UIF ANNUAL REPORT PRESENTATION FOR 2004/05 Portfolio Committee 01 November 2005

INTRODUCTION Thank you for inviting us to present to you the Annual Report and Annual Financial Statements for the 2004/05 financial year of the Unemployment Insurance Fund

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.

KEY OBJECTIVES OF THE FUND Broaden coverage of Beneficiaries Improve Service delivery Strengthen Compliance and Enforcement Sustain an affordable benefit regime Resolve legislative and administrative challenges.

Achievements – 2004/05 FINANCIAL VIABILITY IMPROVED Financial Reserves up 50% Accumulated Reserves of R10,197 billion up 50% - fully reserved as at end of March 2005. Revenue greater than total expenditure Net surplus of R2,071 billion compared to R121 million for 2003/04. The Fund received R6,152 billion in revenue and paid out R2,475 billion in benefit payments up 9% and 18% respectively on 2003/04. Investments with PIC increased by 81% Investments with PIC valued at R9, 759 billion compared to prior year value of R5, 389 billion.

Over half a million beneficiary claims paid – up 13% Benefit type  Claims ‘000  % up year Amount (R)000 % up on year Unemployment 440 12% 1,832,349 19%   Illness 26 30% 135,775 24% Maternity/Adoption 72 14% 289,534 9% Dependents 25 217,846 20% Total   563 2,475, 504

Number of beneficiaries by benefit type over the years Unemployment Illness Maternity/ Adoption Dependants Grand Total 2001 544000 17000 55000 21 637000 2002/03 463000 18000 63000 25000 569000 2003/04 393000 20000 23000 499000 2004/05 440000 26000 72000 563000 +12% +30% +14% +9% +13%

Snapshot of Monetary value of benefits paid over the years Unemployment Illness Maternity/Adoption Dependants 2002/03 2,030205 97,388 284,832 168,738 2003/04 1,536013 109,442 266,012 182,104 2004/05 1,832349 135,775 289,534 217,846 +19% +24% +9% +20%

Improving Client Satisfaction - Number of Approved claims for 04/2004 to 07/2005 up 2.5%

Improving Client Satisfaction - Number of Rejected claims for 04/2004 to 07/2005 down 2.5%

Improving Compliance: Number of Commercial employers and employees registered

Improving compliance: Number of Dosmetic employers and employees registered

Improving Compliance – 2004/05 Commercial Registrations Employers 481,608 Employees 6,475,541 Domestic Registration Employers 631,593 Employees 500,683

Improving diversity in the workplace: Employment Equity Targets   target set for March 2005 % @ 31 March 2005 %variance African male 39.60% 21.94% 17.66% female 33.90% 32.29% 1.61% Asian 1.20% 0.63% 0.57% 1% 0.94% 0.06% Coloured 2% 1.88% 0.12% 2.10% 3.76% -1.66% White 11.20% 4.39% 6.81% 9% 32.60% -23.60% Disability 5% 1.57% 3.43%

Improving Management Capacity Completed the recruitment of key personnel: Chief Financial Officer. Four Executive Managers.

Strengthening of Management Minister of Labour Director General Non Executive Board Deputy Director General Commissioner CFO Chief financial officer Risk mgt CIO Information officer OPS Operations FIN FIN FIN FIN Regional office Regional office Regional office Regional office

Improving Institutional Infrastructure and Capacity Key projects finalised and ready for implementation are; Improved operational system (Siyaya) finalised and rolled out for national pilot in April 2005. Integrated Financial Information system (Axsone) finalised and implemented in April 2005/06. Independent review of the corporate form of the UI Fund completed and approved by Minister. Task team appointed for implementation in 2005/06.

Improving Accountability: Improved Audit Report for 2004/05 The Auditor General’s qualified Report is a positive departure from the previous three years of disclaimer. Substantially reduced number of qualifications and matters of emphasis reflects improved systems of internal control. Number of qualifications down (75%) to 2 from 8 and matters of non compliance down (68%) to 5 from 16 when compared to prior year.

Improving Accountability Auditor General’s report when compared to previous years indicate substantial improvements in areas of management relating to; Internal control environment Accounting processes Services rendered by the Department of Labour Fixed Assets General computer controls

UIF Operating Result – 2004/05 -R2bn Surplus- 2003/04 R’000 Revenue 6,831,267 6,096,336 Benefit expenditure (2,475,504) (2,093,870) Other expenditure ( 532,188) ( 523,650) Surplus before reserving 3,823,575 3,478,816 Transfer to reserves (1,752,000) (3,357,562) Net Surplus 2,071,575 121,254

Financial Highlights for 2004/05   R Million Percentage change 2004/05 2003/04 Contributions income 6,152 5,646 up 9% Investments income 668 448 49% Other Revenue 10 1 900% Benefit Expenditure 2,475 2,094 18% Administrative and other Expenses 312 281 11% Staff Costs 219 243 down -10% Net Income before reserving 3,824 3,477 10% Investments 9,759 5,389 81% Reserves 10,197 6,374 50% Total Assets 10,461 6,556

Growth in investments up 81% 2004/2005 2,620,052 investments 2003/2004 R 2002/2003 2001 - 255k deficit

Growth in Revenue up 9% 6.12 Five year revenue growth R bn 2004/2005 5.65 2003/2004 4.3 2002/2003 R bn 2001 2.8 2000 2.7 Five year revenue growth

Growth in Benefit expenditure up 18% 2.48 2004/2005 R bn 2.09 2002/2003 Benefit expenditure

Financial Sustainability An asset liability study conducted by the Fund’s Actuary concluded the following; Reserves required to meet potential future liability is estimated as R8,7bn at March 2005 as of that date the Fund had R10,2bn in reserves (R1,4bn above the required amount). The Actuary also concluded the Fund is on a sound financial position on a cash flow basis for the next ten years.

QUESTIONS