Page 51 - IDC

6 CITY PRESS, 26 NOVEMBER, 2017

The start of

the UIF-IDC

partnership

During the start of the economic crisis in 2008
the Unemployment Insurance Fund (UIF)
experienced an increase in benefit claims due to
large-scale retrenchments and companies being
forced to shut down.
Every benefit claimed from the UIF also meant
a decrease in contribution revenue towards it. The
fund experienced a challenge in finding
employment for clients listed on the
unemployment database. Due to the economic
environment, industries were shedding more jobs
In than they were creating and unemployment
figures escalated.
partnership approached the UIF with a proposal to fund the
The Industrial Development Corporation (IDC)
with the IDC to assist companies in distress. The benefits
for the UIF would mean job retention and job
IDC creation.
The mechanism for creating the partnership was
that the IDC issued private placement bonds via
the Bond Exchange.
The fund then bought these listed bonds from
the IDC via the Public Investment Corporation, as
part of its investment portfolio.
Four IDC bonds were purchased in tranches of
From left: Daniel Matjila, CEO of the PIC; Teboho Maruping, commissioner of the UIF; Dumisa Hlatshwayo, former chairperson of the UIF Audit and Risk Committee; R500 million at a 5% interest rate. As from March
Welcome Nzimande, UIF board chairperson; Joyce Kganyago, UIF board member; Labour Minister Mildred Oliphant; Samson Moraba, Southpoint chairperson; and 2013, two more IDC bonds were purchased in
Ndumiso Davidson, Southpoint CEO at the opening of the Beehive building in Braamfontein, which provides student accommodation tranches of R500 million at a 4% interest rate. The
duration of these bonds is five years.
Africa’s Unemployment Insurance Fund (UIF) has been How your business clients at the agreed interest rate fixed
hey say necessity is the mother of invention, but
The IDC in turn lends these funds to its
who would have thought that a fund created to
for five years plus 1%, after which the interest rate
insure the working class against unemployment
could be used to create jobs – lots of them?
reverts to a concessionary variable rate linked to
prime.
Since 2008, when the global credit crunch
Ttriggered a worldwide economic crisis, South
What the funding criteria are:
lending money to the Industrial Development Corporation . New jobs created must be sustainable;
. The maximum cost per job should be capped at
(IDC) as part of a billion-rand bid to not only bolster R450 000;
a sum of R5 billion, resulted in 16 560 “actual jobs saved”. UIF money R50 million;
employment, but also preserve existing jobs.
. Each transaction should be capped at
This pioneering concept has been described by UIF
. The funds should be applied towards the
commissioner Teboho Maruping as a “novel funding model”.
primary goal of job creation or job retention in
And the numbers bear out his claims – at last count, on
August 31, they stood at 29 895 jobs created.
South Africa;
The August audit showed that the first UIF loan to the IDC,
basis or on a co-funding basis with the IDC or
Needless to say, it is a monumental achievement – but . Transactions can be funded on a stand-alone
other institutions;
Maruping is not entirely satisfied. “We can do more,” he says. . The client should make their first drawdown of
hunger to significantly boost the impact we are making”. has impact . The client should supply statistics about jobs
funds within seven months after approval;
According to its calculations, the UIF hoped that its IDC
funding would have resulted in 33 638 jobs having been
created and these figures need to be audited
created and 19 418 positions in peril having been saved.
Maruping joined the UIF in 2014 and initially plied his trade
against the number of jobs anticipated at
approval;
as chief of operations before filling the fund’s top post in
December. He says this initiative has become “his biggest
all 12 industrial sectors supported by the IDC and
“I am of the view that the UIF can intervene much more . The funds must be spread by the IDC to cover
should also be spread across all nine provinces
quickly in the market. We have the necessary funding within the country; and
instruments that we have piloted and if we can expand on these, . The IDC takes the credit risk of the underlying
the benefit to the South African public will be much greater.” A partnership that counts its success by how assets funded under the UIF.
Maruping’s sentiments are echoed by his political principal,
Labour Minister Mildred Oliphant, who has described the For more information,
project this way: “As a social security mechanism, many jobs have been created and saved is contact the IDC
unemployment insurance is an important pillar of the anti- on 0860 693 888
poverty strategy aimed at ensuring a better life, and is a key gathering momentum, writes Eugene Goddard or email callcentre@idc.co.za
component of the decent work agenda of government.
“The UIF and the IDC partnership continues to contribute
to the mandate of job creation.” Skilling up a
Maruping says proper procedure lies at the heart of the and back to the IDC – that Maruping believes improved Puzi adds: “It seemed like a win-all situation for us. If new
UIF’s partnership with the IDC. processing speed can occur. jobs are created, we receive more contributions. That is why
“It is a thorough process, with solid, unassailable checks “On the ground we need to shake things up through we took a longer view, beyond low interest and immediate new wave
and balances built into the system,” he says. upskilling and reskilling people, enhancing their ROI towards the greater good for society.”
“But it has a slowing effect. We need to speed things up by employability. We have noticed, for example, that many of Maruping adds that the IDC is “only one of our partners. One of workers
cleaning up the process, making matters easier and smoother the Technical and Vocational Education and Training of our other investment instruments involved Royal Bafokeng,
without sacrificing thoroughness.” colleges lack capacity to handle the funding allocated to which we helped with a housing scheme. The UIF’s intervention
Fezeka Puzi, the fund’s chief operating officer, adds that it is them. We have to help them reach the right level of due in enabling fixed property acquisitions for their employees would Unemployment Insurance Fund (UIF) commissioner
all about “removing the bottlenecks and minimising the risks”. diligence so that access to UIF funding can be fast-tracked.” not have been possible had it not been for our involvement.” Teboho Maruping is serious about lending money
This is no easy task and Maruping – who has a BSc degree Clearly, the UIF has transformed. No longer is it passively Maruping says 422 houses have been built, with 2 677 to the Industrial Development Corporation, all for
in operational research and mathematics, as well as a protecting people against the possible loss of income, but it under construction thanks to this initiative. the sake of the person on the street – or in the
master’s degree in information systems and knowledge is also progressively working towards using its swelling He mentions another UIF initiative, the so-called labour water. When it comes to investing in job creation,
management – knows all about system integrity. coffers for actively engaging in job creation. activation programme. the UIF has several oars in the water.
One of the reasons that the UIF and IDC have formed such Says Puzi: “The collapse of global credit in 2008 made us “It is one of the instruments that could reach 1 million “In one of our partnerships we trained over a
a formidable partnership – as unexpected lender and realise that, in spite of the effect this was having on the people a year if we ironed out the creases, but [we first need hundred scuba divers, young black folk who had
unswerving developer – is their common drive to ensure that global economy, we needed to turn things around. We to work out] how to get the Sector Education and Training no exposure to swimming, let alone scuba diving.
stringent procedures must be followed long before any money needed to continuously work towards creating jobs to keep Authorities to assist us with reaching targets, as well as how “Now they are able to do underwater diving of
is made available. our economy vibrant.” to get rid of obstacles that prevent service providers from 10m and deeper, so they can do deep sea rescuing
Maruping explains: “Before funding is allocated to the IDC, Maruping says: “We want the public to know that the helping us. These obstacles include speeding up payments to all along the KwaZulu-Natal coastline.”
the Public Investment Corporation (PIC) – which administers hundred-billion-plus of rands we have in our well diversified contractors in order to enable faster turnaround times.” This is just one example of the UIF rising to the
the UIF’s portfolio – embarks on a no-holds-barred due portfolio is bei; we are investing in developmental structures Fostering strong partnerships, enhancing employability and occasion, fulfilling need where demand surfaces.
diligence process. Officials there proceed systematically, across the country – from infrastructure construction extending on-the-ground capacity are some of the milestones “Previously there was no one in the
paying careful attention to governance structures, required projects and long-term bonds to student education and Maruping has set for himself. But his desire to cut through environments in which these scuba divers work to
funding allocations and annual financial statements. accommodation, housing, energy and developmental the red tape and speed things up, ultimately benefiting the protect children against drowning, particularly
“This is all done to ensure that the conditions in that endeavours in general. Our partnership with the IDC – which person on the street, seems to be his primary aim. during high-peak times such as the upcoming
organisation are suitable to receive the earmarked funding. It the August audit showed stood at 66% of the corporation’s “We have been looking at getting free Wi-Fi in all our festive season.”
requires that administrative machinery must be in place.” total funding – is just one of our goodwill instruments.” labour centres – we have 126 countrywide, not to mention In addition, Maruping says, “these scuba divers
The due diligence side of things only commences after the And goodwill it certainly is. the 800 visiting points. Ultimately, it means that people could play an important role in our oceans
UIF has received the IDC’s funding proposals. With a second tranche of R5 billion on its way to mark the could come to our centres and register for unemployment economy as set out in the government’s National
“These are presented to our investment committee,” initiative’s 10th anniversary in 2018, it is important to note without any face-to-face engagement.” Development Plan. It is exactly with long-term
Maruping says, referring to an independent advisory structure that return on investment (ROI) for the UIF is not just about In this regard, says Maruping “we have a service provider projects like Operation Phakisa in mind, that we
consisting of eight non-affiliated stakeholders from organised money. lined up – and, if all goes according to plan, the UIF will though it would pay dividends to dive right in and
labour and business. Maruping explains: “Our ROI is very small. We give the commence rolling out free Wi-Fi by March.” help the aspiring scuba divers.”
“The investment committee will look at the proposal before IDC a funding opportunity of R5 billion at CPI [consumer Makhosonke Buthelezi, the UIF’s UIF director of marketing and Maruping stresses that, of the initial 100
it goes to the UIF’s board. Only once the UIF’s executive price index], plus 0.5% return over a period of five years.” communications, adds: “Clients can access our services via trainees, more than 80 have been employed.
committee has reached consensus about the IDC’s input do In a nutshell, most banks would turn their backs on this. uFiling, which is our version of the SA Revenue Service’s eFiling.” “The remaining ones have gone on to further
we approach the PIC. After it has finished perusing the “But it was our focus from the start to be an Maruping says: “In the end, it is all about building on what training with a view to possible absorption. We
proposals we received from the IDC, only then does the due unconventional lender, to help the IDC in ensuring that we started in 2008, taking that progressive vision and using it to don’t just train people without thought going into
diligence process start.” small and medium-sized enterprises in South Africa continue propel the UIF and job creation for our people into the future.” how they will find employment. Supplying skilled
And yet, it is not just at the highest level of this triangular growing, particularly those entrepreneurs and enterprises . This feature is reported by City Press people where demand arises is what it’s all
funding model – from the IDC to the UIF, then on to the PIC that are unable to get funding from ordinary banks.” and sponsored by the IDC about.”

The impact of the Unemployment Insurance Fund’s partnership with the Industrial

Development Corporation since inception in 2010:

Investment total: Geographical impact of jobs saved and created:
R3.9 billion Gauteng

Jobs created: 1 031
Jobs created: 1 123
Total number of 29 895 KwaZulu-Natal Limpopo Free State Jobs created: 7 208
Jobs created: 5 062
jobs created: Jobs saved: 2 227 Jobs saved: 449 Jobs saved: 102 Jobs saved: 8 635
Total number of 16 560
jobs saved:

Northern Cape Eastern Cape Western Cape Mpumalanga North West
Jobs created: 495 Jobs created: 2 187 Jobs created: 12 024 Jobs created: 1 379 Jobs created: 3 129
Jobs saved: 267 Jobs saved: 1 386 Jobs saved: 3 681 Jobs saved: 2 328 Jobs saved: 343

Source: IDC Graphics24