Labour on electronic banking for UIF payment

18 July 2006

In just over a year since its inception, the inaugural government business
partnership to bring secure payment solution for Unemployment Insurance Fund
(UIF) beneficiaries has proved a resounding success.

The partnership between the Department of Labour and the First National Bank
(FNB) which was first introduced to the public on 12 May 2005, entailed direct
transfer of benefit payments electronically into beneficiaries’ bank
accounts.

The Electronic Fund Transfer (EFT) provides recipients an easy, convenient
and affordable access payment in their own environment.

Labour Minister Membathisi Mdladlana today met with a delegation from FNB in
Pretoria to reflect on the implementation of the EFT.

Speaking after the meeting, the Minister said the launch of the partnership
was just the beginning of a long journey towards economic freedom.

Before the introduction of the new electronic banking method, beneficiaries
could access UIF benefits through three different payment methods namely cash
vouchers, cheques and cash paymaster service.

“The cheque payment method opened our clients to unscrupulous merchants who
cashed their cheques on condition that they part with a portion of their
hard-earned money. Cash payments carried with it the risk of having to carry
unnecessary excess cash, which also opened our clients to the risk of being
robbed,” said Minister Mdladlana.

He said the new payment method for UIF benefits did not only assist in
expanding service delivery but also succeeded in bringing back the dignity of
the thousands of UIF beneficiaries, who no longer have to stand in long queues
to receive their payments.

“I still want to challenge FNB to extend this new payment method to all the
government’s social grants in the quest to eliminate long queues,” Minister
Mdladlana added.

“Part of the agreement with FNB is that we open a Mzansi account for those
beneficiaries who do not hold bank accounts. This will contribute towards
strengthening our domestic economy,” added Minister Mdladlana.

“For most first time formal access to banking provides the opportunity to
develop a personal financial history. These are the fruits of a successful
partnership between government and business to help deliver a better life for
the poor,” said the Minister.

Meanwhile, FNB’s Public Sector Banking Chief Executive, Modise Moathlodi,
said the partnership with the government on the UIF strongly formed part of the
bank’s activities relating to the Financial Services Charter.

“It is our desire for all South Africans to be banked affordably and
efficiently,” he said

“By providing UIF payments electronically more South Africans have formal
bank accounts. But most importantly, the government has saved millions of rands
and both our customers and UIF beneficiaries are getting paid timeously and
safely,” Moatlhodi added.

He said a further advantage was the 'in contact' service provided by the FNB
to alert beneficiaries if the UIF money had be deposited, saving clients from
making unwanted trips to the bank.

The Minister said the system had contributed to huge savings in the
Department.

“Through this payment method we have seen a reduction in bank charges.
Overall the electronic banking system has helped us to save more than R33
million as at the end of June (R23 million on bank charges and R10 million on
cheque vouchers) since the introduction of EFT 13 months ago. We have recorded
savings on printing, toner and stationery costs. Another saving has been on the
hiring of payout halls,” the Minister said.

“We want to thank FNB for putting aside their notion of making profits and
helping us to realise these savings.”

Minister Mdladlana pointed out that the system had also assisted in terms of
improving on bank reconciliations, something which led to audit qualifications.
Bank reconciliations were now done on the regular basis.

Between April 2005 and March 2006 more than R2 billion was paid to the
approximately 1,7 million workers who sought assistance from the fund. Whereas
60 percent of the amount paid out to beneficiaries during the previous
financial year was done electronically, so far in the current financial year
every single payment has been through the EFT.

The UIF reached another important milestone with the financial reserves
currently sitting at an unsurpassed R15,6 billion.

Enquiries:
Kgomotso Sebetso
Cell: 082 808 2168

Mokgadi Pela
Cell: 073 2699 870

Issued by: Department of Labour
18 July 2006