Graft-induced Ters brakes should be eased to bail out employers and workers
Recruitment of auditors to follow the money appears more important than keeping up the flow of payments
The government got off the starting blocks with commendable speed in response to the Covid-19 pandemic, and has paid out more than R25bn in terms of the R40bn temporary employer/employee relief scheme (Ters).
The scheme was introduced by the department of employment & labour to preserve jobs during the lockdown, but has now started to slow its payments while employees who have lost their jobs or been put on short time need it most. Many companies that have been unable to get up and running after the relaxation of the lockdown have run out of cash resources.
The main purpose of Ters was to keep people in employment — even when they couldn’t go to work — and to keep the money flowing from the government to the millions of recipients. The reasons for the recent slowdown of payments are complex, from older applications dating back to April taking longer to resolve than expected, to changes in the processing of applications from April to May, IT hardware challenges when May was opened, more recent IT challenges when June was opened — which highlighted some security flaws in the system — and the recent highly-publicised allegation of fraud.
Since the story broke of an alleged R5.7m fraud, there seems to have been an obsession with combating wrongdoing, which has caused things to move far slower than before. Fraud has evidently been committed, but the government appears to have become obsessed with it, despite a lack of evidence that it has been on a significant scale compared with the programme itself.
In the three months it has been in operation, Ters has dwarfed the annual industrial subsidy programmes of all SA government departments put together. It is huge, and the government should be commended for speedily launching such a large programme to pay out such a significant sum of money.
With these large sums being paid one would have expected there to be fraud, but our experience is that it will be committed by a tiny fraction of the applicants. Most businesses would not deliberately place themselves at risk by trying to defraud the government. The process of claiming for workers leaves a rich electronic and documentary audit trail that should limit attempts at fraud to only the most short-sighted.
In this instance the government and business have had the same goal: prevent bankruptcies and employee layoffs. While it is correct for parliamentarians, the public and the media to howl in protest over every fraud case that has been detected, the response by the department of labour & employment to these concerns should be more measured and calculated — improve controls as necessary, but don’t panic so much that the system seizes up.
Just when payments had to be accelerated the brakes have been slammed on. The recruitment of auditors to follow the money now appears more important than keeping up the flow of payments. While I agree that the system and payments should be audited, doing it now — in the middle of the payment process — is flawed. The audits should be delayed to at least September, after most of Ters has wrapped up. If cases of fraud are discovered now it should clearly immediately be reported to law enforcement.
Even if fraud amounts to my highest estimate of R400m, that would be a 1% fraud rate. About R39.6bn will still go to the correct recipients, where it is so desperately needed. If you worry too much about the leaks in a boat you will never reach the shore. Ters is a good scheme and it makes a big difference. The Covid-19 crisis needs speed and focus, rather than officials spending all their time worrying about fraud. We need to again see the resolute and confident leadership that was evident at the beginning of the process. We cannot waver now.
The minister and Unemployment Insurance Fund (UIF) commissioner should meet a sample of individual medium and big employers — not just business groups in the Nedlac process — urgently to learn just how serious the situation has become, how much has gone wrong. They must communicate with parliament, but they must also get around the table with employers and visit business sites. They will soon learn that, while valid, their fears about fraud are exaggerated, and once they are comforted over this maybe they will take their foot off the brake.
UIF officials must not be afraid to make mistakes; it is to be expected that a speedier system will enable some fraud. But there cannot and will not be huge fraud. The much-maligned high concentration of business and employment in the formal sector of the economy is a blessing in mitigating widespread fraud in this case.
Other schemes in countries such as the UK and US have also faced much-publicised challenges and setbacks, but one gets the impression that SA has found it harder than most to get the funds into the hands of the vulnerable. Steps must be taken immediately to allocate strong teams to fix what became stuck in April, with better feedback loops so they can work out what the problems were. Meanwhile, there must be better interaction with claimants.
A call centre with 200 people was established, but those working there lack sufficient expertise and have been found to be ill-equipped to deal with queries. The UIF call centre shunts people around and has been a failure. The advice offered is too general, and often is not of much help as those receiving the queries are not sufficiently trained to deal with them. If call-centre operatives can’t help there seems to be no escalation process to fix problems, and queries seem to vanish down a dark hole.
All claims outstanding longer than two weeks should be allocated to specialised call-centre problem-solvers, who should follow up by calling applicants directly to tell them what to do. Only the UIF can know what to do, but asking applicants to phone in themselves repeatedly is ineffective.
UIF processes are being made more difficult for companies that are already under strain and are being forced to make more salary cuts, retrenchments and other tough decisions to survive the pandemic.
There can be no doubting the economic bombshell that would have hit the economy and workers had Ters not been introduced. However, the flaws in the system are now there for all to see, and must be addressed with greater urgency.
• Ismail is with Cova Advisory.
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