2008/09 Annual Report of Sector Education Training Authorities

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Labour

16 November 2009
Chairperson: Ms L Yengeni (ANC)
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Meeting Summary

Seven Sector Education and Training Authorities (SETAs) briefed the Portfolio Committee on Labour on their annual performances and financial statements for the year 2008/09. The organisations took the Committee through their sector profiles, mandates, National Skills Development objectives and performances, committed funds and projects, highlights and challenges, training lay-off schemes, financial reports from the office of the Auditor-General, corrective interventions, and responses to the economic crisis.

Members of the Committee asked the SETAs to explain how they benchmarked their salaries in relation to what the private sector and government were paying, why some of them had exceeded the 10% limit on administration expenditure, why there was incongruity between the unqualified audits it was getting and the real issues on the ground of skills shortage and unemployment, what were the demographics of the owners of the companies that provided training on their behalf, how the companies were chosen, and  what quality assurance mechanisms were in place to make sure training providers were not misusing the money.

Due to time constraints the SETAs could not entertain the questions, and the Chairperson asked them to reply in writing to the Committee within two working days.

Meeting report

Security and Safety Sector Education and Training Authority (SASSETA)
Mr Zongezile Baloyi, Chief Executive Officer, SASSETA, reported that the 2008/09 financial years were marked with progress and many achievements in the SETA’s drive to deliver on commitments towards the National Skills Development Strategy (NSDS) and responding to skills requirements including the scarce and critical skills in their sector.

A total of 10, 312 learners entered the learning programmes and 95% completed. A large number of these learners were in the employ of the government and private security companies. The learning programmes would continue to respond to the government initiatives because many recruited individuals would undergo training in learning programmes within the primary focus of SASSETA.

The SETA had exceeded expectations in its recognition of the Institute of Sectoral or Occupational Excellence (ISOE). It had conferred the status of ISOE to seven institutions. Five of these were training institutions within the South African Police Services with one Training College located in the Department of Defence and Military Veterans.

In terms of the annual performance oversight monitoring of the Department of Labour, the SETA had, over the last three financial years, recorded performance levels above average. As a result, it had decided to fast track the implementation of the New Venture Creation project across the Safety and Security chambers and it had begun to roll out the programme with significant success at the initial stages.

What remained to be done in support of transformational issues in its sector was extensive work especially regarding the targeting of small Black Economic Empowerment (BEE) firms and co-operatives. It needed to be supported by skills development initiatives. SASSETA had also dealt with compliance issues that the Executive Authority had raised, and adhered to the provisions of the Service Level Agreement entered into with it.

The Board of SASSETA initiated a process of investigating the best practice discretionary grant model, with a view to creating efficiencies in the disbursement of grants and improved skills development project implementation.

Various skills Programmes were implemented. These included: General Security Officer Skills Programmes, Information Technology Skills Programme, Project Management, Assessor Training, Moderator Training, Financial and Accounting Skills Programme, and Verifier Training. Bursaries for both employed and unemployed learners were issued for various fields of study.

He noted that the Auditor-General (AG) had given the SETA an unqualified audit opinion without emphasis of matter. The Audit Committee noted the various items the Auditor-General listed as impacting on governance. Operational expenditure amounted to R48.3 million against revenue collected of R58.7 million. The administrative surplus transferred to Discretionary Reserve amounted to R10.4 million. Therefore, it was within the 10% limit on administrative costs. During the presentation, it was also noted that the National Treasury allowed SASSETA to use an unappropriated surplus from previous financial years to fund projects for the achievement of NSDS targets.

The SETA has not yet determined the impact of the economic crisis,  particularly the extent to which it would affect absorption of learners into the learning programmes within the Private Security Industry. Graphs and tables detailing expenditure were shown.

Agricultural Sector Education & Training Authority (AgriSETA)
Mr Jerry Madiba, Chief Executive Officer, AgriSETA, took the Committee through the sector profile. The SETA currently dealt with about 35 000 commercial enterprises, about 450 000 under resourced enterprises or small emerging farmers. These numbers, especially the latter, were growing because of land reform processes and the fact that when many people were retrenched, they would become emerging farmers. From the SETA’s  income of R142.2 million, a sum of R65 million(20%) went to the discretionary funds.

AgriSETA was made unique by the land reforms and the fact that it targeted the poorest of the poor who were based in rural areas. It comprised about  30% illiterate and  about 50% poorly educated people. It contributed about 25% to the Gross Domestic Product (GDP) and was externally influenced by climate and exchange rates.

This SETA had successfully recorded financial support for mentoring new farmers. Already there were five projects that were supporting more than 200 new farmers. It had also highlighted that one of the problems experienced was that learners were not interested in learnerships, but only in the stipend. When they finished one learnership they tended to move on to another. The SETA, realising this, approached farmers to mentor the learners so that they were able to set up on their own after three or five years.

AgriSETA had recorded success with regard to internships. Learners who had finished their studies had undergone internship with farmers, and sometimes they would fund their studies only when they finished their experiential training. It had forged an excellent work relationship with the Department of Agriculture, Fisheries and Forestry, and the latter paid AgriSETA administration fees, so that it could help it with development strategies that AgriSETA was currently working on.

Mr Madiba noted a few stumbling blocks for the SETA. Funding was not enough to impact on land reform projects and to access National Skills Fund (NSF). There was little progress made on Adult Basic Education and Training (ABET). Most people on the farms were interested only in ABET level 1 – 2 to enable them to get enough skills only to read the Bible, count, and open a bank account. Too little income was received from too few levy players to effectively address the needs of too many under resourced enterprises.

On NSDS performances, AgriSETA had achieved a rating of 3.64. This meant it was meeting the requirements. It could not meet the ABET targets. It had accepted that this would be the position. However, it had recorded success on major indicators that pertained to learners and learning interventions.

In regard to training lay-off schemes, it had been noted that the sector had not been yet affected by the economic crisis. This was attributed to the good rains, products, and exports. The effects of the economic meltdown would be felt early in 2010, due to low commodity prices and the strength of the rand, which negatively affected exports. A sum of R10 million had been set aside for the schemes.

Since inception, this SETA had received an unqualified audit. The 80% levy income had increased by 8%, from R131 million for 2007/08 to R142 million for the 2008/09 financial years. The mandatory grant pay-out percentage was 73%. AgriSETA had approved and allocated 96% of surplus funds available for future discretionary projects, as at 31 March 2009.

Public Services Sector Education and Training Authority (PSETA)
Mr Johannes Rantete, Acting Chief Executive Officer, PSETA, highlighted that the main function of PSETA was to facilitate skills development within the public sector, and it was largely made up of government departments (90%) and parastatals (10%). It operated through an administrative grant from the National Treasury, channeled via Department of Public Service and Administration (DPSA). Government departments did not pay any levy to this PSETA. Parastatals contributed a levy payment to the tune of R2 million per annum. It was established as an Education Quality Training Authority (EQTA) body in terms of Section 5 (1)(b)(i) of the South African Qualifications Authority (SAQA) Act of 1995.

He outlined that ABET learners in KwaZulu Natal were taken through the NQF level 1 qualification. In Limpopo, the Human Resources unit of the Department of Agriculture had 40 learners graduating with ABET Level 4 qualification, and the internal audit division of the Office of the Premier saw 20 learners graduating. 90% of the learners had been absorbed into permanent employment within the government.

The Sector Skills Plan was successfully updated and 340 Skills Development Facilitators (SDFs) were trained on the use of Sector Career Guide and Scarce Skills List. Workshops were held to provide government departments with feedback and evaluation reports on their Workplace Skills Plans. PSETA participated in a pilot project for the Department of Labour to comment on the software used in a new reporting system planned for implementation in the second quarter of 2009.

It had registered an official statistical qualification and unique standard on strategic requisition for National Treasury, and completed the identification process for Institute of Sectoral or Occupational Excellence (ISOE). Eight training providers who were also PSETA strategic partners had been fully accredited.

Mr Joshua Madishona, Chief Financial Officer, PSETA, stated that the SETA had been operating in a turbulent environment characterised by high staff turnover, the absence of a CFO and appropriate recording and accounting systems, no time to address previous audit issues, the 2005 fraud, incomplete fraud investigations, and the difficult and unclear relationship between DPSA and PSETA. The organisation was never audited before, but only was audited this year. The Auditor-General gave PSETA a disclaimer, because there was no evidence for the opening and comparative figures used, the National Skills Fund (NSF) liability was not shown, there was not sufficient evidence to support R323 000 expenses, and there was no verification of cash balances accuracy. An emphasis of matter was raised on audit fees. The Auditor-General had to do more work than he was supposed to, which resulted in fruitless and wasteful expenditure of R73 000.

PSETA was also found not complying with legislation and National Treasury regulations, because  there were no governance structures, and there were deficiencies in internal and operational control and performance information supporting documents. Interventions had, however, been made. Key Board committees had been established. Qualified personnel into Board committees had been appointed. A Board secretariat had been appointed to enhance compliance and improve Board processes. A new Chief Executive Officer had been appointed as from 1 July 2009. The fraud and forensic investigation would be finalised. The services of a Chartered Accounting firm had been retained. The CFO function had been appointed and the SETA had developed and approved Financial and Human Resources Policies and Procedures.

Services Sector Education and Training Authority (SERVICES)
Mr Ivor Blumenthal, SERVICES CEO, focused his presentation on the targeted areas. SERVICES was doing a lot for the disabled. 20% of discretionary funding had been spent towards assisting the disabled. An innovative concept, IBILITY, had been developed in order to introduce the disabled into mainstream working environments.

The youth was the next group that was being targeted. 35 groups dedicated to this section of the population were being funded. Internships and bursaries were awarded to unemployed matriculants. The under-employed who were in employment but who were under-challenged in that employment  were trained to make sure they had occupational qualifications. The qualifications of the employed were given substance by putting more emphasis on recognition of prior learning (RPL).

Attention was also given to those aged over 45. This was seen as a neglected group. They would be recruited as coaches and moderators because they had plenty of experience, which was lacking in youngsters.

850 people who were unemployed - especially individuals who belonged to the Trade Unions – had now graduated and were in employment in non-unionised industries like call centres. A bargaining forum was in place already. It had already provided learnership to people working in the Presidential hotline.

The failure rate was in excess of 20%. The reason for this lay in the literacy and numeracy levels. As a result, the SETA’s ABET programmes were now focused on teachers at the very low grades, so that literacy and numeracy could get attention at the early grades. This School Feeder Programme was similar to one done with the Singapore government.

It was noted that SERVICES was the most feared SETA amongst the training providers because of quality assurance mechanisms that it had in place. This meant that a training provider had to be accredited by the Department of Education and Higher Education Institutions. Service providers would be moderated twice a year. The SETA also made sure that full-time employment for a year was undertaken when training was completed.

A sum of more than R57m has been set aside for training lay-off schemes

Tourism and Hospitality Education and Training Authority (THETA)
Mr Mike Tsotetsi, Chief Executive Officer, THETA, touched on the challenges, finances, and training lay-off schemes of his organisation. He noted that the challenges included the fact that limited levies were collected in this sector, as opposed to the huge demand. The sector constituted about 90% of small, medium and micro enterprises (SMMEs). A significant number of unemployed people sought jobs in this sector, and it had an estimated figure of 40 000 companies. Therefore, it required additional funding to the value of R200 million per annum in order to make a significant impact. Inadequate funding led to some targets not met, and this led to extreme complaints from the public seeking training funds.

THETA received an unqualified audit report from the Auditor-General for the fourth year running. The Auditor-General found the overall governance of the organisation to be adequate, and there were no findings regarding performance information. Graphs and tables showing expenditure per item were shown. The total investment income was R7.6 million and Mr Tsotetsi noted that interest was earned on short-term investments with approved banking institutions. The total revenue was R160.5 million, mainly driven by levy income and NSF income of R18.9 million. Revenue was up by 18.5% when compared with previous years. Total expenses reached R241.1 million and were driven mainly by project expenses of R137.9 million. Project expenses were up by 89% compared to previous years.
Administration expenses increased by 22% to R16.1 million, because of a legal settlement of R1.4 million that had to be paid. Even with this increase the Board and Management managed to keep administration expenses below the regulated 10% of levy income.

There was a strong indication that this sector was hit hard by the recession, especially smaller operators like travel agencies, restaurants, and hotels. Most were found to be scared to come out in fear of losing the 2010 business, and were hoping things would improve. Employers in the sector had been invited, through advertisements in the print media, to come forward for help.

Transport Sector Education and Training Authority (TETA)
Ms Maphefo Matlala, Chief Executive Officer, TETA, gave the overview of her organisation. The Skills Development Act established TETA with the purpose of promoting education, training, and development in the transport sector. This sector comprised eight chambers, being Maritime, Road Passenger, Road Freight, Taxi, Rail, Aerospace, Freight Handling, and Forwarding and Clearing.

During the 2006/07 financial years the organisation experienced many problems. Issues that surrounded the R200 million investment with Fidentia led to the disciplinary action against the Chief Executive Officer and Chief Financial Officer, and under performance on Service Level Agreement (SLA) targets that averaged 2.5. There were negative perceptions about the viability of the organisation.

Currently, the organisation was in a position where it had reviewed its strategies and policies. It aligned its Investment Policy with Public Finance Management Act (PFMA) and National Treasury regulations, and improved internal controls. It also had streamlined its business processes.

For the financial year 2008/09, the number of Mandatory Grants that went to large firms and medium firms were 216 and 153 respectively. 10 538 workers participated in various learning programmes including learnerships, skills programmes and apprenticeships, and bursaries and internships.  TETA had registered an increase of 114% in New Venture Creations, and supported four Institutes of Sectoral and Occupational Excellence. It recorded a 640% increase in non-levy paying enterprises.

TETA had received an unqualified audit opinion for the second year running. Its administration expenditure was within 10%. Mandatory grants paid increased by R38.8 million (37%), and Discretionary Grants paid increased by R19.9 million (34%). Graphs showing expenditure were tabled.

Ms Matlala noted that there were several constraints that impacted on delivery of mandates. It had been found that TETA did not communicate very well with stakeholders. As a result, communication and marketing strategies and policies had been developed and approved by the Board. This was followed by roadshows across the country and capacity building workshops for SMMEs, non government organizations (NGOs) and community based organizations (CBOs), in all provinces, using both print and electronic media. Other communication messages were posted on radio, print media and website.

TETA business processes were also found to be cumbersome. IT infrastructure assessment and analysis were conducted. TETA IT requirements had been established and recommendations were made. Timelines were being regulated by DoL policy and regulations. The organisation had also standardised internal contract management guidelines. The Mandatory Grant policy had been streamlined to be in line with regulations.

Efforts had been expended on human capital development in order to accelerate customer orientation. Consequently, all senior management people were trained in Risk Management. TETA staff had been capacitated on the Supply Chain Management and PFMA regulations, and also on curriculum and qualifications development.

Wholesale and Retail Sector Education and Training Authority (W&RSETA)
Mr Ivan Molefe, Chief Executive Officer, W&RSETA, briefed the Committee. His sector consisted of over 60 000 registered companies. The formal sector was employing 2 million people while the informal one was employing 1 million. It comprised 11 380 levy-paying organisations.

During the 2000 – 2009 financial years, this SETA had successfully implemented the first-ever SMME Training Voucher project for the sector. Its pre-learnership programme for people with disabilities had been hailed by the Department of Labour as ground-breaking and exemplary to SETAs and government. It had pioneered the BEE Training Providers accreditation programme. Fifty trainers had been provisionally accredited so far. It had developed the Skills Programmes Matrix and Career Path for the sector. Ikusasa Pilot Project was established in 2008 to encourage learners to choose careers in the wholesale and retail sector. It had benefited 50 Grade 12 learners. 390 Career Guidance Counsellors nationwide had been capacitated on W&RSETA careers. In the financial year 2008/09 it recorded 5 973 beneficiaries of Discretionary Grants, and a total of 1 741 learners were placed in companies.

There were, however, some setbacks. W&RSETA had registered poor learner employment placement and workplace experience participation. The learner drop-out was standing at 50%. ABET uptake and completion remained very low. Rural and semi urban skills development interventions were very low, and there were large cash reserves due to slow delivery and write-backs. Only 50% of SMMEs had claimed Mandatory Grants. The SETA had recorded a non-achievement of its 4% target of employing people with disabilities.

The impact of the economic crisis was felt on the W&R sector. 66 000 jobs were lost in the first quarter of 2009. R120 million had been allocated to the wholesale and retail, and clothing and textile sector for the training lay-off scheme. Three applications were being processed by Commission for Conciliation, Mediation and Arbitration (CCMA), and systems and processes were in place to implement the scheme.

W&RSETA received an unqualified audit report. The levy income increased by 10%. Employer Grants and project expenses decreased by 2.7%. There had been a low disbursement of discretionary grants. Cash and cash equivalents increased by 29%. Mandatory Grant disbursement amounted to R211 million. That meant it had registered an increase of 2%, when compared with the previous year of 2007/08. Graphs detailing expenditure per category and item were shown.

Discussion
Chairperson asked the Department of Labour (DoL) if the SETAs accounted to the Department or Parliament, and if the Department had a say in the running of the SETAs, in terms of bonuses and salaries paid to their executives.

Mr Eubert Mashabane, Manager, Department of Labour, replied that the Boards of SETAs were autonomous and reported to the Minister of Labour, not the Director-General of DoL. Chief Executive Officers of the SETAs had to account to their own boards. This structure would remain unless the legislation was changed. In respect of the salaries, it was difficult to make a judgment on content to warrant such remuneration. However, he could say that the figures were not randomly selected, but were based on the kind of work done, and there was a fair and transparent process.

Mr Hannes Hoon, Manager, DoL, stated that the Minister ad added a new Section 14 into the Skills Development Act, to the effect that the Minister could change or impose new salary bands.

The Chairperson asked what the role of the DoL was with regard to the SETAs.

Mr Mashabane said the Department dealt with policies around the SETAs, not the day-to-day running of them. If a SETA was not working, the Department would lay down rules. The Minister could not take over. Instead, the Board was answerable.

The Chairperson asked who advised the Minister on the work of the Boards.

Mr Mashabane stated the Minister did not get the report of the individual SETAs, but a collective report of all SETAs.

The Chairperson expressed her discontent about this. She said that it seemed to indicate that the Department was not interested in the work of the SETAs. The fact that they did not have any say in the running of the SETAs meant that if the SETAs acted incorrectly, the Minister would get the blame. She promised the Committee Members that she would summon the Minister and the people responsible for the SETAs within the Department to account before the Committee.

She noted that there was not sufficient time to allow SETAs to answer to questions. The Chairperson indicated that they must respond to the questions in writing within two working days.

The questions were then listed by Members as follows:
Members of the Committee asked the SETAs to explain how they benchmarked their salaries in relation to what the private sector and government were paying, why some of them had exceeded the 10% limit on administration expenditure, why there was incongruity between the unqualified audits it was getting and the real issues on the ground of skills shortage and unemployment, what were the demographics of the owners of the companies that provided training on their behalf, how the companies were chosen, and  what quality assurance mechanisms were in place to make sure training providers were not misusing the money.

The meeting was adjourned.

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