.Agencies such as SARS on Ufiling project.

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Budget ProposalBudget Proposal

Align planning, budgeting and service Align planning, budgeting and service prioritiespriorities

Address capacity challengesAddress capacity challenges Inform stakeholders of the UIF’s strategy and Inform stakeholders of the UIF’s strategy and

budget plans.budget plans.

1717

Budget ProcessBudget Process

Budget TimelinesBudget Timelines Submission to DGSubmission to DG -- 23 Sept 200523 Sept 2005 Approval by MinisterApproval by Minister -- 30 Sept 200530 Sept 2005

Alignment to national prioritiesAlignment to national priorities Income supportIncome support Capacity buildingCapacity building

Alignment to DoL prioritiesAlignment to DoL priorities KRA6:KRA6: Strengthening social protectionStrengthening social protection KRA10: Strengthening institutional capacityKRA10: Strengthening institutional capacity

1818

Strategic OverviewStrategic Overview

Budget takes account of the followingBudget takes account of the following Legislative mandate – UI ActsLegislative mandate – UI Acts Vision & MandateVision & Mandate UIF prioritiesUIF priorities

Safety net for the unemployedSafety net for the unemployed Improve compliance with legislationImprove compliance with legislation Improve institutional capacityImprove institutional capacity

1919

Budget Methodology Budget Methodology

UIF PrioritiesUIF Priorities Additional investment in capacityAdditional investment in capacity

Projects/initiativesProjects/initiatives Financial stabilityFinancial stability

Growth in reserves & investmentGrowth in reserves & investment Good governance structureGood governance structure

AgencificationAgencification Performance managementPerformance management

Budget addresses KRAs and PIsBudget addresses KRAs and PIs

2020

Budget Methodology - continuedBudget Methodology - continued

Key factorsKey factors in budget formulation; in budget formulation; Costs: employees, services, projects and Costs: employees, services, projects and

acquisitionsacquisitions InvestmentsInvestments RevenueRevenue Government prioritiesGovernment priorities Economic indicatorsEconomic indicators

Contributions & benefit paymentsContributions & benefit payments

2121

Budget Methodology - continuedBudget Methodology - continued

Key projects for the year addresses the following Key projects for the year addresses the following challenges:challenges: Compliance of employersCompliance of employers – database, targeted – database, targeted

communicationcommunication Completeness of revenueCompleteness of revenue – invoicing – invoicing Auditor General concernsAuditor General concerns on control environment on control environment Service delivery challengesService delivery challenges (IT Systems) (IT Systems)

Siyaya, axsone, databaseSiyaya, axsone, database Institutional reformInstitutional reform – agencification – agencification Capacity buildingCapacity building – in-house skills i.e. – in-house skills i.e.

Investment & cash management, control systemsInvestment & cash management, control systems

2222

MTEF BUDGET 2006/07MTEF BUDGET 2006/07

High level summary (R millions)High level summary (R millions)Year:Year: 2006/072006/07 2007/082007/08 2008/092008/09RevenueRevenue 8,263 8,263 9,0309,030 9,8649,864ExpendExpend 4,186 4,186 4,7384,738 5,3355,335ReserveReserve (1,410)(1,410) (1,559)(1,559) (1,800)(1,800)SurplusSurplus 2,666 2,666 2,7332,733 2,7292,729

*surplus – Actual 2004/05: *surplus – Actual 2004/05: R2,071mR2,071m*surplus – Budget 2005/06: *surplus – Budget 2005/06: R1,904mR1,904m

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Chapter 6: Budget HighlightsChapter 6: Budget Highlights

Highlight of shifts in Funds when compared to Highlight of shifts in Funds when compared to 2005/06.2005/06. Contributions:Contributions: 05/06 R6,640m05/06 R6,640m

06/0706/07 R7,239m R7,239m

9% increase based on Actuary estimates Mar 2005 report.9% increase based on Actuary estimates Mar 2005 report.

Other revenueOther revenue:: 05/06 R 804m 05/06 R 804m

06/07 R1,024m06/07 R1,024m27% increase due to a corresponding 29% increase in the investment 27% increase due to a corresponding 29% increase in the investment base.base.

2424

Budget HighlightsBudget Highlights

Highlight of shifts in Funds when compared to Highlight of shifts in Funds when compared to 2005/06.2005/06. Admin costs:Admin costs: 05/06 R815m05/06 R815m

06/0706/07 R802m R802m

Decrease of R13m due to anticipated efficiencies.Decrease of R13m due to anticipated efficiencies.

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Chapter 6: Budget Review - Chapter 6: Budget Review - SUMMARYSUMMARY

2006/07 Budget Improvements2006/07 Budget Improvements Anticipated net improvement = R762m or 40%Anticipated net improvement = R762m or 40%

Based on the followingBased on the following Revenue Revenue up up R818m or 11%R818m or 11% Benefit paymentsBenefit payments up up R252m or 8%R252m or 8% Operating costs*Operating costs* down down R 12m or 1.4%R 12m or 1.4% Reserves requiredReserves required downdown R184m or 12% R184m or 12%

* includes R23m or 60% increase in * includes R23m or 60% increase in projects/initiativesprojects/initiatives

2626

Chapter 8: Statement of Chapter 8: Statement of PerformancePerformance

2004/05 Budget v. Audited Statements2004/05 Budget v. Audited Statements****** surplus up ****** surplus up R1,360mR1,360m or 191% due to: or 191% due to: Revenue Revenue up up R795m orR795m or 13%13% Benefit paymentsBenefit payments down down R172m or 6%R172m or 6% Admin Expenditure downAdmin Expenditure down R145m orR145m or 21%21% Required reserves downRequired reserves down R248m orR248m or 12%12%

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Chapter 8: Statement of Chapter 8: Statement of Performance - continuedPerformance - continued

Performance indicatorsPerformance indicators Contribution payout ratioContribution payout ratio2005/062005/06 2006/072006/07 2007/82007/8 2008/092008/09 47.2%47.2% 46.7% 46.7% 49.9% 49.9% 53.4% 53.4%Actual 2003/04: 37.5%Actual 2003/04: 37.5% 2004/05: 40.8%2004/05: 40.8% Employee costs/contribution ratioEmployee costs/contribution ratio2005/062005/06 2006/072006/07 2007/82007/8 2008/092008/09 4.3%4.3% 3.3% 3.3% 3.3% 3.3% 3.3% 3.3%Actual 2003/04: 4.3%Actual 2003/04: 4.3% 2004/05: 3.6%2004/05: 3.6% Administrative costs/contribution ratioAdministrative costs/contribution ratio2005/062005/06 2006/072006/07 2007/82007/8 2008/092008/09 12.2%12.2% 11.1% 11.1% 11.2% 11.2% 11.0%11.0%Actual 2003/04: 9.4%Actual 2003/04: 9.4% 2004/05: 8.8%2004/05: 8.8%

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THANK YOUTHANK YOU