During the start of the economic crisis in 2008 the Unemployment Insurance Fund (UIF) experienced an increase in benefit claims due to large-scale retrenchments and companies being forced to shut down.

Every benefit claimed from the UIF also meanta decrease in contribution revenue towards it. The fund experienced a challenge in finding employment for clients listed on the unemployment database. Due to the economic environment, industries were shedding more jobs than they were creating and unemployment figures escalated.

The Industrial Development Corporation (IDC) approached the UIF with a proposal to fund the IDC to assist companies in distress. The benefits for the UIF would mean job retention and job creation.

The mechanism for creating the partnership wasthat the IDC issued private placement bonds via the Bond Exchange.

The fund then bought these listed bonds from the IDC via the Public Investment Corporation, as part of its investment portfolio.

Four IDC bonds were purchased in tranches ofR500 million at a 5% interest rate. As from March 2013, two more IDC bonds were purchased in tranches of R500 million at a 4% interest rate. The duration of these bonds is five years.

The IDC in turn lends these funds to its business clients at the agreed interest rate fixed for five years plus 1%, after which the interest rate reverts to a concessionary variable rate linked to prime.

What the funding criteria are: . New jobs created must be sustainable;. The maximum cost per job should be capped at R450 000;. Each transaction should be capped at R50 million;. The funds should be applied towards the primary goal of job creation or job retention in South Africa;. Transactions can be funded on a stand-alone basis or on a co-funding basis with the IDC or other institutions;. The client should make their first drawdown of funds within seven months after approval;. The client should supply statistics about jobs created and these figures need to be audited against the number of jobs anticipated at approval;. The funds must be spread by the IDC to cover all 12 industrial sectors supported by the IDC and should also be spread across all nine provinces within the country; and. The IDC takes the credit risk of the underlying assets funded under the UIF.

For more information, contact the IDC

on 0860 693 888 or email callcentre@idc.co.za

The start of the UIF-IDC partnership

Unemployment Insurance Fund (UIF) commissionerTeboho Maruping is serious about lending money to the Industrial Development Corporation, all for the sake of the person on the street – or in the water. When it comes to investing in job creation, the UIF has several oars in the water.

“In one of our partnerships we trained over a hundred scuba divers, young black folk who had no exposure to swimming, let alone scuba diving.

“Now they are able to do underwater diving of10m and deeper, so they can do deep sea rescuingall along the KwaZulu-Natal coastline.”

This is just one example of the UIF rising to theoccasion, fulfilling need where demand surfaces.

“Previously there was no one in the environments in which these scuba divers work to protect children against drowning, particularly during high-peak times such as the upcoming festive season.”

In addition, Maruping says, “these scuba diverscould play an important role in our oceans economy as set out in the government’s National Development Plan. It is exactly with long-term projects like Operation Phakisa in mind, that we though it would pay dividends to dive right in and help the aspiring scuba divers.”

Maruping stresses that, of the initial 100 trainees, more than 80 have been employed.

“The remaining ones have gone on to further training with a view to possible absorption. We don’t just train people without thought going into how they will find employment. Supplying skilled people where demand arises is what it’s all about.”

6 CITY PRESS, 26 NOVEMBER, 2017

Skilling up a new wave of workers

They say necessity is the mother of invention, butwho would have thought that a fund created toinsure the working class against unemploymentcould be used to create jobs – lots of them?

Since 2008, when the global credit crunchtriggered a worldwide economic crisis, South

Africa’s Unemployment Insurance Fund (UIF) has been lending money to the Industrial Development Corporation (IDC) as part of a billion-rand bid to not only bolster employment, but also preserve existing jobs.

This pioneering concept has been described by UIF commissioner Teboho Maruping as a “novel funding model”. And the numbers bear out his claims – at last count, on August 31, they stood at 29 895 jobs created.

The August audit showed that the first UIF loan to the IDC,a sum of R5 billion, resulted in 16 560 “actual jobs saved”.

Needless to say, it is a monumental achievement – but Maruping is not entirely satisfied. “We can do more,” he says.

According to its calculations, the UIF hoped that its IDC funding would have resulted in 33 638 jobs having been created and 19 418 positions in peril having been saved.

Maruping joined the UIF in 2014 and initially plied his tradeas chief of operations before filling the fund’s top post in December. He says this initiative has become “his biggest hunger to significantly boost the impact we are making”.

“I am of the view that the UIF can intervene much more quickly in the market. We have the necessary funding instruments that we have piloted and if we can expand on these, the benefit to the South African public will be much greater.”

Maruping’s sentiments are echoed by his political principal,Labour Minister Mildred Oliphant, who has described the project this way: “As a social security mechanism, unemployment insurance is an important pillar of the anti-poverty strategy aimed at ensuring a better life, and is a key component of the decent work agenda of government.

“The UIF and the IDC partnership continues to contribute to the mandate of job creation.”

Maruping says proper procedure lies at the heart of the UIF’s partnership with the IDC.

“It is a thorough process, with solid, unassailable checks and balances built into the system,” he says.

“But it has a slowing effect. We need to speed things up bycleaning up the process, making matters easier and smoother without sacrificing thoroughness.”

Fezeka Puzi, the fund’s chief operating officer, adds that it isall about “removing the bottlenecks and minimising the risks”.

This is no easy task and Maruping – who has a BSc degreein operational research and mathematics, as well as a master’s degree in information systems and knowledge management – knows all about system integrity.

One of the reasons that the UIF and IDC have formed sucha formidable partnership – as unexpected lender and unswerving developer – is their common drive to ensure that stringent procedures must be followed long before any money is made available.

Maruping explains: “Before funding is allocated to the IDC,the Public Investment Corporation (PIC) – which administers the UIF’s portfolio – embarks on a no-holds-barred due diligence process. Officials there proceed systematically, paying careful attention to governance structures, required funding allocations and annual financial statements.

“This is all done to ensure that the conditions in that organisation are suitable to receive the earmarked funding. It requires that administrative machinery must be in place.”

The due diligence side of things only commences after theUIF has received the IDC’s funding proposals.

“These are presented to our investment committee,” Maruping says, referring to an independent advisory structure consisting of eight non-affiliated stakeholders from organised labour and business.

“The investment committee will look at the proposal beforeit goes to the UIF’s board. Only once the UIF’s executive committee has reached consensus about the IDC’s input do we approach the PIC. After it has finished perusing the proposals we received from the IDC, only then does the due diligence process start.”

And yet, it is not just at the highest level of this triangularfunding model – from the IDC to the UIF, then on to the PIC

Puzi adds: “It seemed like a win-all situation for us. If newjobs are created, we receive more contributions. That is why we took a longer view, beyond low interest and immediate ROI towards the greater good for society.”

Maruping adds that the IDC is “only one of our partners. Oneof our other investment instruments involved Royal Bafokeng, which we helped with a housing scheme. The UIF’s intervention in enabling fixed property acquisitions for their employees would not have been possible had it not been for our involvement.”

Maruping says 422 houses have been built, with 2 677 under construction thanks to this initiative.

He mentions another UIF initiative, the so-called labour activation programme.

“It is one of the instruments that could reach 1 million people a year if we ironed out the creases, but [we first need to work out] how to get the Sector Education and Training Authorities to assist us with reaching targets, as well as how to get rid of obstacles that prevent service providers from helping us. These obstacles include speeding up payments to contractors in order to enable faster turnaround times.”

Fostering strong partnerships, enhancing employability andextending on-the-ground capacity are some of the milestones Maruping has set for himself. But his desire to cut through the red tape and speed things up, ultimately benefiting the person on the street, seems to be his primary aim.

“We have been looking at getting free Wi-Fi in all our labour centres – we have 126 countrywide, not to mention the 800 visiting points. Ultimately, it means that people could come to our centres and register for unemployment without any face-to-face engagement.”

In this regard, says Maruping “we have a service provider lined up – and, if all goes according to plan, the UIF will commence rolling out free Wi-Fi by March.”

Makhosonke Buthelezi, the UIF’s UIF director of marketing andcommunications, adds: “Clients can access our services via uFiling, which is our version of the SA Revenue Service’s eFiling.”

Maruping says: “In the end, it is all about building on what we started in 2008, taking that progressive vision and using it to propel the UIF and job creation for our people into the future.”

. This feature is reported by City Pressand sponsored by the IDC

From left: Daniel Matjila, CEO of the PIC; Teboho Maruping, commissioner of the UIF; Dumisa Hlatshwayo, former chairperson of the UIF Audit and Risk Committee; Welcome Nzimande, UIF board chairperson; Joyce Kganyago, UIF board member; Labour Minister Mildred Oliphant; Samson Moraba, Southpoint chairperson; and Ndumiso Davidson, Southpoint CEO at the opening of the Beehive building in Braamfontein, which provides student accommodation

A partnership that counts its success by how many jobs have been created and saved is

gathering momentum, writes Eugene Goddard

How your UIF money has impact

and back to the IDC – that Maruping believes improved processing speed can occur.

“On the ground we need to shake things up through upskilling and reskilling people, enhancing their employability. We have noticed, for example, that many of the Technical and Vocational Education and Training colleges lack capacity to handle the funding allocated to them. We have to help them reach the right level of due diligence so that access to UIF funding can be fast-tracked.”

Clearly, the UIF has transformed. No longer is it passivelyprotecting people against the possible loss of income, but it is also progressively working towards using its swelling coffers for actively engaging in job creation.

Says Puzi: “The collapse of global credit in 2008 made usrealise that, in spite of the effect this was having on the global economy, we needed to turn things around. We needed to continuously work towards creating jobs to keep our economy vibrant.”

Maruping says: “We want the public to know that the hundred-billion-plus of rands we have in our well diversified portfolio is bei; we are investing in developmental structures across the country – from infrastructure construction projects and long-term bonds to student education and accommodation, housing, energy and developmental endeavours in general. Our partnership with the IDC – which the August audit showed stood at 66% of the corporation’s total funding – is just one of our goodwill instruments.”

And goodwill it certainly is.With a second tranche of R5 billion on its way to mark the

initiative’s 10th anniversary in 2018, it is important to note that return on investment (ROI) for the UIF is not just about money.

Maruping explains: “Our ROI is very small. We give the IDC a funding opportunity of R5 billion at CPI [consumer price index], plus 0.5% return over a period of five years.”

In a nutshell, most banks would turn their backs on this.“But it was our focus from the start to be an

unconventional lender, to help the IDC in ensuring that small and medium-sized enterprises in South Africa continue growing, particularly those entrepreneurs and enterprises that are unable to get funding from ordinary banks.”

Inpartnership

with the

IDC

The impact of the Unemployment Insurance Fund’s partnership with the IndustrialDevelopment Corporation since inception in 2010:

R3.9 billionInvestment total:

29 895Total number ofjobs created:

16 560Total number ofjobs saved:

Geographical impact of jobs saved and created:

KwaZulu-NatalJobs created: 5 062Jobs saved: 2 227

LimpopoJobs created: 1 123Jobs saved: 449

Free StateJobs created: 1 031Jobs saved: 102

GautengJobs created: 7 208Jobs saved: 8 635

Northern CapeJobs created: 495Jobs saved: 267

Eastern CapeJobs created: 2 187Jobs saved: 1 386

Western CapeJobs created: 12 024Jobs saved: 3 681

MpumalangaJobs created: 1 379Jobs saved: 2 328

North WestJobs created: 3 129Jobs saved: 343

Graphics24Source: IDC