1. Department of Labour Unemployment Insurance Fund Budget 2006/07 UIF Presentation to Portfolio Committee 13 March 2006

2. 2 Objective: 2006/07 Budget Report Content Content Programme purpose, Mandate & Key objectives Programme purpose, Mandate & Key objectives Achievements 2004/5 Achievements 2004/5 Budget Proposal Budget Proposal Strategic overview Strategic overview Budget process Budget process Budget Methodology Budget Methodology Key Expenditure projects (UIF Priorities) Key Expenditure projects (UIF Priorities) MTEF Budget (High level) MTEF Budget (High level) Budget Highlights Budget Highlights Financial performance indicators Financial performance indicators End End

3. 3 Programme Purpose: Programme 5: Social Insurance Purpose: Provide for the administrative and other support services to the UIF. 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. Measurable objective: Support and ensure sound administration of the UIF in order to ensure efficiency and financial sustainability.

4. 4 MANDATE The Unemployment Insurance Fund was established in terms of Section 4(1) of the Unemployment Insurance Act, 2001. 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. The Fund administers the unemployment insurance contributions collected from employers and employees to pay benefits and related administrative expenses.

5. 5 KEY OBJECTIVES OF THE FUND OBJECTIVES: OBJECTIVES: Broaden coverage of Beneficiaries Broaden coverage of Beneficiaries Improve Service delivery Improve Service delivery Strengthen Compliance and Enforcement Strengthen Compliance and Enforcement Sustain an affordable benefit regime Sustain an affordable benefit regime Resolve legislative and administrative challenges. Resolve legislative and administrative challenges.

6. 6 Achievements – 2004/05 Improving the Coverage of the Social Security Net Improving the Coverage of the Social Security Net Number of employees covered by the insurance fund increased by 9% an increase of 742,780 employees. From 6,231 930 in 2003/2004 to 6,974,710. Number of employees covered by the insurance fund increased by 9% an increase of 742,780 employees. From 6,231 930 in 2003/2004 to 6,974,710. 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. 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. Sustaining an affordable Benefit Regime Sustaining 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 year value of R5, 389 billion. Investments with PIC valued at R9, 759 billion compared to prior year value of R5, 389 billion.

7. 7 Achievements – 2004/05 continued Improving service delivery Improving service delivery Over half a million beneficiary claims paid – up 13% Over half a million beneficiary claims paid – up 13%

8. 8 Achievements – 2004/05 continued Improving compliance by employers Improving compliance by employers 2004/052003/04 Commercial Registrations Employers474,514427,938 Employees6,475,5455,742,942 -Up 11% by employers. Domestic Registrations Employers628,390596,368 Employees499,165488,988 -Up 6% by employers.

9. 9 Achievements – 2004/05 continued Resolving Administrative challenges Resolving 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: Two additional Executive Managers appointed for Risk Management and Revenue Collection in the current year.

10. 10 Improving Institutional Infrastructure and Capacity Key projects finalised are; Key projects finalised are; Improved operational system (Siyaya – benefit administration system) finalised and rolled out for national pilot in April 2005. Improved operational system (Siyaya – benefit administration system) finalised and rolled out for national pilot in April 2005. Integrated Financial Information system (Axsone) finalised and implemented in April 2005/06. 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 for implementation 1 st of April 2006. Independent review of the corporate form of the UI Fund completed and approved by Minister for implementation 1 st of April 2006.

11. 11 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. 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. 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. 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.

12. 12 Improving Accountability Auditor General’s report when compared to previous years indicate substantial improvements in areas of management relating to: Auditor General’s report when compared to previous years indicate substantial improvements in areas of management relating to: Internal control environment Internal control environment Revenue Management Revenue Management Accounting processes Accounting processes Services rendered by the Department of Labour Services rendered by the Department of Labour Fixed Assets Fixed Assets General computer controls General computer controls

13. 13 Financial Highlights for 2004/05

14. 14 Update 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 2006 All new claimants paid via EFT since Jan 2006 Call centre facilities installed. Call centre facilities installed.

15. 15 Update on achievements continued Sustaining an affordable benefit regime Sustaining an affordable benefit regime The Funds investments at 31 January 2006 is valued at R13.8bn an increase of 41.7% when compared to year end March 2005. The Funds investments at 31 January 2006 is valued at R13.8bn an increase of 41.7% when compared to year end March 2005. Resolving administrative challenges Resolving administrative challenges Service partnerships are being forged with other Agencies such as SARS on Ufiling project. Service partnerships are being forged with other Agencies such as SARS on Ufiling project.

16. 16 Budget Proposal Align planning, budgeting and service priorities Align planning, budgeting and service priorities Address capacity challenges Address capacity challenges Inform stakeholders of the UIF’s strategy and budget plans. Inform stakeholders of the UIF’s strategy and budget plans.

17. 17 Budget Process Budget Timelines Budget Timelines Submission to DG-23 Sept 2005 Submission to DG-23 Sept 2005 Approval by Minister-30 Sept 2005 Approval by Minister-30 Sept 2005 Alignment to national priorities Alignment to national priorities Income support Income support Capacity building Capacity building Alignment to DoL priorities Alignment to DoL priorities KRA6:Strengthening social protection KRA6:Strengthening social protection KRA10: Strengthening institutional capacity KRA10: Strengthening institutional capacity

18. 18 Strategic Overview Budget takes account of the following Budget takes account of the following Legislative mandate – UI Acts Legislative mandate – UI Acts Vision & Mandate Vision & Mandate UIF priorities UIF priorities Safety net for the unemployed Safety net for the unemployed Improve compliance with legislation Improve compliance with legislation Improve institutional capacity Improve institutional capacity

19. 19 Budget Methodology UIF Priorities UIF Priorities Additional investment in capacity Additional investment in capacity Projects/initiatives Projects/initiatives Financial stability Financial stability Growth in reserves & investment Growth in reserves & investment Good governance structure Good governance structure Agencification Agencification Performance management Performance management Budget addresses KRAs and PIs Budget addresses KRAs and PIs

20. 20 Budget Methodology - continued Key factors in budget formulation; Key factors in budget formulation; Costs: employees, services, projects and acquisitions Costs: employees, services, projects and acquisitions Investments Investments Revenue Revenue Government priorities Government priorities Economic indicators Economic indicators Contributions & benefit payments Contributions & benefit payments

21. 21 Budget Methodology - continued Key projects for the year addresses the following challenges: Key projects for the year addresses the following challenges: Compliance of employers – database, targeted communication Compliance of employers – database, targeted communication Completeness of revenue – invoicing Completeness of revenue – invoicing Auditor General concerns on control environment Auditor General concerns on control environment Service delivery challenges (IT Systems) Service delivery challenges (IT Systems) Siyaya, axsone, database Siyaya, axsone, database Institutional reform – agencification Institutional reform – agencification Capacity building – in-house skills i.e. Capacity building – in-house skills i.e. Investment & cash management, control systems Investment & cash management, control systems

22. 22 MTEF BUDGET 2006/07 High level summary (R millions) High level summary (R millions) Year:2006/072007/082008/09 Revenue 8,263 9,030 9,864 Expend 4,186 4,738 5,335 Reserve(1,410)(1,559)(1,800) Surplus 2,666 2,733 2,729 *surplus – Actual 2004/05: R2,071m *surplus – Budget 2005/06: R1,904m

23. 23 Chapter 6: Budget Highlights Highlight of shifts in Funds when compared to 2005/06. Highlight of shifts in Funds when compared to 2005/06. Contributions:05/06 R6,640m Contributions:05/06 R6,640m 06/07 R7,239m 9% increase based on Actuary estimates Mar 2005 report. Other revenue: 05/06 R 804m Other revenue: 05/06 R 804m 06/07 R1,024m 06/07 R1,024m 27% increase due to a corresponding 29% increase in the investment base.

24. 24 Budget Highlights Highlight of shifts in Funds when compared to 2005/06. Highlight of shifts in Funds when compared to 2005/06. Admin costs:05/06 R815m Admin costs:05/06 R815m 06/07 R802m Decrease of R13m due to anticipated efficiencies.

25. 25 Chapter 6: Budget Review - SUMMARY 2006/07 Budget Improvements 2006/07 Budget Improvements Anticipated net improvement = R762m or 40% Anticipated net improvement = R762m or 40% Based on the following Based on the following Revenue up R818m or 11% Revenue up R818m or 11% Benefit payments upR252m or 8% Benefit payments upR252m or 8% Operating costs*down R 12m or 1.4% Operating costs*down R 12m or 1.4% Reserves requireddownR184m or 12% Reserves requireddownR184m or 12% * includes R23m or 60% increase in projects/initiatives * includes R23m or 60% increase in projects/initiatives

26. 26 Chapter 8: Statement of Performance 2004/05 Budget v. Audited Statements 2004/05 Budget v. Audited Statements ****** surplus up R1,360m or 191% due to: Revenue up R795m or13% Revenue up R795m or13% Benefit payments downR172m or 6% Benefit payments downR172m or 6% Admin Expenditure downR145m or21% Admin Expenditure downR145m or21% Required reserves downR248m or12% Required reserves downR248m or12%

27. 27 Chapter 8: Statement of Performance - continued Performance indicators Performance indicators Contribution payout ratio Contribution payout ratio 2005/062006/072007/82008/09 47.2% 46.7% 49.9% 53.4% 47.2% 46.7% 49.9% 53.4% Actual 2003/04: 37.5%2004/05: 40.8% Employee costs/contribution ratio Employee costs/contribution ratio 2005/062006/072007/82008/09 4.3% 3.3% 3.3% 3.3% 4.3% 3.3% 3.3% 3.3% Actual 2003/04: 4.3%2004/05: 3.6% Administrative costs/contribution ratio Administrative costs/contribution ratio 2005/062006/072007/82008/09 12.2% 11.1% 11.2% 11.0% 12.2% 11.1% 11.2% 11.0% Actual 2003/04: 9.4%2004/05: 8.8%

28. 28 THANK YOU