Ar­range­ment yields good re­turns for so­ci­ety

CityPress - - News -

The days of as­so­ci­at­ing the Unem­ploy­ment In­surance Fund (UIF) with chaos, bad au­dit re­ports and mal­ad­min­is­tra­tion have been re­placed with clean books, ac­count­abil­ity and, more im­por­tantly, job cre­ation and preser­va­tion. Thanks to the part­ner­ship be­tween the UIF and the In­dus­trial Devel­op­ment Cor­po­ra­tion (IDC), sev­eral com­pa­nies have been able to pre­serve and cre­ate about 54 000 jobs in the past five years.

UIF com­mis­sioner Boas Seruwe says af­ter he and his man­age­ment team man­aged to turn things around at the fund, they started look­ing to add value to the econ­omy.

“After the ef­fects of the 2008 global fi­nan­cial cri­sis, we em­barked on a plan to al­le­vi­ate the ef­fects of un­em­ploy­ment. We came up with fund­ing the wages of com­pa­nies in dis­tress. We reskilled peo­ple who had lost their jobs and made them ready for the work­place, and we were in­vest­ing in JSE-listed com­pa­nies via the Public In­vest­ment Cor­po­ra­tion. So we de­cided to give money to un­listed com­pa­nies.”

Seruwe says that in 2010, the fund gave the IDC about R2 bil­lion to lend to un­listed com­pa­nies to cre­ate and pre­serve jobs. The UIF had in­structed the IDC to in­vest the money in start-ups and com­pa­nies that wanted to ex­pand their op­er­a­tions.

“Within a short space of time, it was a suc­cess and we started get­ting good re­sults. After two years, we ex­panded the project by in­vest­ing an­other R2 bil­lion in the IDC. All the fund­ing has been al­lo­cated and we are quite happy with what we have achieved. We’re look­ing at work­ing with the IDC again.”

Seruwe says when the pro­gramme started, the in­ter­est rate on loans to the IDC was 5%.

This was linked to the in­fla­tion rate at the time, he adds. A 5% in­ter­est rate is low, as com­mer­cial banks peg their rates to in­fla­tion and add their own charges, de­pend­ing on the client’s risk pro­file. Com­mer­cial banks charge up to 11%, but when the pro­gramme con­tin­ued in 2012, the in­ter­est rate was re­duced to 4%.

“We in­structed the IDC to, at the very least, re­turn our cap­i­tal. And they have done that. The re­turn for us is cre­at­ing and pre­serv­ing jobs. We have been able to do that.

“But if peo­ple are not re­trenched, we also achieve so­cial re­turns. If peo­ple are not re­trenched, it means they will not come to us to claim,” says Seruwe.

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