Sector Training Authorities Annual Report 2005/6 briefings: Transport Education Training Authority (TETA) & Tourism, Hospitality, and Sport Education Training Authority

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Employment and Labour

19 June 2007
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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

19 June 2007

Ms O Kasienyane (ANC)

Documents handed out:
Transport Education Training (TETA) Presentation on the 2005/06 Annual Report and Expected Issues 2006/07 Auditor General
Tourism and Hospitality (THETA) Presentation on the 2005/06 Annual Report and Expected Issues 2006/07 Auditor General

Audio Recording of the meeting

The Committee received presentations by two Sector Education and Training Authorities (SETAs). The third SETA, Media, Advertising Publishing, Printing and  Packaging SETA was denied a hearing by the Committee due to the absence of its board members, and was instructed to return for a hearing on another date.

The Transport SETA indicated the numbers of trainees, the programmes and their locations, and also covered the issues raised by the Standing Committee On Public Accounts and the Auditor General. The presentation also focused on the investment in Fidentia,  and it was clarified that the invested amount was R177 million rand, with the rest of the total of R288 million made up of accrued interest.  The matters of emphasis by the Auditor General were described as non-compliance with the GAAP reporting requirements, problems in the supply chain management, and non-submission of performance information. All these had been addressed. Members requested direct answers regarding the Fidentia investment and the non-compliance with accounting procedures and requirements of the Public Finance Management Act. Further questions related to risk management , training, how many trainees had been employed, the suspension of the former CEO, training specifically for the needs of the 2010 World Cup, the competency of board members, the loopholes in the supply chain management, whether the projects adequately targeted youth, and the profile of the aerospace industry. The Committee was concerned that the Board had not picked up the problems earlier, requested an analysis of the impact of the losses through Fidentia, clarification on service providers, and non attendance of board members at meetings. The Committee stressed its dissatisfaction with the state of affairs at the SETA, and its concern over the ability of the SETA to continue as a going concern. Unanswered questions must be responded to in writing.

The Tourism, Hospitality and Sport SETA focused on the issues raised by the Auditor General, and the actions that had been taken to rectify them, from the 2003/04 audit report. Those issues included non approval of the supply chain management system, and the lack of disclosure of interests by members of the SETA s tender Committee. All problems had been rectified by the SETA including the implementation of the recommendations made by the Auditor-General. The discussion included requests for clarity on training programmes, language training, a programme to upgrade taverns, the tour guide programme and performance assessments.

Transport Education and Training Authority (TETA) Annual Report Briefing
Mr June Dube, Chairperson, TETA Board, and Dr Johan de Beer, Acting CEO, TETA, Mr Dalpat Naran, CFO, TETA,  and Mr S O’Brien jointly gave a presentation to the Committee on the highlights from the TETA Annual Report, and the issues highlighted by the Auditor General.

The presentation commenced by tabling statistics of the number of people trained in the various skills levels and indicated that further statistical analyses by gender and equity would be in the Annual Report 2005/6. It was indicated that the Auditor General (AG) had raised emphases of matter in respect of accounting authority, the compliance with the Generally Accepted Accounting Principles (GAAP) and the reporting mechanisms, the supply chain management and the lack of performance information. The ongoing forensic investigations and the money invested in Fidentia were currently under consideration.
Dr Johan de Beer highlighted the progress made by the SETA on the TAXI Projects in all provinces. This ongoing project imparted professional driving skills, customer care skills and business administration skills. The project had begun this year in the Eastern Cape and was still ongoing. The future plans in the taxi project included the upgrading of training officers to testing officers and the testing centres to assessment centres. The assessment centres were to become quality assured and driving schools would be accredited. There was also training of small boat operators.
The targets not yet achieved in 2005/06 were highlighted in the presentation. The Workplace Experience Grant had now had 392 learners assisted. This specific project would be reported in the 2007 report. The new venture creation and accredited providers were also discussed.
The Auditor General's report for 2005/06 had contained emphases of matter The lack of a report on the Accounting Authority had been remedied as the CFO was going to ensure that the relevant information would be available for the compilation of the report in a timely manner. There was non-compliance with the GAAP/GRAP in financial reporting and the Public Finance Management Act (PFMA) and Treasury regulations. This had been remedied through a revision of the reporting template, which would also be used by all  other Sector Education Training Authorities (SETAs). The AG's report also indicated the problems in the supply chain management, in particular that the tender evaluation system utilised for procurement of taxis was incorrect. The supply chain management policy was approved by the TETA board. The problem had been rectified by employing a supply chain management practitioner who was to ensure that the required processes and procedures would be complied with. There had been non-submission of the information relating to performance against predetermined objectives. This problem occurred due to the request by the Auditor General to audit information from May, whereas it was normal to report annually through the training reports. The information was not available by the end of May.

Mr June Dube briefed the Committee on the special investigations. He focused primarily on the Fidentia investment issue. He highlighted that the money invested in Fidentia was R177 million, not R188million that was indicated in the presentation slide. Contrary to media reports, the R177million invested plus the interest to December would have resulted in a return of R288million. Fidentia was being run by curators and investigations were still ongoing. Those on TETA would take place in July. The curators were also trying to get back the money invested through selling the assets of the responsible Fidentia individuals. TETA was supporting the curators in their investigations. On  28 February 2007 TETA convened its own special forensic investigation through KPMG, who had reported back at the end of May. KPMG had asked to work with a Scorpion State agent due to the perilous nature of the issue being investigated. A further meeting was convened on 7 June, where it was decided that, owing to operational and governance considerations, the CEO at the time would be suspended. This was also done to ensure that the investigations taking place would not be compromised by individuals at the centre of the matters being investigated.

Mr Dalpat Naran presented on the special investigations relating to finance issues. He noted that an internet bank fraud had taken place involving R1 983 357. The bank and the forensic authorities were informed and investigations took place. The investigations resulted in the recovery of R748 508, and the balance of R1 234 850 was still subject to legal processes. Special investigations also took place over the discovery of an irregular claim of R4 million by a board member. The member was subsequently removed from the TETA board and the funds were recovered.

Dr Johan de Beer commented on the current worry whether SETA could continue as a going concern and meet its obligations as a result of the funds lost through Fidentia. He aired his confidence that TETA could honour all its existing or current obligations in line with targets set on the National Skills Development Strategy (NSDS) and that targets indicated in the presentation would be met.

The Chairperson commented that there had been much media speculation and a SCOPA report on the investment policy of TETA and the Fidentia investment. Concern was raised  on risk management by TETA. Some of the issues had been clarified, but there was a need for further matters to be clarified.

Dr de Beer responded by clarifying the issue on risk management, noting that there was an internal audit team that had been investigating the SETA and identified problems relating to risk management. The TETA Board and management had received training sessions on risk management processes, and there was now a stringent risk management system in place, which aided in identifying the internet fraud described in the presentation within 24 hours. It would take time to recover the money due to the legal processes. Criminal charges had also been laid against the particular individual responsible for the fraud.

Mr C Lowe (DA) asked how many people of the 69 412 people trained in the 8 chambers of the SETA had been employed.

Dr de Beer responded that it was difficult to gauge how many individuals from the 69 412 individuals trained had found employment. However, 50% of the individuals who enrolled into the programme were already formally employed before enrolling. The rest were previously unemployed and had little or no previous training, but were put through apprenticeships. There was no tracking done on these individuals, although they were equipped with the skills to enter the open labour market and were encouraged to do so.

Mr Lowe commented that the non-compliance with the GAAP/GRAP, PFMA and treasury regulations should not be trivialised. The briefing to the Committee on the Fidentia investment highlighted certain discrepancies over the money He asked for further clarification on the issue. He noted that the previous CEO was suspended after the SCOPA hearing for investigation of his possible involvement in the investment. He asked whether the board was not aware of his involvement and how the Board itself was involved.

Dr de Beer responded that R177 million was invested in Fidentia, and the rest of the money owed to TETA was accrued interest on the original investment. The external forensic investigation being conducted by KPMG requested the suspension of the former CEO. Investigations were still ongoing on board members who might have had vested interests in Fidentia. He added that TETA was alerted by the financial board of TETA about the possible loss of the money invested. Efforts were immediately taken to try to recover the money and to check that all the processes leading to the investment were done properly. SCOPA indicated that the correct procedures were followed in investing the money. The forensic investigations were still taking place and cooperation was being rendered by TETA.
Mr L Maduma (ANC) asked whether the training of professional drivers took cognisance of the 2010 World Cup traffic, in terms of the competency of the drivers and safety issues.

Dr de Beer said that there was current focus on the upcoming 2010 World Cup in the training being provided to taxi drivers. There was consistency with the principles of Accelerated Shared Growth Initiative for South Africa (ASGISA), focusing on the need to have a 24-hour transport service for the duration of the World Cup. TETA was furthermore receiving public and private funds for this purpose.

Mr Maduma commented that the suspension of the CEO should be guided by a time frame that stipulated when the investigations must be completed, also taking into consideration the progress of the investigations into the Fidentia investment.

Mr Maduma said that it appeared that the TETA board was not competent to manage public funds. He asked whether the preliminary hearings that had taken place had revealed any loopholes or gaps that needed rectifying.

Mr  de Beer responded that there were no educational or tertiary requirements for a person to serve on the SETA boards laid out in the Skills Development Act (SDA). However, every board member was required to serve on the board for only two years, during which many projects would capacitate the individuals in the principles of board management. TETA had tried to conduct such training to raise skills.

Mr B Mkongi (ANC) referred to the loopholes in the supply chain management that were indicated by the Auditor General’s report. He asked why the correct procedures and processes were not followed. He also requested why TETA failed to include the report of the accounting authority in the financial statements submitted to the Auditor General, and why the GAAP and GRAP procedures were not followed.
Mr Naran responded that the TETA had complied with the GAAP/GRAP procedures in the past, and this year's non-compliance was due to a slight confusion that occurred with the reporting template that had been provided by the Department of Labour (DoL). However, a complete set of accounts had been submitted after this report was received.

Mr Mkongi asked which learners were targeted in the TAXI projects. There was a huge unemployed number of youths who had matriculated, yet who did not have drivers' licences and he wondered if they were targeted.

Mr Dube responded that the core business of TETA was to train individuals and try to ensure that they were employed.  There was specific targeting of youths in training programmes although there was over-subscription of the programmes. Furthermore the training had a focus beyond the 2010 World Cup.

Mr Mkongi requested the profile of the learners in the aerospace training projects, in particular their race . He further requested more information about the service providers utilised by the TETA and the relationship they had with the CEO.

Mr Dube responded that the majority of ground staff in the aerospace industry were black whereas whites held the majority of the jobs requiring critical skills. The training programmes were attempting to remedy this situation.

Mr M Mzondeki (ANC) asked whether the customer training included in the taxi projects had an emphasis on disabled persons and rural areas.

Mr Mzondeki also asked why the TETA board was unable to pick up the numerous problems identified by SCOPA and the Auditor General before they escalated to the current levels.

Mr T Anthony (ANC) requested more clarification on the organisational structure of TETA. He also asked why the incorrect process were used in the tender process in the first place.

Mr Anthony asked whether the TETA board was not incapacitated by the large number of board members.

Mr S Siboza (ANC) aired that the Committee wanted strong reassurance of TETA’s ability to continue running the projects identified in the presentation. He asked TETA's plan to ensure that the targets and commitments could be achieved despite the difficulties.
Dr de Beer responded that the impact of the money invested in and unlikely to be recovered from Fidentia must be analysed. The money lost should not have any impact on the current learnerships and skills training already being conducted, so these targets should be achieved  Furthermore TETA was still getting separate funding.
Mr Mogale wondered if there was any risk management used by TETA. He further asked if there were any programmes being run in the important maritime industry. He asked where such learnerships, if they existed, were situated.

Mr S O’Brien, TETA, said that the training had been concentrating on the blue water maritime operations in Durban and Cape Town. This was due to the fact that only these two locations had universities that provided training related to the maritime industry. There had been focus on small businesses and internal careers centres who informed individuals on the available careers at sea.

Mr Mogale asked for further clarification on service providers, as the presentation had noted the presence of backlogs.

Mr Mkongi (ANC) asked why some of the members of the board had not attended meetings. He further asked for detailed information on the R399 000 spent on restructuring and the R1.4million spent on consultancy fees.

Mr Anthony requested that the TETA board must indicate to the Committee whether this SETA’s existence was still necessary and how it would add value to the industry.

The Chairperson asked about the female representation on the TETA board.

The Chairperson aired the Committee’s dissatisfaction with the performance of the TETA, and hoped that the governance and performance would improve. All unanswered questions must be responded to in writing, as there was insufficient time to address them.
Tourism, Hospitality and Sport Education and Training Authority (THETA): Briefing on  on Auditor General's findings for 2003/4
Mr Mike Tsotetsi, CEO, THETA, and Mr Chris Johnson, Chairman, THETA board, noted that the presentation would not focus on the Annual Report for 2005/06, as indicated in the title, but on the Auditor General’s findings in respect of the special investigation for the 2003/2004 financial year. Furthermore, he highlighted that the 2005/06 Audit Report was the first unqualified report, although it did contain the emphasis of matter in respect of the special investigation.

Mr Tsotetsi highlighted the four issues that were brought up in the special investigation for the 2003/04 financial year, relating to procurement. These findings were that THETA did not have an approved supply chain management system in terms of Treasury Regulation 16A for the period. It did not follow adequate procurement processes and supply management regulations in awarding contracts to a supplier relating to the INTAC Project for approximately R14 million. The tender committee members did not disclose any direct or indirect interest in terms of Section 50 (3)(a) of the PFMA. THETA did not manage the project efficiently as payments were made to the supplier even though the supplier did not deliver adequately on the project deliverables.

Mr Tsotetsi tabled the responses of THETA to all issues. The Board had now approved a supply chain strategy and policies and procedures had been adopted. It had obtained declarations of interest in contract forms and it was determined that no Board members had any interest in the INTAC project. The recommendations of the AG had been adopted to remove the risk and potential for financial misconduct. THETA had now mandated immediate steps and interventions to improve internal capacity and performance, promoting corporate governance and ensuring efficient project management. There had been no evident of criminal, fraudulent or corrupt actions by any officials. Policies and procedures were developed and these were being revised on an ongoing basis.

Mr Tsoletsi tabled the expected issues for 2006/07, which related in brief to irregular expenditure for settlement of a court case, which would exceed the administration threshhold.
Mr B Mkongi (ANC) referred to THETA's annual report and requested more clarification on the skills being offered in the Tourism and Hospitality industry.

Mr Tsotetsi responded that the type of training offered focused on travel agencies, travel agents and itinerary development. In the hospitality industry there were 50 qualifications. In  the sporting industry it dealt with the coaches and administration to ensure that there was adequate representation of women  in sport, adequate fitness training and recreation.

THETA received funding from different organizations. In 2003 the SETA received funding from business trusts that was used to improve the skills of the unemployed. Trained individuals had managed to get employment quickly . There was also training of tour guides, who now had to be registered after having received the necessary training, including first aid. 300 individuals had gone through short courses on sight-seeing, bird watching and other matters.

Mr Lowe referred to page 39 of the Annual Report and asked for clarification on the R6 million that was spent on salaries, and the further R6,7 million spent on administration expenses. He also asked for more clarity on the special investigation report, which indicated that there were members who sat on the tender committee despite having interests in the tenders allocated. He asked if any criminal charges were laid.

Mr Tsotetsi replied that the tender committee used to constitute board members, and all Board Members were required to declare their interests on an annual basis. There was, however, no separate declaration of interests required when it came to the tender committee.

Mr  Mogale referred to Page 12 of the Annual Report that indicated that THETA had contributed R5 million to a tavern development project. He asked what the programme entailed.

Mr Tsotetsi replied that the tavern programme instituted was due to the realisation that these taverns had a low turnover and were not registered. The project was being spearheaded by South African Breweries (SAB) and intended to upgrade the taverns to proper businesses. The programme had been providing training that focused on Accounting/Finance, Labour and improving trading competency, and had so far been implemented in Gauteng, Eastern and Northern Cape. Through partnering with SAB the intention was to ensure that the taverns were situated well, and had customer service. The indications of the programme had so far been phenomenal, though it was still in the analysis phase.

Mr Mogale  requested whether the programme on 2010 World Cup preparations in Nelspruit included the company allocated to run the hospitality in that region, which was, according to reports, seriously challenged.

The Chairperson asked for more clarity on the tour guide programme and requested whether there was any performance management conducted in respect of the training of tour guides in German and French. 

Mr Tsotetsi responded that the individuals involved in the training were people who were previously disadvantaged because communication was a stumbling block in their previous career, and the programme was geared to aiding them.
Mr Ben Keet (THETA) added that the performance assessment of the individuals in the tour guide training had been pleasing.
The Chairperson requested that the THETA respond to the rest of the questions in writing. The Committee was confident that this SETA could achieve its set goals as well as improving its performance on the SETA score card.

Media, Advertising Publishing, Printing and  Packaging (MAPPP) SETA Annual Report
The Committee noted that the board members of this SETA were not present.

The Chairperson denied a hearing to the SETA, noting that the absence of board members was disrespectful and indicated a lack of seriousness. The MAPPP SETA was requested to return with board members for another hearing.

The meeting was adjourned.


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