Posted on: December 6, 2011 Posted by: Diane Swarts Comments: 0

The SA Compensation Fund (CF) carries a surplus of R13.5-billion and “poor data systems” into 2012. The CF is also prone to wasteful spending and fraud.

A massive CF surplus was calculated at 30 September 2011. Compensation Commissioner (CC) Shadrack Mkhonto hinted in November 2011 that management of the Compensation Fund could be privatised.

Shortly before this surprise move, the CC had said that the fund was migrating to new data systems, rolling out a new system to accelerate payments to hospitals and doctors, and stepping up fraud prevention efforts.

There was a R1-billion shortfall in compensation paid out to injured workers in the last financial year.

Meanwhile six former SA Department of Labour employees and a physiotherapist were charged in 2011 with defrauding the SA Compensation Fund of about R1-million rand. Allegations of the medical profession milking compensation money go back five years.

Neglect, poor systems and miedical ‘milking’ at the CF go back ten years, when former Labour minister Mdladlana promised ‘new broom’ measures that cleared some backlog, but service had remained inconsistent.

The Department of Labour (DOL) administers the Compensation Fund (CF) for employers and victims of occupational disability, occupational disease and fatal occupational incidents.

Administration of the Compensation Fund could be outsourced to a private company. Opposition politicians welcomed the plan that could “provide better services”.

Domestic workers get compensation cover

Compensation coverage could be extended to domestic workers, a plan proposed by the DA. Domestic workers are the only category of non-military workers excluded from Compensation Fund coverage.

“When domestic workers are injured at work, they receive no support and often lose their jobs if they become disabled or have permanent injuries. This cannot be allowed to continue” argued the DA in 2011.

The Compensation Fund has long been hampered by administrative problems and a dysfunctional computer system. Claims require onerous paperwork.

With increased management capacity, the Fund would be able to register hundreds of thousands of domestic workers and their employers.

DOL invests in PIC

DOL and its labour insurance entities, Unemployment Insurance Fund (UIF) and Compensation Fund (CF), had “contributed to job creation by investing billions of rands in the Public Investment Corporation (PIC).”

Labour minister Mildred Oliphant had made the announcement at a meeting at Kievitskroon conference centre near Pretoria before about a hundred DOL managers from all provinces at a departmental evaluation workshop.

The CF had invested reserves of R27-billion by April 2011, with the PIC. “These funds are in turn invested by PIC through an investment agreement in commercial and social responsible projects by Standard Bank, Eskom, Transnet and other parastatals involved in infrastructure projects that contribute to employment creation.”

‘Irregular expenditure’ of compensation money

The Compensation Fund annual report for the 2009 -2010 year received a qualified audit with emphasis outcomes for the fifth time in five years, citing poor management controls that resulted in misstated comparative figures totalling R342-million, and incidents of fruitless, wasteful and irregular expenditure of R14-million.

The Auditor-General’s (AG) report into the Compensation Fund paints a picture of an administration that is poorly managed, and a management team that is not adhering to good internal control measures and sound corporate governance.

The CF employs a Chief Financial Officer and three senior Financial Executive Managers.

The Auditor-General found irregular, fruitless and wasteful expenditure from extension of an IT contract without a signed agreement, for R7.6-million. The Fund had incurred interest on late payments of medical claims.

The Fund is “not fulfilling its core function efficiently, as set out in the Compensation of Occupational Injuries and Diseases Act”, said the DA.

PHOTO; Compensation Commissioner (CC) Shadrack Mkhonto hinted in November 2011 that management of the Compensation Fund could be privatised.


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