Com­pen­sa­tion Fund goes PRI­VATE

Long-suf­fer­ing oc­cu­pa­tional fund has had re­peated qual­i­fied au­dits. Now a chunk of its work has been given to Rand Mu­tual As­so­ci­a­tion

CityPress - - Business - DE­WALD VAN RENS­BURG de­wald.vrens­burg@city­press.co.za

Alarge chunk of South Africa’s so­cial se­cu­rity net will be out­sourced to the pri­vate sec­tor from March next year. The long-suf­fer­ing R24 bil­lion Com­pen­sa­tion Fund, which pays claims and pen­sions to work­ers in­jured on the job, will trans­fer more than 11% of its work to Rand Mu­tual As­so­ci­a­tion (RMA), which is col­lec­tively owned by South Africa’s mines.

The trans­fer of all so-called class 13 em­ploy­ers out of the fund’s hands in­cludes most of the met­als and en­gi­neer­ing sec­tor – up to 60 000 em­ploy­ers and 500 000 em­ploy­ees.

The fi­nal no­tice of this trans­fer was pub­lished in the Gov­ern­ment Gazette early this month.

The statu­tory con­tri­bu­tions that will shift from the fund to RMA amount to any­thing be­tween R600 mil­lion and R900 mil­lion a year, says Pa­trick Mat­shidze, RMA’s chief op­er­at­ing of­fi­cer.

The con­tri­bu­tions are levied on com­pa­nies’ wage bills at rates set higher for dan­ger­ous sec­tors. Un­der­ground gold and plat­inum mines (class 4) pay up to 5.8%, while the con­tri­bu­tions in class 13 range from be­tween 0.33% and 2.6%.

Last year the Com­pen­sa­tion Fund col­lected le­vies of more than R7 bil­lion from all sec­tors com­pared with RMA’s R1 bil­lion from the mines only.

The trans­fer is meant to help the fund – which has con­sis­tently been given qual­i­fied au­dits – get its af­fairs in or­der. More im­por­tant than the shaky ac­count­ing at the fund is its back­log in pro­cess­ing claims for med­i­cal ben­e­fits, death ben­e­fits and dis­abil­ity pen­sions tied to work­place ac­ci­dents.

The fund, and by ex­ten­sion RMA, are part of the coun­try’s so­cial se­cu­rity net. If the sys­tem fails, it can be con­strued as a vi­o­la­tion of work­ers’ con­sti­tu­tional rights, says Mat­shidza.

RMA and its share­hold­ers, the mines, also stand to ben­e­fit from the new business. By law, it will not be al­lowed to cross-sub­sidise the com­pen­sa­tion costs of the more dan­ger­ous mines, which come to R1 bil­lion a year.

RMA wants to take over com­pen­sa­tion fund­ing in other sec­tors, too.

One rea­son is that, though it is by law a non­profit company, the min­ing in­dus­try could see its bill re­duced should other sec­tors, such as man­u­fac­tur­ers, come on board to share the load.

Another rea­son is the de­cline in min­ing em­ploy­ment.

RMA is sit­ting with much ex­cess ca­pac­ity, says Mat­shidze.

In the hey­day of South African gold min­ing, the company in­sured 700 000 work­ers. That has dropped to 400 000. The class 13 trans­fer will at the least dou­ble the work of RMA, po­ten­tially cut­ting the run­ning costs car­ried by mines in half.

Though RMA is li­censed to of­fer the same statu­tory cover as the fund does by law, it has other in­surance prod­ucts regis­tered with the Fi­nan­cial Ser­vices Board. Th­ese are not bound by the same non­profit im­per­a­tive but they barely break even, Mat­shidze claims.

The Aug­men­ta­tion Pol­icy – which nearly all RMA’s min­ing clients pay for – aug­ments the in­surance for in­jured work­ers to make up for lost earn­ings rather than the statu­tory min­i­mum cover. RMA also sells poli­cies to cover work­ers while they are com­mut­ing or are at the mines’ hos­tels.

A prod­uct ideal for the man­u­fac­tur­ing sec­tor is the riot pol­icy, which in­sures against work­ers’ in­juries dur­ing strikes and other dis­tur­bances.

It is un­cer­tain how long the ar­range­ment with RMA will last. The ini­tial li­cence is for three years, but it is re­new­able.

Mat­shidze would not be drawn on whether RMA wants to make the ar­range­ment per­ma­nent, but said there was no rea­son it could not take over more of the com­pen­sa­tion sys­tem.

The of­fice of the fund’s com­mis­sioner, Shadrack Mkhonto, was un­reach­able by phone this week and it did not re­spond to writ­ten ques­tions about the trans­fer.

RMA is still con­duct­ing con­sul­ta­tions with em­ployer groups and unions in the class 13 sec­tors. This largely means the Steel and En­gi­neer­ing In­dus­tries Fed­er­a­tion of South­ern Africa (Seifsa) and Numsa.

Seifsa’s CEO, Kaizer Ny­at­sumba, had no com­ment on the pro­posed de­vel­op­ment.

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