Business organisation Business Unity South Africa (Busa) has withdrawn from the Unemployment Insurance Fund (UIF) structures at the National Economic Development and Labour Council (Nedlac) and removed its representatives from the UIF board.

“This step is essential to safeguard the reputation of our representatives, uphold sound governance principles and send an unequivocal message that the current situation is unsustainable,” Busa says in a media release.

The decision follows six years of engagement, repeated warnings of maladministration and ongoing efforts to support reform for the benefit of workers, employers and the stability of South Africa’s labour market, it adds.

Regrettably, the organisation says, these efforts have not yielded the desired results.

Since 2020, Busa says, organised business and organised labour have participated in multiple processes aimed at reforming the UIF, noting that detailed proposals have been submitted, addressing governance, operational effectiveness, service delivery and the need to place contributors at the centre of the system.

Busa says that, while it called for the establishment of a Nedlac task team to develop a credible reform pathway for the UIF in 2024, progress has stalled over the past two years, with no clear commitment to ensuring the effectiveness of this task team.

“This has undermined confidence in the process and reinforced concerns that the fund is either unwilling or unable to confront the extent of its dysfunction,” Busa says.

“The UIF remains deeply dysfunctional, characterised by persistent operational failures, governance weaknesses, delays, unresponsiveness and a drift away from its core mandate,” it adds.

The organisations notes that the fund’s purpose is to collect contributions form employers and employees and provide eligible contributors with income support during periods of unemployment, maternity, illness, adoption, parental leave, reduced working time or other qualifying income loss.

“It is unacceptable that contributors are left without support while funds are redirected, delayed or absorbed into programmes that do not directly address their statutory entitlements,” Busa asserts.

Busa says the continued expansion of Labour Activation Programmes (LAPs) – in ways that appear to overlap with the mandates of the Department of Higher Education and the sector education and training authorities – is of “serious concern”.

Equally troubling, the organisation says, are efforts to redirect UIF resources towards government-to-government programmes that primarily benefit non-contributors while contributors themselves face delays, exclusion and administrative barriers.

Although LAPs are positioned as interventions to support access to employment opportunities and skills development, Busa says their current performance raises significant concerns.

The organisation argues that the UIF-Temporary Employer/Employee Relief Scheme (TERS) experience during the Covid-19 pandemic should have underscored the importance of efficient systems, robust oversight, timely payments and clear accountability.

While UIF-TERS provided critical support to many workers and businesses, Busa notes that it also exposed serious weaknesses in the fund’s administration, noting that employers continue to report applications pending for more than 12 months.

Further, Busa says the UIF’s rigid requirement for distressed employers to rectify up to 20 years of compliance data is impractical and demonstrates a lack of responsiveness to stakeholders.

“There is a growing impression that proper governance systems have been deliberately undermined. UIF board meetings have frequently been scheduled or rescheduled at short notice, making it difficult for members to adequately prepare or adjust their commitments.

“These disruptions have contributed to repeated failures to achieve quorum – not owing to a lack of willingness to participate, but because of impractical and ad hoc arrangements”.

Busa calls on Employment and Labour Minister Nomakhosazana Meth to urgently place the UIF under administration.

It argues that an independent administrator should be appointed with a clear mandate to stabilise operations, clear claims backlogs and address governance failures.

As part of this process, Busa says a forensic investigation should be undertaken to assess the legality and appropriateness of all fund expenditures.

“Business remains committed to constructive engagement with government and labour to build a functional and credible social security system that protects vulnerable workers.

“However, such engagement must be grounded in accountability, urgency and a genuine commitment to reform. Workers and employers cannot be expected to continue funding a system that fails when they need it most.”