UNEMPLOYMENT INSURANCE FUND(UIF) Presentation … · UNEMPLOYMENT INSURANCE FUND(UIF) Presentation...
Transcript of UNEMPLOYMENT INSURANCE FUND(UIF) Presentation … · UNEMPLOYMENT INSURANCE FUND(UIF) Presentation...
UNEMPLOYMENT INSURANCE FUND(UIF) Presentation
To
Commission of Inquiry Into Higher Education and Training
On
Post School Education and Training Funding
By UIF Commissioner Teboho Maruping
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FOCUS AREA
Financial Position
Contraints to the use of the funds
2
1
4
Scope for using the proceeds / surplus in the UIF
to fund PSET
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3
6
Legislative framework
Background of the Fund
Amendment Bill
7 Additional Explanatory notes
LEGISLATIVE FRAMEWORK
The Unemployment Insurance Fund (UIF):
Established i.t.o Section 4(1) of the UI Act, 2001
(Act 63 of 2001), as amended.
The Act empowers the UIF to register all employers and employees in South Africa. 4
UI Bill approved 2017
Empowers SARS Commissioner to collect monthly contributions from both employers and workers
UNEMPLOYMENT INSURANCE ACT
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Purpose
To establish UIF to which employers and employees contribute; and from which employees who become unemployedor their beneficiaries, as the case may be , are entitled to benefits and in so doing to alleviate the harmful economicand social effects of unemployment
Application of the Act
The Fund must be used for the,
1. Payment of benefit in terms of this Act
2. Reimbursement of excess contributions to employers
3. Payment of -
i. remuneration & allowances to members of the UI Board and its committees and
ii. any other expenditure reasonably incurred and relating to the application of this ACT
UI Contributions Act No 4 of 2002
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The purpose of this ACT is to provide for :
1. The paymentof contributionsfor the benefitof the UIF and
2.Proceduresfor thecollection ofsuchcontributions
Purpose of Act
This Act must be administered by the Commissioner
The Commissioner may delegate any power or assign any duty which relates to the collection of :
contributionspayable to the UICommissioner interms of section 9
any information tobe submitted byemployers in termsof this ACT, UIC
Administration of the ACT
This Act applies to all employers & employees; other than-
1. an employee & his/her employer where such employeeis employed by that employer for less than 24 hours amonth
2. an employee and his /her employer where the employee receives remuneration under a learnership agreement registered in terms of the Skills Development Act, 1998
3. employers and employees in the National & provincial spheres of government
4. an employee and his or her employer where an employee has entered the RSA for purpose of carrying out a contract of service, apprenticeship or learnership within RSA, if upon termination thereof the employer is required by law to repatriate that person or if that person is so required to leave the Republic
Application of the ACT
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1. Outcome 4 : Decent employment through an inclusive
economic growth
2. Outcome 12 : An efficient , effective & development
oriented public service and an empowered
and inclusive citizenship
3. Outcome 13: An inclusive & responsive social protection
system
Government
Outcomes:
1. DOL strategic objective 1, Outcome 4Contribute to decent employment creation
2. DOL strategic objective 5, Outcome 13)Strengthening social protection
3. DOL strategic objective 8, Outcome 12Strengthening institutional capacity of the Department
1. Outcome 12Improve financialmanagement
2. Outcome 13Improve service delivery
3. Outcome 13:Improve compliance
4. Outcome 4:Fund poverty alleviationscheme
Priorities of the Fund
Increase contributions collected by at least a rate equal to the prevailing Consumer Price Index
Increase the rate of processing claims in order topay within the targeted service levels andturnaround times
Contribute in the various schemes designed to
alleviate the harmful effects of unemployment
which includes investing mandated funds in
Social Responsibility Investments
Maintain effective systems of internalcontrol as required by the Public FinanceManagement Act
DOL UIF
Service Delivery Outcomes & Strategic Goals
VISION, MISSION AND VALUES
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ONE VISION
Transparency
Open to all stakeholders
Mutual respect
To all colleagues& stakeholders
Client-centres services
by Providing excellent & world class
service to allIntegrity
Communicate openly and
honestly with relationship
based on trust
Accountability
Own up to our responsibilities in relations to
our behaviours & actions
Team Work
Involve eachother, worktogether, seekideas and sharesolutions
• The UIF strives to contributes tothe alleviation of poverty inSouth Africa by providingeffective short termunemployment insurance to allworkers who qualify forunemployment insurance andother related benefits
VISION
• Rendering an effective and accessible service to all stakeholders
• Being a sustainable organization with sufficient reserves
• Administering the Fund professionally
MISSION
UIF Footprint
• The Unemployment Insurance Fund operates in 9Provincial offices of the Department of Labour
• There are 125 Labour Centres that members of thepublic can access to apply for benefits
• These Labour centres further service more than 820visiting points within their geographical location
• Claims processing happens at 84 sites.
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• 100%dedicatedstaff
• Split staff aspersal ( thesestaff performintegratedservices
UI Staff in provinces
• Registrationof employers
• Declarationmanagement
• claimsmanagement
• overpaymentdebtmanagement
• Appeals
• Financialmanagement
• payrollauditors
Provincial Set UP
• Applicationfor benefits
• Payments/continuationforms forbenefits
• Enquiries
• Advocacy
Labour Centre Set Up
How it cascades down to the Provinces
1. GLOBAL FINANCIAL POSITION OF UIF
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As at 31 March 2016, theFund had net assets to theamount of R120.12 billionwhich comprised of anaccumulated surplus of R98.5billion and technical reservesto the value of R21.62 billion
Funds are held in investmentsaccording to the Fund’sinvestment mandate which ismanaged by the PublicInvestment Corporation asstipulated in the UI Act.
GLOBAL FINANCIAL
POSITION OF UIF
2. Contribution Revenue vs Benefit Payments (R’billion)
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8.06
9.16
10.32 10.76
11.34
12.44
13.69
15.31
16.15
17.12
2.84 2.92
3.85
5.71 5.38 5.61
6.01
7.08 7.09 7.69
-
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Contribution Revenue Benefit Payments
3. Contribution Revenue vs Benefit Payments and Administrative/Operating Expenditure (R’billion)
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8.06
9.16
10.32 10.76
11.34
12.44
13.69
15.31
16.15
17.12
2.84 2.92
3.85
5.71 5.38 5.61
6.01
7.08 7.09 7.69
2.00 2.28 1.96
3.61
1.38
2.48 3.05
3.49
4.44
3.06
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
-
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
Revenue Benefit payments Admin and Operating Expenditure
Note: Admin and Operating Expenditure includes employee cost and technical reserve provisions for benefit payments and excludes payments made with regards to unemployment alleviation schemes.
4. Unemployment Alleviation Schemes Funds paid and committed (R’billion)
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- - - 0.004
0.048
0.022 0.032
0.088 0.093 0.081
- - -0.022
0.044
0.158
0.307
0.211
0.274
0.510
-
0.10
0.20
0.30
0.40
0.50
0.60
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Unemployment Alleviation Schemes
Funds Committed
Investment of the Accumulated Surplus as at 31 March 2016 (R’billion)
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62%
25%
8%3% 2%
Assets under management
Bonds
Listed Equity
Cash
Money Market Instruments
Developmental Instruments
Asset Class Value (R'000)
Bonds 74 930 877
Listed Equity 30 259 912
Cash 9 870 154
Money Market Instruments 3 224 155
Developmental Instruments 2 155 886
Total Assets Under Management 120 440 984
Liquidity of the Investment Portfolio
as at 31 March 2016 (R’000)
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37%
63%
Duration of Investment Portfolio
Current Assets Long Term Non-Current AssetsDuration of Assets under Management Value (R'000)
Current Assets 44 020 585
Long Term Non-Current Assets 76 420 399
Total Assets Under Management 120 440 984
Distribution of Capital Market Instruments (R’000)
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Capital Market Instruments (R'000)
Government Bonds 58 522 681
Parastatal Bonds 13 738 756
Other Bonds 2 234 353
Total Bond Instruments 74 495 790
79%
3%
18%
Capital Market Instrument Split
Government Bonds Other Bonds Parastatal Bonds
Developmental Instruments Committed as at 31 December 2016 (R’000)
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Agriculture10% Construction
Engineering1%
Education18%
Energy6%
Financial Services3%
Health25%
Housing22%
Mining0%
Petroleum2%
Renewable Energy3%
Road Infrastructure10% Technology
0%
Industry / Sector COMMITED
AMOUNT
Agriculture 983 430
Construction Engineering 80 000
Education 1 812 000
Energy 625 000
Financial Services 257 500
Health 2 462 000
Housing 2 200 000
Mining 48 000
Petroleum 180 000
Renewable Energy 250 000
Road Infrastructure 1 002 482
Technology 43 500
Total Developmental Instruments Committed 9 943 912
Developmental Instrument Deals-in-Progress as at 31 December 2016 (R’000)
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Agriculture6%Energy
2%
Financial Services77%
Health1%
Petroleum7%
Technology0%
Various7%
Industry / Sector Un-Commitment
Approvals
Agriculture 509 668
Energy 178 000
Financial Services 6 923 149
Health 133 000
Petroleum 600 000
Technology 21 000
Various 600 000
Amendment Bill
Changes
Workers will accrueUIF credit faster:
1:6-1:5
Claim longer:
365-238
Maximumclaim=R14872
Maternity benefits setStd rate of 66%
Maternity will now alsonot get subtractedfrom normal UI benefitscredits
People who get puton short time canclaim UIF benefitsif certain wagesdrop below acertain level
Period to lay UI benefits extended from 6-12 months
financing of theretention ofcontributors inemployment and re-entry of contributorsinto Labour market &any other schemeaimed at vulnerableworkers
1. Contribution notimpacted
2. Increase in coveragewithout members increasingcontributions
3. Intervention to keeppeople at work formalised
4. There are otheramendments in the pipelinethat will result in costimplications
5. Public Employment Actwas reviewed toaccommodate interventionby UIF in respect ofemployers who are indistress
Key consideration of the Amendment
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The constraints to the use of the funds
The UIF beneficiaries are both Employers and Employees who pays their contributions. The benefits due to both Employees and Employers is defined in the UI Act
•UIF is a defined contribution mechanism in that the Employer and Employee each contributes 1% of the employee salary as defined by the Act which amounts 2
•This is clearly defined and stipulated in the UI Contributions Act
The constraints to the use of the funds
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1 • On an annual basis the Fund’s actuaries conduct an actuarial valuation of the Fund as required by the UIA
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• These reserves are required to sustain the Fund’s sound financial position in the short and long term.5
As at 31 March 2016, the Fund’s reserves for “Change in benefits payable” and “Change in unearned premium reserve” increased from R1,2 billion as at 31 March 2015 to R2,8 billion at 31
March 2016.
Outstanding benefits provision increased from R3,8 billion at 31 March 2015 to R4,2 billion at 31 March 2016
The Fund’s Technical Reserve also increased from R19,1 billion at 31 March 2015 to R21,6 billion as at 31 March 2016.
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The Fund’s surplus Funds are invested through PIC in accordance
with the following investment mandate:
Asset Class Minimum
Range
Strategic Asset
Allocation (SAA)
Maximum Range Benchmark
Capital Market 20.00% 27.50% 40.00% ALBI
Equity 10.00% 24.00% 30.00% FTSE/JSE (SWIX) Excl Property
Inflation Linked Bonds 20.00% 30.00% 40.00% CILI
Cash & Money Market 1.00% 5.00% 10.00% STEFI
Listed Property 0.00% 2.50% 5.00% J253
African Investments 0.00% 2.00% 5.00% MSCI (AFRICA) Excl SA
Foreign Equity 0.00% 4.00% 10.00% MSCI (ALL COUNTRY WORLD INDEX) Excl SA
Unlisted Property 1.00% 5.00% 7.00% IPD
Total 52.00% 100.00% 147.00%
The constraints to the use of the funds
The constraints to the use of the funds
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• 90% of the Fund’s investment portfolio is invested with a long term duration. Listed equity which is fairly liquid are not bought with the intension to speculate but held over a long term.
• Selling these instruments pre-maturely might result in realised losses and transaction costs for the Fund.
• The Fund’s Amendment Bill has been signed by the President
• The Bill will be promulgated shortly and implementation regulations issued
• According to an impact study performed by the Fund’s Actuaries the implementation of all amendments in the Amendment Bill will have a significant impact on the decreasing of the Fund’s surplus.
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Scope for using the proceeds/surplus in the UIF to fund PSET
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Payment of benefits to UIF beneficiaries
Collect revenue from employers
Participate in government initiatives to create and sustain decent employment
Administration of UIF operations
Service delivery to all UIF clients
Compliance to the UIA
Anyfunding arrangement MUST fall within the mandate of
the Fund
UIF has established theLabour ActivationProgrammes unitwhose primaryobjective is to increasethe Fund’sparticipation in povertyalleviation schemesand investment of 20%of the fund’s totalinvestment portfolio inDevelopmentalinstruments
The UIF Actdoes makeprovision forinterventionstowards jobcreation,retention,skillsdevelopment,Training layoffscheme andTurn aroundsolution
Is there scope for using the proceeds/surplus in the UIF to fund PSET ( 4 Proposals)
1• Establishing a relationships by cementing a Memorandum of Understanding with the Fund’s Labour Activation
Programme targeted at training of the unemployed
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• The Fund has 5% of it’s total Portfolio allocated to it’s Unlisted Property mandate. There is room here to build institutions of higher learning for PSET. The Fund will bear the project- and building cost and PSET will rent the properties from the Fund
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•Currently the Fund’s mandate towards Developmental Instruments are 20% of it’s total Portfolio value. Developmental Instruments are a theme across Capital and Equity asset classes and may include, but is not limited to, unlisted equity, unlisted debt, mezzanine, quasi debt and/or a combination thereof. The main focus of SRI investments is to create and sustain employment. Within this mandate we can acquire student accommodation through partnerships with institutions as we have done with Southpoint for PSET students
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•PSET can issue a private Bond that the Fund will buy via the JSE.
•The Fund will sacrifice investment return earned on the Bond in return for a clearly defined, negotiated and supported social impact generated by PSET.
•This option will be similar to the relationship the Fund currently has with IDC
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