Compensation Fund meltdown

Department of Labour director general Thobile Lamati will not privatise the R52-b Compensation Fund in 2015, despite its meltdown after many turnaround efforts.

Lamati said the DOL would take further measures to turn the Compensation Fund (CF) around. The fund should compensate employees who are injured or fall ill at work, but it is failing workers and doctors in the public and private sectors.

Lamati said they needed “skills and competencies… to adjudicate and process claims”. The compensation backlog of 231 000 claims looms before the new electronic management system introduced last year, named Umehluko, following a string of system changes (see earlier reports on Sheqafrica.com, including the Siemens contract saga).

Compensation Fund Commissioner Shadrack Mkhonto said the Fund is in a dire situation, as it faces a fundamental problem with the payment of doctors and hospitals for claims lodged.

Commenting on the web-based electronic compensation claim system, named Umehluko (Difference), Ravind wrote; “Please compensation commissioner, upgrade your system to be more user-friendly and efficient. The doctors as well as the employers are having a hard time, wasting hours on end to get through to one of your consultants for assistance, let alone reporting incidents on your new Umehluko system.

“We have had critically injured employees turned down at hospitals because doctors would not like to treat an injury on duty, IOD, rather on their medical aid which is much easier for payment.

“We recently could not get a motivation from a doctor through to COID for an MRI. What do we do? Your Labour centres are not much help at such times either. Please CC we need your urgent co-operation and assistance.” (see comments by Ravind and Leon below this post, or add your own comment).

The Democratic Alliance (DA) found that South African workers in need of medical care could not access compensation.

The DA’s research indicated “barriers to access to medical care for workers injured on duty, who required emergency medical care and treatment”.

Many doctors and medical practitioners are not paid for treatment and care given to injured workers. Some waited close to a decade for payment. Some doctors simply turn Compensation Fund patients away.

The new electronic claims system had also collapsed. There is a “shortage of skills and operational ability of government to run this Fund,” said the DA, and called for privatisation of the medical aid division (see reports on the construction compensation fund FEM, and the mining and metals compensation fund, on Sheqafrica.com).

EOH Holdings "sees significant opportunities to grow revenue from the public sector in both South Africa and Africa, based on African governments' desperate need for information technology expertise." (Photo; News24).
EOH Holdings “sees significant opportunities to grow revenue from the public sector in both South Africa and Africa, based on African governments’ desperate need for information technology expertise.” (Photo; News24).

One in three injured workers are denied treatment
The South African Medical Association (Sama) Gauteng members were owed R13.4-m, according to the DA, who had also surveyed the National Employers Association of South Africa (Neasa), the Independent Practitioners Association Foundation (IPAF), and Qualicare.

About 36% of 243 respondents surveyed in Gauteng said they had been turned away by a doctor, 33% by a private hospital, and 13% by a government hospital.

The figures for being turned away were worse in provinces such as Mpumalanga, Limpopo, North West, and Free State.

CPC /Qualicare, a network of doctors in the Western Cape with 600 members, said according to its survey of mid-2014, over 300 doctors had not received payment from the fund for a long time. About 200 of its doctors would no longer treat Compensation Fund patients.

CompSol, an intermediary that handles about half of the medical claims against the fund, indicated that since April 2015, unpaid debt owed to its members by the fund was R555 982 029. In March 2015 it was granted a court order of R16.3-m for outstanding payments against the Labour Department and the Compensation Commissioner.

Compensation Fund “unable to prevent fraud”
Compensation Commissioner Shadrack Mkhonto had earlier blamed capacity and fraud problems on “growing demands of clients”. The CF was “unable to detect and prevent fraud by officials and service providers.”

The auditor general gave the fund’s financial statements a disclaimer of opinion for reasons including poor accounting records and lack of internal controls.

“The financial statements as a whole are materially misstated due to the cumulative effect of numerous individually immaterial uncorrected misstatements in… financial position, financial performance, and notes to the financial statements,” reported the AG.

According to the financial statements, R2.7-b in benefits were paid in the last financial year, but the Auditor General doubts even these figures.

DOL responds to Compensation Fund shambles
Labour Minister Mildred Oliphant wrote in the DOL annual report: “I am proud to present the Compensation Fund Annual Performance Plan for 2015 financial year, which is informed by its 2014 -2019 Strategic Plan.

“The Compensation Fund has made an unequivocal commitment to improve its operations by continuing with efforts to fundamentally shift the organisation to become efficient and service oriented.

“It is also through this annual plan that the Fund could effectively position itself to deliver on its mandate of providing compensation for occupational injuries, diseases and rehabilitation of workers, and continuously add value to all its clients.”

DOL skills audit
The Department of Labour in January 2015 noted responses to its request for proposals for a skills audit for 1100 Compensation Fund employees, by 6 February 2015. These bidders responded;
ESTARA SKILLS DEVELOPMENT
ERNEST AND YOUNG
WORK DYNAMICS
SOBETHU
DELOITTE
OCEANA HR PROFESSIONALS
LTS CONSULTING
BUSINESS ENTERPRISE UNIVERSITY OF PRETORIA
EXECU PRIME
21 CENTURY PAY SOLUTIONS GROUP
VICTORIOUS GROUP INC
AKANANI
EOH [new owners of Siemens, still on ‘handover’ contract].

Compensation Fund performance plan 2015
Compensatoin Commissioner Shadrack Mkhonto wrote in the Commissioner’s Statement; “It is with great pleasure to present the Compensation Fund’s Annual Performance Plan for 2015… to deliver on its mandate of providing compensation for occupational injuries, diseases and rehabilitation of workers.

“This will enable the Fund to contribute to government and departmental priorities while accelerating its efforts to improve the provision of a social safety net… The plan will focus on these key performance areas:
• Protecting vulnerable workers
• Strengthening social protection
• Strengthening the institutional capacity of the Fund.

“Online claims registration portal and automated adjudication system has been developed and piloted with selected users.”

Compensation Fund tests RMA system
Mkhonto also writes of “implementation of a system that is tried and tested and 90% compatible with the business of the Compensation Fund… through implementation of the business operating model and business processes that are compatible to the Fund.

“Through interaction with various similar organisations, Rand Mutual Assurance (RMA) business model, business processes, and processing system were identified as a system best suited to the business model of the Fund.

“However, before the RMA system could be adopted, the Minister approved that a pilot project be conducted.” The Fund is piloting the RMA system.

The Fund is also amending its own legislation, and will have a draft Bill for public comment in early 2016.

Compensation revenue collection raised
The Return on Earnings (ROE) website yielded good results in terms of registration and assessments of employers. The Fund will “improve revenue collection by revising its revenue management strategy to ensure better declaration by employers and increase revenue collection in the process.

Compensation Fund invests in PIC projects
The Compensation Fund will work with the Public Investment Corporation (PIC) in “supporting and enhancing the Socially Responsible Investment (SRI) by investing in projects that promotes economic growth through labour intensive employment.”

R3.8-b will be put aside for this purpose. In addition, PIC proposed establishment of rehabilitation centres costing R1-b, inside existing public hospitals, in conjunction with the Department of Health,” wrote Mkhonto.

The plan was signed by minister Oliphant, as well as;
S Nkhabelane; Director: Organisational Effectiveness
K Tselane; Acting Chief Director: Operations Management
T Mokomatsidi; Chief Director: Corporate Services
J Modiba; Chief Financial Officer
S Mkhonto; Compensation Commissioner
S Morotoba; Acting Director-General.

Siemens ghost haunts Compensation Fund
The Public Private Partnership (PPP) contract with Siemens terminated three years ago, yet the Department of Labour has invoked a “termination support and handover period” clause in the contract, where Siemens had to provide support and maintenance for an extended period at a set price.

Siemens was wholly acquired by EOH. “The Exit and Transfer of the PPP progressed to ensure that all knowledge, information, intellectual property, assets, etc, are transferred back to the Department,” said the DOL.

“The Compensation Fund experienced numerous problems with the IT provider, and the relationship deteriorated due to non-delivery and non-cooperation.

“This included refusal to complete the changes requested to systems, stopping of the phase II portion of the systems development, non-cooperation on the data migration; suspension of IT services to review the governance processes of the appointment.”

Sources; DOL. DA. Sheqafrica.com.

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Edmond Furter

Editor at Sheqafrica.com
Edmond Furter is the editor of Sheqafrica.com. He is a freelance technical journalist, and has won six journalism awards. He specialises in industrial, business, and cultural content in web, journal, and book formats.

4 thoughts on “Compensation Fund meltdown

  1. Please compensation commissioner, upgrade your system to be more user-friendly and efficient. The doctors as well as the employers are having a hard time, wasting hours on end to get through to one of your consultants for assistance, let alone reporting incidents on your new Umehluko system.
    We have had critically injured employees turned down at hospitals because doctors would not like to treat an injury on duty, IOD, rather on their medical aid which is much easier for payment.
    We recently could not get a motivation from a doctor through to COID for an MRI. What do we do? Your Labour centres are not much help at such times either. Please CC we need your urgent co-operation and assistance.

  2. Is has been happening daily from 10 in the morning for the past three weeks? Umehluko is not working again?
    As in; “Umehluko is currently undergoing unscheduled maintenance. We apologise for the inconvenience. Please contact the system administrator or IT team for more information. Email ccms@labour.gov.za

  3. The system is clearly failing. Spare a thought for the injured and those who do not even make it home to be with their loved ones. In the end, this is literally adding insult to injury. I wish I could throw my shoe in his face.

  4. If the Compensation Fund do not have the ‘skills and competencies’ to adjudicate claims then the government should outsource this department to the private sector.
    To literally have to turn people away all because of the Compensation Fund’s inability to pay the doctors and hospitals for services rendered, is a sad state of affairs.

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