Proposal for South Africa’s unemployment insurance fund to be overhauled

The Congress of South African Trade Unions (Cosatu) says that there are significant gaps in the Unemployment Insurance Fund (UIF), which is meant to support South African workers.

Speaking to ENCA, Matthew Parks, the deputy parliamentary coordinator for Cosatu, said that there is a need to modernise the UIF as the nature of work is fundamentally changing.

Parks noted that now more than ever, an employee such as a domestic worker may work multiple jobs and get paid sporadically, or others are self-employed or work for e-platforms such as Uber drivers.

Cosatu said that the UIF’s IT systems need to be modernised and additional staff need to be employed to provide the rapid response that employees and businesses need to promote economic growth.

The Cosatu coordinator said that due to these varied ways of working, a new creative and understandable model that takes care of the traditional (formal) type of worker, as well as the informal/hybrid worker, is needed.

Parks said there are ways to do it – like paying a flat rate. He added that it is, however, important that many workers merely get registered.

For example, out of 900,000 domestic workers, only roughly 20,000 receive money from the UIF. Domestic work is an industry that is often not bound by written agreements or formal working hours; the sector is currently facing significant changes.

Recent data from an Old Mutual Savings and Investment Monitor (OMSIM) showed that more South African households are choosing to do without a domestic worker to save money.

To combat such instances, steps have been taken to address informal working practices, such as the introduction of The Compensation for Occupational Injuries and Diseases Amendment Bill, which aimed to further formalise the domestic worker sector. Under this bill, it has become mandatory for employers of domestic workers and employees to contribute to the UIF.

Despite this, Parks said that there have been multiple instances where employers deduct funds from workers’ pay to contribute to UIF but do not actually do so – thus defrauding them.

He added that there are many cases involving fraud and corruption regarding the fund as a whole, and workers have struggled to access funds that are meant to benefit them.

Earlier this year, there was an instance whereby the UIF and the Public Investment Corporation (PIC) were uncovered to have effectively lost R1.8 billion by investing in a company that was in debt.

Court documents revealed that public funds were involved in the dealings between the PIC/UIF and other investment firms, including Coast2Coast Capital which was defaulting on its debts.

Read: South Africa’s largest retailer in massive energy shift