Compensation Fund fraud: what Johannesburg workers and employers need to know

Rising losses, weak controls: the state of the Compensation Fund

The Compensation Fund has seen identified financial losses rise sharply, with figures totalling R71 million across the past two financial years, up from R10 million in 2022–23, according to senior internal sources and the fund’s 2024–25 management report.

Who the fund is and why it matters

The Compensation Fund, which sits in the labour department, provides insurance to employees for injuries, diseases or death sustained at work. It also pays medical costs and lost income and shields employers from direct financial liability for workplace accidents.

What auditors found

The Auditor-General issued a disclaimer audit opinion and flagged persistent financial mismanagement, weak controls and mounting fraud risks that undermine the entity responsible for compensating injured workers.

The 2024–25 management report records that the fund received the same adverse outcome as the previous year because management failed to adequately implement corrective measures recommended by auditors over several years. The report lists governance failures, unreliable financial records, illegal payments, cyber security weaknesses and repeated Public Finance Management Act breaches.

Fraudulent payments and missing documentation

Auditors reported growing losses from payments diverted into fraudulent bank accounts: R41.4 million in 2024–25, up from R30.1 million the prior year and R10 million in 2022–23. Management was unable to provide supporting documents for total payments of R14,622,826.33, and for payments of R10,348,249.65 auditors were not given evidence to confirm that paid bank accounts belonged to authorised beneficiaries.

Senior internal sources also told reporters that there were payments amounting to R279 million made to medical service providers without supporting documents, and that the identified R71 million may understate the full extent of losses because more fraudulent activity remains undetected.

Claims of deliberate looting and system vulnerabilities

An official speaking to reporters claimed the system itself enabled theft, saying:

“The system has been intentionally designed to enable looting of the fund. The fund uses a system which is not encrypted and there are no proper controls in place.”

Auditors also found weak user access controls in the fund’s SAP and CompEasy systems and internal network testing identified 220 vulnerabilities, including 52 classified as critical and 73 as high risk.

The report notes that the fund has spent more than R60 million on software licences for a biometric identity management system that is not operational and that a delayed R148 million project meant to strengthen access controls has yet to deliver.

Impact on injured workers and employers

Auditor-General Tsakani Maluleke warned that the fund’s deteriorating control environment directly affects injured workers who rely on timely and accurate compensation, rehabilitation and medical support. The report states:

“The inadequate control environment leads to inaccurate calculations of compensation benefits and delays in the processing of claims submitted by workers.”

The report also flagged concerns about poor revenue collection, including failures to pursue long outstanding debtors, weaknesses in employer assessments and the continued granting of Section 85 reductions without proper verification.

Response and next steps

The fund’s spokesperson, Hloni Mpaka, had not replied to questions by the time of publishing. The Auditor-General’s findings and the fund’s management report point to systemic weaknesses that auditors say require corrective action to protect beneficiaries and reduce fraud risks.

What workers and employers should take away

• Be aware that auditors have found significant control failures and rising losses linked to fraudulent bank-account changes and intercepted payments.
• Understand that delays and inaccurate calculations of compensation are an identified risk affecting injured workers.
• Watch for announcements from the labour department and the Compensation Fund about remedial measures and any operational changes to improve security and claims processing.