Compensation Fund explains how it lost R71 million in two years

The Compensation Fund has responded to The Citizen’s reporting on fraud-related losses totalling approximately R71 million over the past two financial years.

On Thursday, the fund confirmed the figures while outlining steps taken to recover funds and hold wrongdoers accountable.

Department of Employment and Labour spokesperson Teboho Thejane explained that these losses amounted to R32 million in 2023/24 and R41 million in 2024/25.

He said they were largely linked to fraudulent changes to banking details and to intercepted payments that exploited control weaknesses in legacy systems.

“These losses were identified through strengthened audit, oversight, and investigative processes, reflecting improved detection capability and increased transparency in reporting,” Thejane said.

Compensation Fund’s recovery efforts and accountability

In response to the losses, the fund moved swiftly to recover funds and pursue those responsible.

Thejane said approximately R46 million had been recovered through collaboration with banking institutions and the Asset Forfeiture Unit, while preservation orders totalling R22.9 million had been secured across nine cases.

Cases have also been referred to law enforcement and specialised agencies, including the South African Police Service, the Directorate for Priority Crime Investigation, the National Prosecuting Authority, and the Financial Intelligence Centre, with criminal, civil and administrative processes ongoing.

“The Fund continues to pursue recovery through coordinated enforcement action and strengthened partnerships with financial institutions,” Thejane said.

Adverse audit findings

The Citizen previously reported that the fund’s 2024/25 management report showed the entity had received the same adverse audit outcome as the previous financial year, after management failed to adequately implement corrective measures recommended by auditors over several years.

The Compensation Fund acknowledged this, with Thejane saying audit findings had highlighted control weaknesses, documentation gaps, and deficiencies in verification processes.

He said corrective measures had since been put in place, including strengthened audit and monitoring systems, improved verification and payment controls, and the introduction of digital platforms to reduce the risks of manual processing.

“These actions form part of an ongoing programme to address control weaknesses identified through audit processes and strengthen overall governance,” Thejane said.

Biometric system operational, says Fund

The Citizen also reported, based on information from internal sources, that the fund had spent more than R60 million on software licences for a biometric identity management system that was not operational, despite the broader project carrying a price tag of R148 million.

However, the Compensation Fund denied this.

Thejane said the biometric identity management control system was implemented in October 2025 and is fully operational, having since strengthened controls through biometric-based user authentication, improved accountability and traceability of transactions, and strengthened segregation of duties in high-risk processes.

“The system has enhanced the control environment, with no reported incidents of fraudulent banking detail changes following its implementation,” Thejane said.

Thejane added that fraud losses had fallen to approximately R3 million in 2025/26, representing a 92% decrease from the previous year.

“The fund remains focused on protecting public resources, improving system integrity, and ensuring accountability in the administration of benefits,” he said.