Getting things right by doing things right - a chat with Vuyo Mafata, Compensation Fund Commissioner

From the outside, the government’s Compensation Fund looks like quite a mess. Once you’re on the inside, you realised that’s wrong. It’s not just a mess, it’s one hell of a mess. In fact, it’s three or four messes all rolled into one, says Vuyo Mafata, its new Commissioner.

By Lesley Stones

Vuyo built up a great reputation as the CFO of the Unemployment Insurance Fund (UIF), collecting contributions of R15 billion a year, paying R7 billion in benefits and managing its investments of R100 billion. But taking on the challenge of the floundering Compensation Fund (CF) has given him headaches that involve malfunctioning technology, unhappy human resources, a lack of basic financial practices and outright fraud. "People don't know whether to congratulate me or give me their sympathies," he jokes. "Time will tell." But it's going to take time because the CF is mired in so many problems that Vuyo expects to see little progress for at least 12 to 18 months. And a complete turnaround is still a distant dream.

"We have identified some things that require correction, which are mostly medium to long-term projects. The problems are so entrenched it's going to be 24 to 36 months before we see major improvements. It is a huge, huge challenge."

Rising from a CFO to a CEO-type role was a natural step, he says, and after ten years at the UIF he was ready for a change. "History is full of CFOs who have gone on to manage big organisations. It is the next progression career-wise from CFO to overseeing the operations of an entire organisation, so it was a challenge I felt I needed to try. The skills you learn from being a CFO play a big role in the position of managing a financial institution. If the finances aren't in order, there's not a lot the organisation can do." Unfortunately, the Compensation Fund's finances are far from being in order, he discovered.

Letting workers down

The fund was established to provide compensation to people who are injured at work, left disabled or killed in work-related incidents. But it is letting down those workers as well as the medical practitioners because their claims go unpaid for months or get lost entirely. The South African Medical Association (Sama) says many doctors refuse to treat to 'injured-on-duty' cases in case they are never paid by the fund.

Legal action is common too. In one current case the Radiological Society of SA and 19 radiology practices are taking legal action against the labour minister over the fund's failure to process and pay R121.5 million in claims for services provided to injured workers. The society says some claims have gone unpaid for years, while the average repayment takes 350 days.

Vuyo says being taken to court is a regular occurrence for the fund as it hasn't been paying medical practitioners or clients. "Money isn't the problem, spending the money is the problem," he says.
The Auditor-General has also expressed concerns for a number of years about the CF's finances, Vuyo says: "It's sitting on healthy reserves (of R56 billion) but the problem is managing those reserves, and the financial administration of the organisation has been very poor. That is one of the things that appealed to me, that I can play a role in getting this organisation back to where it should be."

Vuyo was initially appointed as the acting Commissioner in mid-2015 and made permanent in March 2016, which must be a vote of confidence for the rescue plan he has devised. The issues are multiple: poor financial management with financial principles being ignored, bad people management creating an unhappy work environment, inefficient business processes and information technology (IT) systems that don't work properly.

One complication is that there are three fields of activity within the CF: it is the country's biggest medical aid scheme; it is a pension fund, and it is a short-term insurer. Those are treated as one business, but Vuyo may split them into three distinct operations to make them each easier to manage.

Recruitment drive

Getting the right people on board is also crucial, and Vuyo has been on a recruitment drive and made several changes at senior management level. The medical aid business didn't have people with the necessary medical skills, so people are being recruited now. He has also appointed a CFO, two financial directors, a head of legal services and a head of human resources. That broad sweep of new appointments shows how many problem areas had arisen.

"The challenges in this organisation are huge, and it is not going to take a short period to resolve it, but I think with my skills I should be able to help. It is not an individual thing - no one person can do this. The mess isn't because of one person, it is because of a whole collective, and to get it out of the position it is in, I need a good team around me," he says.

From a financial point of view, the key will be getting back to basics and applying sound financial management principles. "There have been a number of previous turnaround strategies, but they dealt with the symptoms of the problem, not the root causes, and the best way to deal with the root causes is to get back to doing the right things right," he says.

Vuyo has uncovered a high level of non-compliance with the basic financial rules and legislation that govern public sector institutions. Some stem from an element of neglect, and some from fraud, he says. "There's been a lack of leadership in the financial management. People are not being guided and led in terms of what needs to be done or the policies, so we need to put the proper policies in place and review our accounting policies."

Another pressing need is to fix the IT landscape by installing the right technology to manage the massive amount of daily transactions that must be processed. The head of IT has embarked on a huge installation of an SAP Enterprise Resource Planning system and is searching for a new claims processing system. According to Vuyo, the current electronic claims system installed not long ago was done in haste and isn't working properly.

"Most of the interventions in the past were dealing with the symptoms, not the root causes, so a lot of things were implemented that weren't sustainable. We need to find long-term solutions, and getting the right claims management system is one of them."

At 38 years old, Vuyo says he enjoys working in the public sector because it is an excellent learning ground. "I am still young, so there is still scope for me to go to the private sector at some stage, but I have experienced things in the public sector which I wouldn't have done in the private sector," he says. Like being called to explain his strategies in parliament, for example, and handling investments of R120 billion when he was with the UIF.

Vuyo says attending events hosted by CFO South Africa is helping him with his new role because he has met and developed a network of other CFOs who he can call upon for help and advice. "Getting to share knowledge and insights has been very helpful. The public sector CFOs know each other now, so it has become easier to call for help or to say I am looking for someone, and people can assist," he says.

This article first appeared in CFO Magazine.