Black Business Council submission to the Portfolio Committee on Labour regarding the Unemployment Insurance Bill, 2001
20 March 2001

1. Introduction
The Black Business Council ("BBC") supports the process of transforming the current social services of Unemployment Insurance. This becomes important as our country is experiencing rather high levels of unemployment particularly amongst Black South Africans. This presentation is aimed at providing a black business perspective by commenting on the Unemployment Insurance Bill ('UIB") or hereafter referred to as the Bill.

The BBC is encouraged by the groundbreaking provisions in the new Bill in terms of
De-linking the maternity benefits from unemployment benefits;
The inclusion of higher-income contributors; and
The introduction of a progressive scale of benefits, amongst others.

The above provisions will go a long way to ensure that the unemployed people will have adequate access to and benefit from UI and that the Bill will be funded on an equitable basis between employers and employees.

The BBC is however, concerned about the following aspects of the Bill:
The exclusion of domestic workers and public servants;
The financial status of the current fund and its ability to meet future funding commitments;
The double taxation of benefits;
That Government is not willing to underwrite any funding deficit;
The timing in terms of Section 9(2) within which an application for UI must be made.

The BBC acknowledges the role of UI, which is a short-term measure and which must be part of a greater strategy around social services in South Africa.

2. Areas of Concern
2.1Exclusion of domestic workers and public servants
The BBC is concerned about the temporary exclusion of domestic workers from the scope of the current bill in terms of Section 3(l)(d) which envisages an investigation to determine a method of inclusion.

The BBC supports the inclusion of Domestic workers who are often most vulnerable to unemployment and therefore it is contrary to their best interests to exclude them from the current proposed legislation. We believe however, that special exemptions need to be made for domestic workers. If they are expected to contribute on the same basis that other workers, their take home pay would be considerably less. This should be considered during the proposed investigation.

The BBC also supports COSATU in that the definition of a domestic worker should be similar to the one included in the Basic Conditions of Employment Act.

2.2 Financial status of the current fund
A core concern of the BBC is that the financial status of the current fund is inadequate to meet its funding obligations. This is in part to fraud and corruption under the existing Act. The BBC feels that this has not been adequately addressed in the current legislation. A new administration system which is effective and efficient should be implemented with sound internal controls to ensure a drastic reduction in fraud and corruption.

We will discuss later in this presentation the funding obligations of Government.

2.3 Taxation of benefits
The taxation of benefits, which is dealt with in section 26, would further erode the positive effects of a sliding scale of benefits. We believe that this would be unfair to unemployed people that have already been subject to relatively high levels of normal income tax. The calculation of Taxable Income as defined in the Income Tax Act, currently excludes the deduction for UIF. This further complicates an already overburdened tax collection system, as it would mean that a new definition for the calculation of Taxable Income would have to be defined and a process for collection of such taxes established.

Further the tax exemption status of the Fund is not clear in the new Bill. We believe that the Fund should be fully exempt from tax, thus allowing maximum benefits to contributors.

2.4 Deficit Underwriting
This is an area of concern because of the current financial state of the Fund. The BBC feels that Government should underwrite the Fund as was done in the past to provide it with the stability it needs. This will further boost the general confidence in social services and put the minds of current contributors at ease knowing that when they possibly could need the Fund that the funds will be available. This would promote a culture of payment both from employers and employees.

The BBC feels that strongly that an actuarial valuation should be performed regularly to determine the funding obligations of the Fund in the future.

2.5 Timing for the application of benefits
The BBC is concerned at the proposed amendments to the application period for benefits is too short. In terms of Section 9(2) the application for benefits must be made within six months of the termination of contract of employment, except where good cause shown to the Commissioner, he may accept such application made after six months. We believe that the current provision under the UI Act [Act 30 of l966], which allows for applications to be submitted within a period of four years, should prevail. The labour dispute process can take a long time to resolve coupled with the additional burden placed on the Commissioner, would reduce the effectiveness of the Fund. It is therefore in the interests of the unemployed to maintain this period of application.

3. Conclusion
In conclusion, the BBC supports the new Bill and would stress that this is a short term social service and it is the most effective social investment that Government can make as the funds come from the contributors themselves. Except for the areas of concern noted above, the BBC is encouraged at the positive impact that the Bill will have.

We encourage the Fund to reduce inefficiencies and fraud by being committed to good governance and accountability.