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The Unemployment Insurance Fund (UIF) is, by law, mandated to provide unemployment, illness, maternity and other benefits to its millions of contributors when they are out of work. But the UIF is also using its R139 billion accumulated assets to invest in various sectors of the economy, including education, housing, agriculture and health infrastructure.
It does this by partnering with the Public Investment Corporation, the state-owned asset management company, to invest in projects that not only ensure a healthy return for the fund, but pump money into projects that have a meaningful social impact. These include offering tertiary study loans to students from low-income households, helping government to alleviate the critical shortage of student beds at universities, and helping black entrepreneurs to get involved in a range of businesses, such as poultry farming and construction of new hospitals.
The fund has partnered with the Industrial Development Corporation (IDC) to inject R4 billion into a developmental fund that has helped save thousands of jobs in the distressed manufacturing sector, while creating new ones. How this works is that the UIF bought six IDC bonds for a period of five years for a combined R4 billion. Under the agreement, the IDC used the money to fund client companies that were in distress, in order to avoid job losses. It injected money into new projects that have the potential to create thousands of jobs in the manufacturing sector. Of the R4 billion in bonds, 95% has been disbursed to IDC clients. A total of R2.5 billion of these bonds has matured and the remaining R1.5 billion will mature in the next three years. The facility has been so successful that the UIF committed itself to a second funding initiative with the IDC to the value of R5 billion.
The UIF’s R136 billion investment portfolio, managed by the Public Investment Corporation, covers agriculture, education, health infrastructure, renewable energy, mining and the financial services sector.
To date, these initiatives have created or sustained 6 860 jobs, of which 3 024 are permanent and 3 836 are temporary/seasonal. An additional 195 new jobs were created during the financial year. The partnership with the IDC has created 29 895 jobs and saved 16 560 jobs to date. Most of these jobs created and saved were co-funded with normal IDC funding.
Education
The UIF has invested R57 million in Eduloan, a company established to provide education finance to the missing middle – those whose households are deemed too poor to qualify for bank loans, but too rich to qualify for National Student Financial Aid Scheme assistance. Eduloan disbursed R446 million in tuition, accommodation and related financing to just over 34 000 students in 2016, creating 140 jobs in the process.
To help increase the number of student accommodation facilities available, the UIF has invested R600 million in a R2 billion joint venture between the Government Employees Pension Fund and Adowa Property Developers to rollout student accommodation across the country. The Adowa Student Accommodation Joint Venture is building and will manage facilities that will accommodate 10 000 affordable student beds mainly aimed at previously disadvantaged students across the country. At least 140 permanent and 6 500 temporary jobs have been created through the joint venture.
Around R800 million has been invested in South Point Management, also for the construction of accommodation facilities, to provide 10 000 beds to students in Johannesburg, Port Elizabeth, Pretoria, Durban and Cape Town.
Health
Two investments have been concluded with black-owned hospital manager Busamed and fund manager Razorite Healthcare to build a 220-bed private hospital in Modderfontein, east of Johannesburg. This will be an affordable healthcare centre with state-of-the-art rehabilitation and sub-acute facilities. The UIF has put R300 million into this venture.
The fund has invested R1.7 billion in Kefolile Health Investments Limited, a 100% black-owned company that operates in the health, pharmaceutical and consumer goods sector. The company has used the funds to acquire significant shareholding in Ascendis Health Limited and Bounty Brands, which operate in North America, Australia, Asia and Africa, to tap into their popular brands in the health and consumer goods sector. The transaction was entered into in June last year and has already created 1 600 jobs. A further 500 jobs are forecast.
Agriculture
Daybreak Farms, a breeder of poultry and, more specifically broilers, that are raised for their meat, has attracted a R483 million investment from the UIF. Daybreak has a breeder arm, which is situated in Bela Bela, Limpopo. In Mpumalanga it has two broiler chicken production, processing and distribution operations in Sundra and Delmas, and a feed mill in Kinross. Daybreak raises these tiny chicks into fully grown broilers that are slaughtered and processed into frozen whole birds and frozen bird portions. The company has the capacity to produce 1.2 million birds per week at its Sundra and Delmas facilities. The project has created 2 408 permanent jobs and contract work opportunities since its commencement.
Three grape and citrus farms, collectively known as De Riviere and situated in the Saron area of the Western Cape, have been purchased with the assistance of a R91 million investment by the fund. This equates to 50% of the purchase price. The land in Saron is suitable for this type of farming and its close proximity to the Cape Town Harbour makes it the ideal location to export these in-demand fruits to various destinations across the world. This deal presented an opportunity to acquire farmland with excess water rights and significant development potential in a prime grape region.
There are 142 permanent employees on the farms, but an expansion that is currently underway is projected to create an additional 222 permanent and seasonal jobs.
In September this year, construction of a feedlot and piggery producing slaughter cattle and pigs began in Berlin, East London. The feedlot will have a capacity of 10 000 cows, starting with 3 000 cattle per year over a period of three years. The piggery will start with 240 sows per year, increasing to 2 500 sows by the fifth year. They will produce nine piglets each twice a year, translating to 3 300 piglets in the first year alone, once mortality is taken into account.
This R59 million investment by the UIF into this R89 million project will enhance rural development, skills transfer, food security and offer unemployed agriculture graduates much-needed practical experience. It will initially create 244 jobs, growing to 607 jobs in the seventh year of production.
Housing
A partnership with Royal Bafokeng Platinum to build homes for employees of the mining company has entered its second phase. The UIF has funded the project to the tune of R2.2 billion, to develop and manage a home ownership scheme in Waterkloof Hill Extensions 3, 4 and 5 in Rustenburg for the benefit of employees on the platinum mines in the area. The development will result in the construction of 2 677 stand-alone homes between February 2016 and November 2019. The affordable housing project has created 1 907 jobs by June this year and more are envisaged in the second phase.
