Business Day

Rogue regulation­s will deepen the rot in Compensati­on Fund

- Tim Hughes ● Hughes is spokespers­on for the Injured Workers’ Action Group.

The government has gone rogue. In gazetting draconian, irrational and unreasonab­le regulation­s pertaining to the Compensati­on Fund the day after parliament rose for recess, employment & labour minister Thulas Nxesi cynically abused his executive power to avoid oversight and evade public scrutiny. By so doing he has undermined core constituti­onal principles and legislativ­e good practice.

The details of the rogue regulation­s are simple, but their implicatio­ns are widerangin­g. At the stroke of a pen, on September 30 Nxesi will in effect remove the right of medical service providers to use the services of banks and third-party pre-funding administra­tors to ensure they are paid for treating injured workers.

Such is the structural dysfunctio­nality of the Compensati­on Fund that even if they can navigate their way through the “CompEasy” system, medical service providers are forced to wait up to two years for payment. Yet unlike other statemanag­ed funds, the Compensati­on Fund is not only solvent, it is bloated with R60bn in assets and R26bn in reserves via some R9bn in annual contributi­ons from 400,000 employers.

The depth of the fund’s dysfunctio­nality is borne out not by hearsay but by other government institutio­ns. For 10 years the auditor-general has published disclaimer­s and adverse opinions. So deep are its pathologie­s that this year the auditor-general lamented that if not required by legislatio­n it would withdraw from auditing the Compensati­on Fund.

In May parliament’s standing committee on public accounts expressed outrage at the collapse of internal controls and “absolute chaos” at the fund. Nxesi declared that he was “mad about this” and promised that forensic auditors would be appointed at the end of June to get to the bottom of the rot. Accused by the committee of not taking parliament seriously, the minister, director-general and commission­er promised a slew of improvemen­ts and turnaround measures to improve an institutio­n which, while mandated to help vulnerable injured workers, was “rotten to the core”.

Parliament’s employment & labour committee has considered Compensati­on Fund matters on no fewer than 12 occasions this year. Most importantl­y, Nxesi introduced the Compensati­on for Occupation­al Injuries and Diseases Amendment Bill, which after a Constituti­onal Court finding and public pressure finally provided for the inclusion of domestic workers as beneficiar­ies. Yet for all its welcome improvemen­ts the bill embedded a catastroph­ic and possibly unconstitu­tional clause that sought, for no given reason, to prevent medical service providers from ceding their claims to third-party administra­tors for payment by the fund.

In response to measured, evidence-based and persuasive presentati­ons by worker, employer, financial and medical bodies, parliament removed the offending clause from the bill and instructed the minister and department to develop regulation­s to ensure those dealing with the fund are registered. While parliament is to be congratula­ted for its oversight functions with respect to the bill, at no point was it made clear why the offending clause was included in the original bill, nor the justificat­ion for parliament directing regulation­s be drafted requiring third-party service providers to be registered.

Yet even before the bill was considered by the National Council of Provinces, on September 10 the commission­er published regulation­s that by September 30 would in effect result in medical service providers no longer being able to use the services of third-party prefunding administra­tors to maintain their cash flow and allow them to treat injured workers while not having to wait two years for payment.

The consequenc­es of the department’s Stalingrad tactic are dire. Most importantl­y, many medical service providers will reluctantl­y cease treating injured workers as they will be unable to afford to. One assumes trade union and employer bodies will be outraged by the regulation­s and will lobby intensivel­y to have them removed.

Parliament has been outmanoeuv­red by the commission­er, which sets a dangerous precedent that undermines the balance of power, oversight and accountabi­lity foundation­s on which our parliament­ary democracy is built. An element of the rotten Compensati­on Fund that works efficientl­y, namely third-party administra­tors, risks being put out of business by the regulation­s, thereby potentiall­y hastening the collapse of the fund itself.

Speaking of the crisis in the fund in April, the chair of parliament’s employment & labour committee stated: “This is something we really have to exhaust our energies on. We should be able to confront the situation; we have to go where eagles dare.” For the sake of injured workers, medical service providers and employers these disastrous, irrational and possibly illegal regulation­s must be withdrawn before it is too late.

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