Implementation of the Skills Development Act

Meeting report

LABOUR PORTFOLIO COMMITTEE
12 September 2000
IMPLEMENTATION OF THE SKILLS DEVELOPMENT ACT

Documents handed out
Power point Presentation to Portfolio Committee [if required, e-mail [email protected]]

SUMMARY
There has been a problem of non-compliance in respect of the levies intended for the SETAs which are payable by companies. Mr Morotoba noted that the penalties in the Act would be enforced against these companies and that SARS would ''make an example'' of them.

Mr Morotoba identified 5 SETAs which have experienced problems in becoming operational. The reasons range from problems with the recognition of their unions to problems with reaching agreement on certain provisions in the establishment constitutions of the SETAs.

There has been a problem with the disbursement of funds. He attributed this partially to the time lapse between the time which plans were submitted for projects and the time that the money actually came from the Department of Finance. He admitted that there would be some underspending this year but was optimistic about 2001.

MINUTES
Implementation of the Skills Development Act
Mr Sam Morotoba (Executive Officer of the National Skills Authority) noted that South Africa needed a skills development strategy because formal sector employment is shrinking, small and medium enterprises are actually not growing, and thousands of school-leavers are looking for jobs every year. In the World Competitiveness Report which measured the availability of skilled labour in various countries South Africa ranked last. For the year 1999 South Africa came in at number 47 out of 47 countries.

Nationally they are trying to uplift the standards of education and training to create a competent workforce. Skills Development Strategy (SDS) supports formal sector job growth. However, skills development should not be seen as a solution to the country's economic problems but rather as a contributing factor to economic growth.

The Act establishes certain institutional structures. These include:
- the National Skills Authority (NSA)
- Sector Education and Training Authorities (SETAs)
- Learnerships and other skills programmes
- National Levy Grant Scheme
- National Skills Fund
- Partnerships between the public and private sector

National Skills Authority
The National Skills Authority was established on 13 April 1999. In terms of the Act it must consist of:

- a Chairperson

- 5 representing organised labour

- 5 representing organised employers

- 5 representing community and development interests

- 5 government departments

- 4 representing E and T providers (councils)

It also consists of the following non-voting members: an executive officer, a SAQA representative, and 2 employment services experts.

The NSA worked with the Department of Labour to establish committees to ensure that the work is done. Social partners play a major role in channeling the funds.

Sector Education and Training Authorities
The Minister established 25 SETAs by March this year. Most SETAs are based in Gauteng. Establishment regulation however says that they must have provincial offices. Sectors like agriculture have experienced many problems. They also had a problem with the Personnel Care SETA. They dealt with this by integrating it with the Services SETA. This integration has happened after extensive consultation.

List of SETAs:

1. Financial and other Accounting Services
2. Banking
3. Chemical Industries
4. Clothing, Textiles, Footwear and Leather
5. Construction
6. Diplomacy, Intelligence, Defence, Trade and Industry
7. Education, Training and Development Practices
8. Energy
9. Food and Beverages Manufacturing Industry
10. Forest Industries
11. Health and Welfare
12. Information Systems, Electronics and Telecommunications
13. Insurance
14. Local government, Water and related services
15. Media, Advertising, Publishing, Printing and Packaging
16. Mining and Minerals
17. Manufacturing, Engineering and related services
18. Police, Private, Security, Legal and Correctional Services
19. Primary Agriculture
20. Public Service
21. Secondary Agriculture
22. Services
23. Tourism and Hospitality
24. Transport
25. Wholesale and Retail

Functions of SETAs:
- to develop and implement a Sector Skills Plan (SSP)
SETAs requested companies to provide workplace plans. They consolidated these plans into workplace strategies and submitted it to the Department of Labour. The SSP which comes out of the SETA must provide:

- a competitiveness analysis of their sector,

- a skills profile of their companies

- service improvements for public service in the sector

- desired future industry strategy and objectives

- sector plan actions in relation to individuals, companies, SETA education and training providers,

- must examine equity and social issues in the sector. Example, existing inequalities, legislation, and government policy.

Other functions of SETAs are to pay grants according to sector and national priorities; to design, register, manage and promote learnerships; and also to report to the Director General.

They have established eleven SETA consultation forums which sit on a monthly basis. They exchange ideas on implementation and look at problems that SETAs face. When SETAs go to provinces they must interact with businesses, etc. Provincial SETAs play a major role for placement of unemployed people in new learnerships.

Skills Development Levies Act
Section 8 of this Act provides for the payment and distribution of skills development levies to the SETAs. The money is collected by the South African Revenue Service and the Department and SARS then work together to ensure that the SETAs get their portion (80%) of these levies . There has been a problem of non-compliance with some big companies. Only about 50% of companies were complying with the Act.

Section 25 of the Act deals with the National Skills Fund. Twenty percent of the levies which are paid by companies go toward this fund. The other financial sources of the fund are from the government budget and various other sources. Provinces will play a major role in the disbursement of the funds.

The proposed disbursement of these funds are to the following:
- unemployed target groups
- Small, Medium and Micro Enteprises (SMMEs)
- the Social Plan
- employment generation
- learnerships

The National Skills Development strategy objectives are to:
- develop a culture of high quality learning
- stimulate and support skills development in SMMEs
- assist new entrants into employment in the labour market
They will be working toward these during the next four years.

In conclusion Mr Morotoba noted that there will be a National Skills Development Strategy Conference held on 5 and 6 October 2000. Amongst other issues the Conference will address provincial challenges and regional focus areas.

Discussion
Mr Heine (DP) asked if all the SETAs are in place, if they are accessible to businesses (employers), and whether they have Chief Executive Officers?

Mr Morotoba replied that all SETAs are now in place. On 20 March they were formally established. He admitted however that the SETAs have not marketed themselves to show the employers that they are there. Currently the Department is distributing information on SETAs. They are experiencing problems with five SETAs. They are still appointing CEOs.

Ms Thabethe (ANC) asked about the low level of compliance in relation to the paying of levies. She commented that there must be penalties for this in terms of the Act and asked what they were doing about this. She asked what criteria they used to group the SETAs. She also asked for a comment on the fact that school-leavers and graduates are still experiencing problems getting jobs.

Mr Morotoba replied as follows:
- They followed the International Labour Organisation system to group the industries for the demarcation of the SETAs.
- The Act provides mechanisms to deal with people not complying with the payment of levies. They will be targeting big employers. There are processes in motion to deal with non-compliance. He would not say which companies were not paying but said that SARS would make an example of these companies.
- In terms of school leavers, there is a national problem that the growth of the formal sector is not sufficient. There are simply not enough jobs. There is a mismatch between what industries require from graduates and the training that they have. Graduates must undergo relevant programs to give them the skills that they need. The learnership addresses this in that it provides workplace experience. For example doctors do an internship in a hospital. Graduates should get an opportunity to do this, then move off to formal employment.

Mr Middleton (IFP) asked if the chairperson of the National Skills Authority has been appointed or not. He asked how many SETAs had been set up and how many companies have been exempted from paying levies.

Mr Morotoba's reply:
- They have not appointed a Chairperson yet. The Minister has assigned two deputy chairpersons to chair their meetings in the interim. One is from the labour sector and the other is from the business sector. The problem is that the chair from the labour sector and the chair from the business sector could not agree with each other on issues. The Minister is dealing with this issue now and he will appoint someone.
- Twenty-five SETAs have been established. Each has a certificate from the Minister to open up office as a legal entity. The progress to get the final staff members on board has been slow.
- The exemptions are currently being managed by SARS. Many requested exemptions but did not meet the criteria. He said that he did not know of specific companies which had been granted the exemptions.

Mr Rasmeni (ANC) commented that SA was internationally classified as having low skills therefore international investors were reluctant to invest. He asked what the Department was doing in terms of prioritising SETAs to address this problem as
''training must address the transformatory agenda of government''. He noted that in agriculture, black farmers have not been trained. He asked if government departments were working together on this. He also asked under which SETA domestic workers fell.

Mr Morotoba answered as follows:
- On the issue of prioritisation, some SETAs (especially those linked with job creation) are getting additional funds from the National Skills Fund. The allocations from the levies are accessed for job creation. He noted that in terms of the regulations they do not want big structures which employ a lot of people but do not give them training.
- All government department are linked but the problem is the effectiveness of departments and the fact that many officials are overworked.
- Domestic workers fall in the Services SETA. This SETA will get an additional grant from the National Skills Fund because there has been a problem with levy payments in this SETA.

The Chairperson said that SMMEs are expected to pay levies but it is hard for them to access the benefit. They cannot maximise the benefit of paying the levy. How is the Department addressing the need of the SMME sector? Also the incentive scheme of the past was open to abuse. Is the scheme different now? How are they overcoming the problem?

Mr Morotoba noted that:
- SMMEs with payrolls below R250 000 are not necessarily required to pay levies in terms of the Levies Act. They have held workshops with the SMME sector and will continue to have workshops with them.
- On abuse of the system, there is a big difference between the new levy and the old one. Industries previously had no checks and balances to ensure that there was no abuse. Now SETAs must have a business plan and they must provide annual reports. They will have to interact with various employers and target groups and guard against abuse of the system. There were many workshops where the Department of Finance provided input on the Public Finance Management Act. The systems are in place to counter abuse. The Minister will make awards to SETAs for best practice. This will also have the effect of identifying those who do not engage in best practice.

Mr Oliphant (ANC) asked for clarification on the five struggling SETAs. He also asked if there were timeframes set for learnerships. He noted that European Union funding had been received yet he did not see tangible results of the funding on the ground. He asked for an explanation of the disbursement of these funds and if the funds are being used?

Mr Morotoba's reply:
- The problematic SETAs are Primary agriculture; Defence (they had a problem with the recognition of their unions); Health and welfare (they could not reach agreement on certain provisions which were necessary for the establishment of their constitutions); Public service SETA (some line departments chose to go with line function SETAs, for example, Education went with the Education SETA). He could not recall the fifth SETA and promised to get back to the Committee on this.
- They have draft regulations on timeframes for learnerships. The State Law Advisors had found the regulations to be flawed, therefore they had to be redrafted. It was supposed to be finalised by the end of July but was not. It should be finalised by the end of September when it will go to the President's office for approval before promulgation.
- Disbursement of donor funds - Certain margins were not spent. They had agreed with their social partners that this money can be used in new areas for new projects. Some funds will have to go back. The disbursement of funds from the National Skills Fund and the Levy Grant Scheme will depend on the quality of the plans from the various industries. There is a likelihood of underspending. Next year they hope the situation will change.

Ms Thabethe said that people are waiting for support. The funds should not go back they should rather be used. She added that most SETAs are in Gauteng yet the other provinces also need that support.

Mr Morotoba replied that the time frames in respect of approving funds are problematic. There was a six month delay between the time that the plans were submitted to when the funds to implement those plans was released by the Department of Finance. During this time they had developed new plans and new areas of assistance needing funding. They agreed with Ms Thabethe that the donor funds should be used rather than be sent back. The problem is that they agreed with the donors to spend the funds in a particular area. If they want to spend it on a different project than agreed to, they will have to amend the agreement.
On the location of SETAs, provisions in the Regulations required a provincial office component. At the end of the day however the social partners make the decision.

The Chairperson asked if government allocates to skills development beyond the levy. Is government giving its own money?

Mr Morotaba said that government does contribute quite a lot. It is government funding that goes toward sustaining statutory bodies such as the NSA and SETA consultation forums.

The meeting was adjourned.