UIF drops ball over Ters funding

It was always going to be tough for the Unemployment Insurance Fund (UIF) to rise to its biggest challenge yet when the government chose it to run a scheme aimed at softening the economic impact of Covid-19 on businesses and their employees.

With a nudge from the business leaders, President Cyril Ramaphosa’s team came up with a form of salary protection under which the UIF would pay out R3,500-R6,700 for three months until end-June to workers forfeiting their salaries during the lockdown.

But technical glitches and backlogs have hobbled the programme, resulting in R4.2bn in unpaid claims and denying cash to nearly 1-million potentially deserving workers who have not had an income in three months.  

Payouts went relatively smoothly in April largely because the UIF was dealing with applications from employers applying on behalf of their workers. That limited the number of documents and bank details the UIF’s staff had to process.

The UIF ran into trouble the next month after labour minister Thulas Nxesi instructed it to change its IT systems to enable it to pay employees directly in response to complaints from workers that their company bosses were using the money to line their pockets instead of paying it out to them.

Since then the fund’s registration system has been plagued with technical problems. When it reopened for the June payroll it had to be shut down last week as it showed applicants’ confidential details. It went live again on Monday only to be taken down due to the same glitch, meaning some applications for June have to be returned.  

Nxesi’s idea was not bad but it was not properly thought through. He was asking way too much from the UIF, which paid out just more than 800,000 claims in the whole of 2019. It looks as if the changes to the system are doing more harm than good.

It is true that processing millions of applications in the space of a few weeks is difficult for any institution, never mind the UIF which already had a reputation for inefficiency. Individual claimants have complained for years about the amount of time spent queuing and the number of visits needed to secure benefits.

But the so-called Temporary Employer/Employee Relief Scheme (Ters), on which the Covid-19 scheme is based, worked relatively well in the first month largely because it was not clogged up with millions of applications from individuals.  

The good news is that the fund has paid out more than R26bn, more than half the money set aside to support business and workers.  

Nevertheless, the unpaid R4.2bn could be a lost opportunity. Businesses are meant to use it to retain workers but chances are they have opted to retrench them, and some companies might also fail to survive.  

With dozens of companies in a mad rush for cash, including forcing employees to share the pain with deep pay cuts and retrenchments, it is not unreasonable to imagine that the R40bn package would have been soaked up fairly quickly had the system not been unreliable.

Behind this payroll support scheme, alongside other measures such as the R200bn credit guarantee scheme to keep credit flowing to small businesses, is an understanding that we need to get or keep as many businesses as we can in a relatively healthy shape to play a leading role in the post-Covid investment-led economic recovery.

Official Stats SA data on Tuesday showed that the economy contracted 2% in the first quarter, deepening a recession that started before the Covid-19 onslaught and piling pressure on support structures such as the UIF to get their houses in order as unemployment numbers can only go up from here.  

The programme is merely a Band-Aid for locked-down businesses, and many will fail no matter how much money the UIF pumps out, but it is not unfair to ask Nxesi to ensure the system is reliable.