Two days after the Unemployment Insurance Fund (UIF) and its owner, the department of employment and labour, defended their decision to invest R5bn into an untested job-creation project, minister Thulas Nxesi has stepped in and pulled the plug.
After last week’s revelation by the Sunday Times that the UIF intended to invest the money in Thuja Capital Fund — against the advice of its own adjudication structures — Nxesi this week intervened and stopped the deal pending an explanation from his director-general Thobile Lamati.
It was part of a project under the Labour Activation Programme (LAP), run by the UIF and some partners.
“I have since instructed the director-general and the UIF commissioner to suspend this project pending a full report on all the matters that are raised about it in media reports and related matters,” Nxesi said this week.
Among issues raised in the Sunday Times report was that both Maruping and Lamati:
- overruled the UIF’s interim adjudicating committee and concluded an agreement to fund Thuja, which exists only on paper;
- confirmed that no due diligence was done on Thuja, which is partly owned by Productivity SA chairperson Mthunzi Mdwaba;
- confirmed that Thuja’s proposal was referred to the Public Investment Corporation, the state-owned fund that manages the UIF’s assets, among others, and that the PIC declined to fund the company.
The idea was criticised by labour federations Cosatu and Saftu, which both described it as improper use of workers’ money. Cosatu again called for the UIF to be placed under administration, saying it was clear the leadership had run out of ideas.
Lamati had said the reason for going ahead was that the investment had the potential to create jobs — up to 200,000 — and an additional R16m in UIF collections, and that was something that could not be passed up.
“We decided that instead of being risk-averse, we would go ahead with the project because of its potential. We may be wrong or we may be right, but we think young people need employment,” Lamati said last week.
Post-publication, the UIF and the department issued a statement reiterating its support for the programme.
“Bureaucracy in government should not be used as an excuse to suppress opportunities that can begin to substantively address the problem of unemployment. What is important is that we pursue actions that can be justified and that are intended to ensure that the department discharges its mandate.
"And for this our hearts need to be in the right place. There is no place for corruption or serving of self-interests,” it added.
But before the ink had dried on the statement, Nxesi, who is in Mangaung where the ANC celebrated its anniversary this week, instructed that the contract be put on hold, and demanded a full explanation.
His spokesperson Sabelo Mali said the report was expected to be handed to the minister next week.
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